EBays Success in E-Commerce - Assignment Example

I. Introduction I am one of the millions of users all over the globe who have established eBay as a popular trend in the developing dimension of e-commerce and internet marketing. In my opinion, auctions at eBay offer an easy, handy, resourceful and amusing marketplace in which to trade, sell and purchase. Though majority of the users are informal partakers who log on from time to time within a week to look for bargains or search for articles for their private collections, numerous have made eBay an essential component of their everyday lives and businesses. EBay began as a Pierre Omidyar’s home business and eventually became the globally leading auction marketplace and one of the few key companies of dotcom to actually generate profits. Its progress and growth has been remarkable since 1996 in which it restructured as a corporation. Registered users of eBay have dramatically increased, registering 10 million users by the advent of the 21st century. On a normal day, at least 1 million distinctive guests log in to the site. An average of five items are inventoried for vending on eBay every second, which means more than $100 of gross product transactions every second (Bunnell & Luecke 2000: 4). The beauty of the idea and vision of eBay is that it has got rid off numerous of the incompetency of conventional individual-to-individual business exchange. It offers a place wherein sellers and buyers can expediently transact, trade information regarding products and respective prices, and transacts retails at the lowest possible costs. And it has composed accumulating and bargain seeking in an agreeable and enjoyable manner. This paper will explore and analyse the extraordinary growth of eBay through the application of the assumptions and components of internet marketing. II. eBay: A Model of Internet Marketing The growth of the Internet economy has previously generated thousands of employment opportunities in both developed and developing countries, and the same trend is occurring throughout the globe. This is indeed merely the beginning. A number of individuals occupying these newly created jobs are newly trained computer technicians, programmers and managers. Several others, though, are migrants from the traditional marketplace. Similar to the forty-niners of the United States in the nineteenth century, these individuals have observed great opportunity in the Silicon Valley’s gold fields and other breeding grounds of dot-com, and are preparing to venture their claims (Dennis et al. 2004). The first generation of fortune seekers, similar to the previous gold rush, was led by the youthful, the agitated, and the unburdened or those individuals without debts and domestic responsibilities to worry about, Generation Xers, in a contemporary Children’s Crusade. This is shifting as increasingly middle and top level technical experts and managers are improving their resumes and pursuing the wagon trails created by the first generation. The capabilities and competencies they carry over from the traditional marketplace are progressively in demand as the Internet economy develops, grows, becomes established, and realizes that they require skills and technical knowledge in finance, marketing and human resource management. Employment at eBay shows this current trend. Save for Pierre Omidyar and Jeff Skoll, the eBay founders, majority of the most important executives of eBay previously held managerial position in the old economy: “Meg Whitman from Hasbro; Matt Bannick, vice president of customer service, from McKinsey & Company; CFO Gary Bengier from Kenetech Corporation, an energy service firm; and Marketing Senior Vice President Brian Swette from Pepsi Cola” (Bunnell & Luecke 2000: 96). Embarking upon the shift from the traditional marketplace to the new economy is not constantly plain and simple, and a number of migrants experience the shift tougher than that experienced by others. As Tuck Rickards stated, the head of Internet application for Russell Reynolds Associates, which is a firm for executive staffing, “The person looking for a VP of marketing or chief of technology position needs to be Web savvy [whereas] the distribution specialist or operations person will probably find his previous experiences more transferable” (Bunnell & Luecke 2000: 96). Skilled employees and professionals from the traditional marketplace stumble upon a noticeably astonishing work setting. Energy levels are intensified, and employees and staffs put in taxing hours. Individual lives are united with work life. The risks are substantial and everybody aspires to be successful. The organisational structures they bump into are as well concretely unusual. Companies of Dotcom generally have flexible structures and insignificant presence of hierarchy or regulation. Even David Filo, cofounder of Yahoo! and whose working agreement Po Bronson illustrates clearly in The Nudist on the Night Shift (Random House 1999), his brilliant depiction of Silicon Valley: David Filo doesn’t even have an office. He shares a double-wide cubicle with another guy. It’s a window cubicle, but located right on the thick support pillar, so there are only a couple of feet of tinted window on either side. David was standing up, and he was awash in a trash heap of paper... forty inches deep of unread memos, promotional literature, office chatter (Bronson 1999: xv). Since eBay would refuse to disturb its executives for interviews, or even allow researchers to wander in the hallways, and former employees are difficult to locate, a deeper look at the successful Internet Company is, essentially, based on secondary analyses and literatures on company activities. Even as less than ideal, these however present valuable ideas into what is really happening (Bronson 1999). A. Focus and Speed Positioned in a new and unfamiliar environment, Internet companies encounter unpredicted difficulties and opportunities with surprising stability. Meg Whitman acknowledged this once she took the top managerial position in 1999. She was well aware that her management group would have to deal with and get rid of these as soon as possible; doing the other way around would generate obstacles of unresolved conflicts and unsolved problems. With the aim of taking care of the problems, she organised a weekly meetings for her management group, each for the duration of at least four hours. “I figured out early on that if we were going to work together as a team we needed to throw the ball around a lot,” she informed Harvard researchers. “So we spend a lot of time together” (Tempest 1999: 7). Regular meetings included frequently planned companywide conventions. In the top executives’ point of view, these meetings reinforced the level of expertise and confidence among managers which consequently make the decision-making process faster, more efficient and more successful: “We’re now able to have pretty short and focused discussions, figure out what the points of view are, and make a decision quickly” (Tempest 1999: 9). Being outsiders, we are unable to observe directly the decision-making processes or capacities of eBay, yet we can examine their outcomes, and these support Whitman’s assertion in relation to two aspects of organisational administration: tactical focus and speed. Similar to Priceline, Amazon, Yahoo! and other leading Internet companies, eBay has more venture prospects than it can address. This excess would be a nuisance were it not for eBay’s definite understanding of its objective and its rigid concentration on a few strategies. That objective, which is to be the biggest face-to-face online auction company globally, is expressed repetitively by the top management. Every vital decision should be tightly aligned with that objective. Similarly, the company has traditionally recognised a few strategies for various attributes of its enterprise: widening the user base, reinforcing the brand, expanding the trading foundation, cultivating community fellow-feeling, and improving site features and usefulness. Yet again, any strategic or policy resolutions should improve one or more of these underlying tactics (Angel 2002). Transparency and simplicity of objectives and strategic orientation make the process of decision making faster, more efficient and more successful. The process of decision making for a number of Internet competitors, specifically Amazon, which is aiming to be everything to every individual, should be more taxing and time-consuming due to its very expansive mission (Angel 2002). The essentiality of time cannot be exaggerated in the dynamically shifting dimension of e-commerce. If evaluated exclusively on the basis of its most important public announcements, eBay is competent in making major decisions promptly. Undeniably, one of the major difficulties of examining eBay and writing this essay has been the incessant current of announcements made by the company on new projects, new programs, new site features, new rules and regulations, new purchases, new alliances and other key innovations. These speedy announcements disclose an Internet company that endeavours on opportunities and difficulties promptly and get rid of them without a bunch of hand-pressing or setback. Dimension and organisational plainness definitely add to this. The value of these choices, though, remains obvious. B. Developing the Web Site For example, you are a seller and that roughly 20,000 individuals visited your store throughout your first year of business. The following year, 250,000 people passed through your store’s entrance. This is good news for business, though traffic indoors and in the parking lot will be a great problem. You recruit a designer and a service provider to work on the expansion of the store and the parking lot. Near to the end of the fourth year, the number of your customers has suddenly increased into 3 million, and people are regularly crashing in. A long line of impolite customers lengthens from the store’s entrance around the street. The customer population reaches 15 million after the fifth year, and at present the queue of people attempting to make their way in through your entrance lengthens unimaginably! eBay is not a vending store, yet the aforementioned numbers illustrate the explosive increase of its registered users in the recent decade. The frequency of auction inventories and transactions throughout that period has accompanied a parallel velocity of increase, forming a key infrastructure difficulty for the company’s top management. Escalating traffic levels on the Web site of eBay demands regular expansion and enhancement of technology, systems for the processing of transactions, infrastructure systems, and the technical experts needed to sustain it. Sizeable capital investments should be made to acquire and set up servers with the service providers of the company. Any relaxing in this attempt could lead into a sluggish response instances for users or potential service defects. The eBay customer base will put up with neither (Dholakia et al. 2002). The first experience of Meg Whitman of the broadening problem took place within a month of partnering the corporation, when the site crashed and malfunctioned for more than five hours. As outsiders, we can merely sense the alarm and disappointment around the eBay store at that moment. The system had overload capacity and support potentials, yet insufficient to remove the possibility of defects. Even at that time the system was providing tremendous everyday demands: millions of Web page view demands, millions of searches, thousands of individual offers, and e-mail requests. Furthermore, an online auction has distinct and taxing constraints that other systems do not confront: “constant processing and reprocessing of incoming bids” (Bunnell & Luecke 2000: 106). These put unbearable strains on the site and weaken its stability. One way out to the dilemma of stability was to set up sizeable overload capacity, which the company provided in the past. Excess capacity is expensive, yet Whitman perceived this outlay as insignificant compared to the outlay of defects and inadequate Web site operations. She transformed that idea into an organisational mission of steadily improving the system to the demanded capacity (Tempest 1999). Upgrading a site system is a challenging venture. Prakabar Sundarrajan, vice president of Research and Development stated that, “The key problem of growing in scale with demand [for Internet companies in general] is predicting what the demand will be... You can’t say that demand will grow by a certain factor. It’s not a smooth curve. You’re going to have spikes and you’re going to have unpredictable events [such as denial of service attacks].” He claimed that an Internet company as well should have the appropriate form of capacity for the appropriate form of demands. Calculating those demands is challenging. “It’s difficult to build overcapacity for everything” (Bunnell & Luecke 2000: 107). Whitman’s tactic of setting up overload capacity, though, appears to be paying off. Throughout the very obvious refusal of-service criticism against eBay and other key Internet companies in 2000, the problems of eBay were extremely narrow. And by that same year, it seemed that the rate and seriousness of previous service defects was not likely to duplicate itself (Black 2005). III. Gearing Up for the Future The marketplace for individual-to-individual Internet dealing in 1999 was virtually young, transforming quickly, and an issue of cutthroat competition. Online auction sites were burgeoning like mushrooms. “It was nerve-wracking,” revealed by Bob Kagle of Benchmark, “when we saw one competitive assault after another being mounted” (Bunnell & Luecke 2000: 155). It began with Onsale, which was previously recognised as a trendy site for transactions between business and customer. Onsale had enormous assets and resources and initiated a significant marketing attempt in getting underway its individual-to-individual auction site. MSN, Lycos, Excite and Yahoo!, and numerous small thematic online sites came forward, which is indeed motivated by the apparent success of eBay and the low entry cost. Searching for something strategic to attract dealers their way, a number of them removed the typical dealer charges (Bunnell & Luecke 2000). All discovered the attempt difficult. Yahoo! Auctions surfaced online in 1999 with a remarkable range of service providers and buyers but was unsuccessful to establish much of an impression. According to AuctionWatch.com, “To understand what ails Yahoo! Auctions, all you have to do is visit its message boards. It’s quiet—real quiet – underscoring one of the site’s real dilemmas: lack of community and user loyalty” (Bunnell & Luecke 2000: 156). “It’s been difficult for us to build up our site [to close] to a million listings,” revealed to the AuctionWatch.com by a Yahoo! representative. “It’s taken us a year to do so, and we started when eBay was only listing 700,000 items” (Ritchie 1999: 1). Following competitors would have encountered greater problems in obtaining footing. The “1,000-pound gorilla of the Internet” (Bunnell & Luecke 2000: 156) surfaced into the individual-to-individual auction market in 1999. With nearly 10 million users, 15 million offered products and services, and Web site features that took advantage from the trials and errors of eBay, the entry of Amazon.com to online auction market became a strong wedge, hammering the share price of eBay by more than $10 in one day. eBay was a gigantic remedy in e-commerce, yet Amazon became much bigger (Bunnell & Luecke 2000: 156). The Internet community witnessed the competition between eBay and Amazon with fascination and keenness. Amazon was consistently venturing into new fields; it intended to span the entire universe. Yet this was the first time it had rivalled a reputable online company, and its growth, or lack of development, would suggest much regarding its capability to embrace its own in a prospective, more developed Internet economy. The new online auction site of Amazon was strikingly similar to that of eBay’s. The source of its layout and features is unquestionable. User contracts and logistics were remarkably comparable. By plan, any user of eBay would be at home at Amazon and will encounter no difficulty in using and consulting the site. There were as well essential bonuses. Providers received a no-charge agreement for a number of months as the site upgraded. They might as well get a complimentary cross-promotion to related retail sites of Amazon (Dennis et al. 2004). For instance, a dealer auctioning a picture of Paul Anka’s with the artist’s autograph could be able to connect the auction to a related site of Amazon selling Anka’s latest album. Amazon as well enhanced the stake on buyer assurances. Its A-to-Z Guarantee is intended to endorse the stakes of a dealer failing to dispatch an item that was already been paid by the customer, and a bought item being physically dissimilar from the description of the dealer (Dennis et al. 2004). Numerous were amazed by a number of the apprentice’s features. As stated by the AuctionWatch.com, a service provider that supervises and appraises online auction sites, Amazon “has outclassed the competition in the area of customer service” (AuctionWatch.com 1999: 1), a constantly challenging field for eBay. “Long-term customer service for new users is eBay’s biggest cross to bear,” added by the AuctionWatch review. “Currently, new users are falling through the cracks. The site is simply unable to keep pace with the number of customer service queries it receives” (AuctionWatch.com 1999: 1). Amazon asserted more improved strength in this critical area. As a late competitor, Amazon had stumbled upon the edge of the online auction market’s golden rule: “buyers and sellers go where the action is hottest” (Bunnell & Luecke 2000: 157). Keenan Vision (1999) mentioned in a previous statement that “eBay has found a natural feedback loop where creating a critical mass of bidders increases the price obtained by sellers, which increases the number of sellers, which attracts more bidders, et cetera” (para 4). Getting through that loop is particularly challenging. It is like acquiring employment experience. Larry, also known as the wishmaker, recapped the points of view of several expert sellers of eBay: “I’ve posted auctions on just about every site you can imagine [but] I pretty much stick with eBay.” His explanation for routing many of his enterprise through eBay is direct and indicative of those Amazon aimed to catch the attention of. “The buyers are there [on eBay]. I’m established there. My feedback rating establishes me as an upstanding member of the community. I don’t have those ratings on other sites because I don’t do much business on any of them. I’d rather stay where I’m known” (Bunnell & Luecke 2000: 158). Another loyal customer of eBay provided this chat room suggestion: “I love the format at Yahoo! and at Amazon. Buy ya gotta be where it’s at” (Bunnell & Luecke 2000: 158). Yet Amazon was not done giving its strongest competitor challenges. In 1999, it launched zShops, a step that intended to build an Internet shopping marketplace wherein dealers could sell their products and services. On its first day, zShops presented nearly a million items, approximately thrice the quantity of items lugged by a Kmart store: movies, music, collectible items, artwork, cars, books, toys, and others. According to CEO Jeff Bezos, “We will be a place to find anything” (Bunnell & Luecke 2000: 158). The mission of Amazon was to become the largest shopping mall in the world. Success would strengthen its appealing power on the Internet relative to Yahoo! and other greatly trafficked gateways. zShops as well intended to draw the attention of the thousands of independent dealers who were uneasy to make use of the Web as a new delivery means, involving those presently selling through eBay (Dennis et al. 2004). zShops assured to be a an effective remedy for Amazon, which during that time had dealt with a loss of nearly a billion dollars. A flow of money from monthly charges to registering sellers and a small percentage fee against all transactions for which Amazon managed purchases from credit cards would sustain the growth of revenues and help sustain the massive stock price of the company. And dissimilar to the book and CD auctions of Amazon, zShops would demand no catalogue, stockrooms, or other permanent assets. All obligations for cataloguing, billing and shipping would be placed on the shoulders of partaking z-sellers. It resembles the hands-off, charge-based business framework of eBay. Amazon just has to manage the site and amass its charges (Dennis et al. 2004). zShops was exceptionally appealing to several individual sellers in that it provided them access to the growing groups of users of Amazon, which at that time numbered more than 10 millions. Larger retailers were less delighted, since Amazon would mediate and negotiate between them and the users with whom they intended to develop durable relationships (Bunnell & Luecke 2000: 159). IV. Conclusion At the advent of the new millennium, eBay remains uncontested as the leader of the individual-to-individual online auction market, with a nearly 100 percent of market share. The number of contenders is increasing, and working real hard to dethrone the king. In my own evaluation I think eBay managed to overpower the biggest problem confronting all online auction sites, which is amassing an enormous base of sellers and buyers. This in itself reduces the possibility of being smouldered which is every users of auction greatest worry. eBay will remain unchallenged unless other big online auction sites can even out the playing field. If and when that happens, the layout and customer service problems of eBay will definitely emerge as the weak point of the site. Its weak point will be its most at risk and the rivalry can generate important inroads. The success of eBay in its preferred market forte indicates quite a few significant lessons for any Internet company that aspires for success in individual-to-individual e-commerce. First, auction sites should dominate the highest share of transactions. Sellers and buyers go to the site with the highest user base, which is also referred to as the network influence. Second, auction sites should provide a substantial and fascinating assortment of products. The depth and variety of available products draw the attention of buyers, which consequently will attract more providers. Third, establish system dependability. Defects are expensive and weaken the loyalty of customers. Fourth, offer first-class customer service. Customers demand to have their queries answered and their issues resolved, if not they will discontinue using the site or resort to another site. Fifth, guarantee the dependability of user billings and shipments. These are paramount necessities for site reliability. Sixth, boost brand popularity. With countless Internet users resorting to online auction sites in the near future, brand popularity is the most guaranteed way for enlarging new site customers and enlarging transaction quantity. Seventh, improve Web site handiness and friendliness. If a site can be accessed and explored easily, more individuals will visit the site, stay logged on for longer hours, and make more business dealings. And lastly, improve on first-class search devices. People will not purchase what they are unable to find easily and swiftly on the site. References Books Angel, K. (2002), Inside Yahoo! Reinvention and the Road Ahead, New York: Wiley. Bronson, P. (1999), The Nudist on the Night Shift, New York: Random House. Bunnell, D. & Luecke, R.A. (2000), The E-Bay Phenomenon: Business Secrets behind the World's Hottest Internet Company, New York: Wiley. Dennis, C. et al. (2004), E-Retailing, New York: Routledge. Dholakia, N. et al. (2002), Global E-Commerce and Online Marketing: Watching the Evolution, Westport, CT: Quorum Books. Tempest, N. (1999), Meg Whitman at eBay Inc., Boston: Harvard Business School Press. Journal Articles AuctionWatch.com (1999), A Review of Amazon.com, 16 August. Black, G. S. (2005), Is eBay for Everyone? An Assessment of Consumer Demographics, SAM Advanced Management Journal , 50+. Ritchie, E. (1999, October 20), The Fairmarket Approach, AuctionWatch.com . Online References “Amazon.com Makes a Market with Auctions,” Keenan Vision Spot Analysis, 1 April 1999. www.kennan-scope.com. 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