The Structure of eBay - Case Study Example

Running Head: RETAIL MARKETING Retail Marketing In Harvard Style By s can buy goods from e-Bay by logging on to their website. As an online retailer, the business provides customers with pictures and descriptions of the products posted for sales transactions. Using a credit card, customers can purchase through the computer. The process is quite easy to carry out since the website presents the step-by-step procedures. With the information coming from the credit card, the modem sends out the details to the financial institution (www.wiki.media-culture.org.au). It is very evident from the structure of eBay that purchase through them benefits buyers because of the seemingly no limitations on geographical boundaries. As Hahn puts it, it is the strength of the online shopping business like that of eBay that is inherent by the fact that it is online (Hahn, 2006). Use of the internet allows both the sellers and bidders to participate in online auctions from anywhere in the world. A seller let’s say in China can put up a doll in an online auction site that can be bid on by bidders that reside in the United States. In essence due to the absence of territorial barriers made possible through the use of the virtual space, items can be purchased by technically everybody anywhere in the world. Inherent in the worldwide interdependence of buyers and sellers is the comfort given to the buyers. The buyer simply sits in front of the computer, logs on to the online shopping site, uses an e-money, then waits for the delivery of the product. There is no longer a need for personal visit on stores which could require much effort especially for busy buyers. The Internet offers variety that is simply impossible in traditional stores (Postrel, 2004). Definitely, buyers do more than purchase items of their choice because they also work or study. More than the comfort offered by online shopping, time is saved for other purposes. Basically, the cost of participating into internet auctions through various retail agents is zero (Hahn, 2006). Online shopping also allows buyers to customize their products, as well as benefit from cheaper prices. As buyers are purchasing directly from the supplier, it eliminates the need for retailers and distributors who often add to the cost of the product. Postrel (2004) found that prices on the Internet were 6 percent to 16 percent lower than prices off-line. Aside from the fact that purchase through online auctions saves time, it also allows the buyer to offer a bid at the time convenient to him since there are time constraints (Miller and Layton, 2000). Bids can be made on items any time of the day and because items are listed for usually longer than a week, potential bidders have a lot of time to ponder their choices and bids. Elderly people often have more trouble accessing built shopping centers because transport is usually not as readily available to them. This market has begun to realise the convenience of shopping at home. Tedeschi (2004) found the percentage of seniors on the Internet who were also shopping online in 2000 at 38 percent and by February 2004, that figure had increased to 49 percent. Buyers also have better access to product review and rating systems. These services allow potential buyers to read product evaluations and comments made by other consumers who have previously purchased the product. It also gives customers the power to make more informed choices. Customers can also save a surprising amount of time by shopping online. Research indicated online Christmas shopping is at least four times faster than pounding around the shopping precinct. For experienced online shoppers, who know where to go, the time saving is even greater - for them its typically six times faster than a trip to the traditional shopping destinations? (M2 Presswire, 2003). Online shopping though is a double bladed sword. While it provides great advantages to buyers, it also out rightly bestows disadvantages. Purchase through the internet becomes less of leisure and more of a task. In the advent of technological advances, online fatigue tends to set in. Shopping becomes less of a stress reliever the way that in-person shopping is for some people (www.consumerreports.org). Because of the nature of online shopping in which it takes place on a computer it can often seem like work, while an afternoon in the mall is seen as recreation. According to Stone (2000), a common disadvantage with auctioning online is that many bidders seem to be so caught up with winning an auction and the thrill of beating another person to the last bid that they are spending more than they can afford, and possibly more than the retail price they would pay for the same item. Accordingly, buyers could also pay higher depending on the possible extra charges for delivery which varies with location. Fraud is another large and seemingly unavoidable disadvantage of online auctioning. Unlike real life auctions, it is much easier for sellers to sell bogus items they do not possess and collect money from the bidders without ever sending them their items. There have been many reported cases where people have been charged with fraud after placing non existent items on online auctioning websites, but for everyone of these reported cases, there are many more that go unreported (Stone, 2000). Unfair negative feedback for sellers could be considered as a disadvantage of online auctioning. Some sellers will make extra effort to please all their customers, however one unreasonable customer that is impossible to please can affect their reputation forever by placing negative feedback on the website. This is why becoming a regular seller on online auctioning sites can be extremely time consuming, as sellers must go out of their way to meet all their customers demands and requests (i.e. emails requesting more details of the product and shipping, postage and handling costs) so that they can avoid being labeled as unreliable or dishonest by their customers. Another growing concern is the sale of illegal items over online auctioning sites, including sellers auctioning off rare animals, unborn babies, their virginity and drugs. On websites as large as Ebay, it is becoming increasingly hard to monitor and police illegal activity (www.wiki.media-culture.org.au). The main benefit for sellers is that it allows them to reduce costs in relation to overheads. There are cleaning, building maintenance and rental that can be avoided. Some companies may reduce costs further by not printing catalogues and solely allow their customers to visit the website for product pictures and descriptions. Technology employed for auctioning also allows sellers to track customer, product preferences and alert these customers of new products they may be waiting for or could be interested in. This may help the business increase their visibility in the marketplace and assist buyers to remember the company. As a result, customers may be more inclined to buy from that company when they decide to make their actual purchase. Raisch (2001) believes the importance of customer relationship in which the ability to interact with customers at any moment creates the opportunity for growth and brand loyalty. An underlying benefit for sellers is that the products displayed on their websites may prompt people to make in store purchases. Hof (2001) found that half of consumers use a retailer’s website for research before buying a product in its physical store. Sellers are at the same time disadvantaged in using online shopping to sell products. It happens when competition is so stiff that prices are driven downward because of competition. Competitors try to offer a lower price against each other to gain more customer base. In addition, though many items can be sold online, there are items such as clothing and jewelry that are preferred by buyers to be bought on shops for scrutiny. In such cases, shops pose an advantage. Technology is very dynamic and monitoring is such a grueling task when fraudulence is at hand. Sellers could ship products to buyers thinking that they have the money at hand only to know that the buyer used a bogus account. Products for sale are given only limited time to be posted in online sites compared to the longer display in real shops. It can be a case as well of buyers bidding only minimal amounts as reservation prices which might result to sellers selling products at a lower price. 2. From the late 1990s, the range of information, products, and services available on the internet grew massively. At the same time, the popularity of the internet also grew at a phenomenal rate. To keep abreast of the online shopping trend, all types of traditional retail companies have entered the electronic shopping market by opening their own online stores. Over the years, majority of these companies have continually endeavored to expand their range of goods. Rifkin (2004) predicts that the future possibility of online shopping sites completely taking over built shopping centers is slim. This is because built shopping centers now provide more than just shopping. Instead they are places where people actually choose to spend their leisure time. Built shopping centers now provide stage shows, parades, child care, restaurants, art displays, movie theatres, video amusement complexes and much more. It was also found that browsing is still a popular leisure activity. Summers, Smith, et al. (2003) observed that people still like touching the goods they are going to buy, as well as the social interaction. Luxury items such as jewelry, clothing and even cars are preferred by buyers to be seen and examined prior to purchase. It is an act on the part of the buyer to ensure enjoyment of the product after purchase. In such items such as luxury products, buyers tend to buy more on shops where they could examine the commodity before purchase. Techno stress and online fatigue also factors in the possible decline of online auction. Shopping with the use of internet tend to tire the buyers instead of helping them enjoy. Though online auctions provide convenience, they also rob off the buyers with the opportunity to take pleasure from shopping which is believed to be a remedy for stress. Buyers are also becoming wearier of fraudulence and hacking. Reports of stolen credit cards and that of counterfeit ones have effects on the preference for online transactions. According to a study (www.consumerreports.org), over the past few years it seemed like the sky was the limit when it came to online shopping. Each the numbers grew and grew as more people discovered the joys of click and spend. But international news reports that online commerce has slowed in some key categories such as books, office supplies, beauty products and computer peripherals. Analysts say the trend is here to stay and point to the recent decision by Dell to sell PCs at Wal-Mart stores as a sign that selling online is no longer as successful as it once was. The value of internet sales in terms of transactions and revenues are still impressive, and are expected to reach $116 billion this year, but thats still just 5% of all retail sales (www.consumerreports.org). The threat of online sales has caused retail stores to step up their game, making stores brighter and more fun to shop in. I believe based on the issues of competitiveness of real shops, fraudulence, vulnerability of online operations on hackers and risk aversion of buyers on possible purchase of products at higher than the normal shop price that online sites pursuing internet retail activities will slowly decline in terms of volume of transactions. There will still be purchases on such retail businesses online but it will be inhibited by the disadvantages posed by internet sales which are slowly unfolding to buyers. 3. Competitive advantage, as popularly known in business and management environment, has to do with a companys ability to outdo competitors, either by improving upon what competitors are currently doing or by doing something completely different in a way that proves successful. Being able to implement an e-commerce plan that improves sales or cuts costs might give one retailer a competitive advantage over another. At the same time, being the first to come up with a new e-commerce business model, or a unique twist on an existing model, might also allow an up-start to gain an early competitive advantage. Using the words of Dena Waggoner (2000), “The strongest competitive advantage is a strategy that cannot be imitated by other companies. Competitive advantage can also be viewed as any activity that creates superior value above its rivals." A prime example of an upstart gaining an early competitive advantage by being first-to-market with a new business model is eBay.com, the worlds largest online auction site, with more than 22 million registered users and roughly 8,000 product categories (Melendez, 2000). According to Melendez (2000), although rivals like Yahoo! and Amazon.com attempted to gain market share from eBay by launching their own auction sites, eBays ability to gain critical mass gave it the competitive edge it needed to stave off its rivals. Despite Amazons attempt to lure customers with guarantees of product quality and Yahoo!s offering of commission-free auctions, eBay attracted more sellers than any other auction site simply because it had the most buyers. The formation of auction communities such as eBay illustrates the inherent advantages to size. When eBay had established the first mover advantage, it was enormously difficult for others to compete (Frank and Cook, 1995). A seller could find the most buyers on eBay and a buyer could find the most sellers. Why would anyone go to another auction site? eBay provides a place for buyers and sellers to meet to exchange goods through auction. The bigger the participation of buyers and sellers, the more liquid the market and the better opportunity to get a good deal in buying and selling your goods. The first mover advantage enjoyed by eBay made it hard for buyers and sellers to switch to another site with fewer participants. Yahoo and Microsoft are both communities with lots of participants, but neither has yet been able to wrest leadership from eBay in on-line auctions. I believe that eBay could withstand its competition from Yahoo! and Amazon.com for still a considerable stretch of time but the competitors may eventually take the lead if eBay does not improve in some areas. A big drawback of eBay is the fact that it does not have a full monitoring of all the buyers, sellers and products involved. In contrast with for example Amazon.com, there are even reviews and comments from different perspectives that include buyers, sellers and the site operators regarding the products offered. It gives an impression that eBay do not have the full knowledge of whose who in the auctions undertaken in terms of both buyers and sellers. 4. eBay could easily make money from its operations beginning from the listing fee charged in the business. The profitability though, since the operations are worldwide, brings certain issues to the company. One of which is the issue of taxation. Tax control could easily be levied to eBay by different regulators worldwide. The regulation could easily be passed by eBay to charges pushing the price of items on sale higher. Higher prices in turn could benefit competitors of the company knowing that competition is so intense and a little mistake in strategies could make the company vulnerable to weaknesses. Because eBay is seen to be the most successful retail agent at the moment on online transactions, fraudulence and internet intrusions are always at the sides taking the opportunity when it is right to attack the business. Fraudulence is critical in such an online business since transactions are based on trust and a single mistake could be the downfall for the company. The vulnerability of the company lies on the worldwide interdependence of the buyers and the sellers. Due to the differences in locations, charges on delivery and other related matters could entail a shooting up of prices considering as well the viability of having different structure of taxes on countries. Since technology is dynamic, the strategy of eBay should cope with the system through a dynamic management of operations. References: Consumer Reports. (2007). Online Shopping Growth Slowing. Accessed August 12, 2007 from http://www.consumerreports.org Frank, R. and Cook, P. (1995). The Winner-Take-All Society. New York; Penguin Books Hahn, J. (2006). Advantages of the Online Auction Business Model. Accessed August 12, 2007 from http://www.gotlinks.com Hof, D. (2001). Business Week: Don’t Cut Back Now; Bricks and mortar Retailers Are Finding That Online Visits Boosts In-store sale. Accessed August 12, 2007 from http://proquest.umi.com IOMA. (2004). How two companies use web analytics to boost value of e-biz. Report on Financial Analysis, Planning & Reporting, 4 (9): 1 Accessed August 12, 2007 from http://gateaway.proquest.com Melendez, T. (2000). Its Too Late for Wait and See Approach in E-commerce Arena. Houston Business Journal Miller, K. and Layton, R. (2000). Fundamentals of Marketing, 4th ed. Australia;McGraw-Hill M2 Presswire. (2003). IMRG: Cristmas Shopping is Four Times Faster Online Than on High Street. Accessed August 12, 2007 from http://proquest.umi.com Postrel, V. (2004). The New York Times: Selection Ranks Above Price Among the Benefits of Online Shopping. Accessed August 12, 2007 from http://gateaway.proquest.com Stone, B. (2000). Online Auctions. Accessed August 12, 2007 from http://www.ucs.mun.ca Summers, J., Smith, B. et al. (2003). Essentials of Marketing. Australia; Nelson. Tedeschi. (2004). The New York Times: No longer a Niche Marketing Outlet, the Internet is Now Attracting Shoppers from Almost All Walks of Life. Accessed August 12, 2007 from http://gateway.proquest.com Waggoner, D. (2000). Competitive Advantage. Encyclopedia of Management, 4th ed. Farmington Hills; Gale Group Wiki Media-Culture. (2004). Accessed August 12, 2007 from http://wiki.media-culture.org.au Read More