E-Bay: Online Platform for Business - Case Study Example

E-Commerce Report By: Executive Summary E-commerce is continuing to grow. Experts warn that the online auction concept may be defining a totally new and unique distribution alternative due to continuous growth in electronic commerce. This study will examine the e-commerce phenomenon and will focus on e-Bay, an online platform for business. The data in this research indicate that, online transaction has many benefits, provided the online platforms use effective marketing strategies and have distinct leadership. The study used both primary and secondary data to derive the findings. Contents Executive Summary 2 Introduction 4 Brief history of the company 6 Corporate Strategies 7 SWOT analysis 11 Demographic target group (25 to 35 years) 13 In-Depth Interview 14 Effectiveness of eBay 18 Recommendations for further research 19 References 21 Introduction E-bay is the most popular market place on the internet. It allows members to sell and buy anything online. The service was launched in 1995, and by now it serves over 140 million people in the world. Statistics indicate that over 4,000,000 in the world are making all or most of their living on E-bay. E-bay’s online paying system is called PayPal and it enables transactions anywhere in the world. According to E-bay’s top leadership, trust is the ingredient that enables the company gain immense success (Anttiroiko, 2008). E-bay has a positioning statement ‘The World’s online market place’. This statement means many things about the company’s identity. The company has been able to trade on local, national, and international basis. It has traded with a diverse and passionate community of individuals and small businesses. EBay offers an online platform where millions of items are traded each day. EBay in 2014 continued to show good results. It showed strong growth but the competition is rising. The graph below indicates the percentage of mobile usage as of the first quarter of 2014, and eBay was the only e-commerce platform that appeared in the rankings (Collier, 2009)). The objective of eBay was to develop the work ethic and culture of eBay as fun, open and trusting environment. Additionally, the company aims at keeping the organization focused on the big picture, objectives and key priorities (Bidgoli, 2010). Brief history of the company Pierre Omidyar formed the company. He wanted to ponder an internet auction venture. Pierre wanted to create an efficient marketplace, where everyone had access to the same information and could compete at the same terms as anyone else. He launched eBay from his home in mid-1995. By the end of that year, the concept of an internet market place caught on so quickly. The website became a hit immediately, and started recording high profits. In 1998, the website went public. It sold a share at $18. By March 1999, each share was selling at $ 282. At this time, the company’s capital market capitalization had surpassed that of big companies, for example, Amazon. It became the world’s most valuable internet retailer. EBay strategies are very straightforward. EBay has gained respect and attention from numerous internet users. This is because the company focuses on trading a lot of money on mere faith and trust. The website believes the people are good. It believes the customers have something to contribute, and that honesty, open environment can bring out the best in people. The company recognizes and respects everyone as an individual. It encourages each customer to treat others the way they want to be treated. In general, the website’s values mean that the entire strategy lies in trust in order to build e-loyalty. This is to ensure s long-term profitable relationship with the customers, and to encourage open and honest communication between clients (Boyce, 2006). Corporate Strategies The company has five corporate strategies. The foundation of eBay lies on the idea that practically anything is sold over an internet platform. EBay’s business model is to conduct commerce through the internet. The model became very effective in the world and more and more people preferred to transact online. People preferred to enjoy the comfort of their workplace or home and still buy things by the click of the mouse (Collier, 2009). EBay can bid anything, ranging from office stationary to real estates, to cars. Many online retailers have failed to accomplish what eBay has done. According to business experts, eBay has ruled the market because of two long-term goals. These are, becoming the world’s largest consumer-to-consumer online auction house, and building out of the five corporate strategies (Collier, 2009). From a closer analysis of these corporate strategies, one notices that the website has applied sound strategic management. Its business model emphasizes on creating an environment where anyone can come and transact without feeling cheated. Below is an analysis of the five strategies: Establish a larger user base EBay had a strategy of attracting new customers. The company started forming relationships with more than 60 websites. The relationship with America online was the one that gave eBay the largest access to the biggest user base on the internet. Additionally, the website focused on fast growing and fragmented small business market. It created a feature called business exchange with this market. Businesses in this market were able to buy or sell business merchandise in their local market (Bunnell, 2001). EBay has the biggest market in the US as indicated in the graph below. eBay focused on local and international trading The website had already created 53 US markets. The markets were created by delivering the best services and giving users the continence for shopping. The website used this strategy to build a global presence in more than 150 countries (Bunnell, 2001). Creating a strong brand The company emphasized on quality. When the company started, the management did not spend in marketing, but rather relying on viral marketing. The company used a lot of effort in retaining market recognition. After arrival of new professionals, the company’s brand improved significantly (Ennico, 2007). Broadening the trading platform By 1999, there were many competitors in the market for eBay. Majority of the competitors were big start-ups, including Yahoo and Amazon. These competitors were internet significant players with established user bases. To increase its competitive advantage, eBay extended its core businesses into other attractive niches. There was introduction of higher priced product categories, which in the end increased the profit margin despite using minimum infrastructure and low operating expenses. Furthermore, the company made new acquisitions, for example buying the auction house Butterfield (Ennico, 2007). Maintaining strong community affinity The website believed in the idea that developing direct interaction between buyers and sellers would enable creation of loyal and active community users. This strategy has been part of eBay since its inception, as noted earlier (Bensinger, 2012). The company has applied the five external market tests. These tests enabled common persons, not aware of online retailing, to understand eBay. Some of the market tests include: Inimitability: Are the resources hard to copy? EBay’s resources are very easy to copy. Durability: Are the resources durable? Do they take time to depreciate? EBay’s resources are very durable. Appropriateness: Do people capture the value of the resources created? EBay resources are very valuable for auctions. That is why the website generates a lot of profit from the people. Substitutability: Can different resources replace a unique resource? EBay has improved its substitutability. It has committed internal resources to improving customer experience. Despite EBay’ competitors such as Yahoo and Amazon having better services, eBay has one resource that cannot be replaced. This is a large and loyal community. SWOT analysis Strengths of eBay EBay is the number one online transaction website. More than 100 million people conduct transactions on this site every day (Collier, 2009). The website utilizes the benefits of Customer Relationship Management. Any person that transacts in the site has to register with the company. This means the company ensures there is Business-to-Consumer. However, the Consumer-to-Consumer business model builds strong customer relationships. Strong relationships occur out of this model, whereby in most cases rewards are offered to the most loyal eBay customers (Collier, 2009). The word ‘eBay’ has become a generic term for online transactions. A company that has emulated this example is ‘Google’, which means a search engine. Many people nowadays say they are ‘Ebaying’ when they are auctioning online. The website has eradicated fraud from its system, despite eBay’s business model leaving itself open to a number of fraudulent activities. The company deals with cases of fraud very quickly. Fraud could be in the form of selling stolen goods or auctioning counterfeit goods (Bunnell, 2001). System breakdowns are threatening many technological companies. In the recent past, eBay has encountered breakdowns in its payment brand, PayPal. However, since technology is improving, this challenge becomes less of an issue (Capala, 2013). Opportunities The ability of eBay to acquire new resources provides new business opportunity for the website. For example, the latest venture by eBay to acquire online telephone company for $2.6 billion provides new business opportunity for eBay. EBay has enough capital to buy firms, and they have did it in the past, including buying the payment system PayPal. This was an effort of increasing a number of new services to the consumers. There are new and emerging markets in the world. This provides an opportunity for market development for eBay. Some of these emerging markets are India and China. Nowadays, in these countries people are becoming richer than the past. Aspirating consumers are growing in these markets (Bensinger, 2012). There are numerous opportunities in the available market. What the company needs to do is more market penetration. There are many potential customers in Europe and the USA. These potential customers are yet to discover the advantages of online transactions (Capala, 2013). Threats In normal settings, success attracts competition. Many competitors have a competitive advantage over eBay because of cultural experience in their domestic markets. When competing in international markets, eBay is faced with competition from other USA based companies, such as Yahoo and Amazon. In this case, Yahoo dominates the Japan market. There are illegal practices that threat the business model of eBay. There are unscrupulous individuals who are in a potential to attack eBay. A good example is emails sent in the name of eBay to unsuspecting customers. However, these emails may be used to steal private information from customers. EBay is not in a position to control all costs. Some of these costs are delivery charges and credit card charges. If the delivery price is too expensive due to increase in fuel prices, the customer will bear the burden, and finally, the overall price of the auctioned product becomes expensive (Collier, 2009). Demographic target group (25 to 35 years) Online shopping has attracted a considerable attention in recent years. EBay has concentrated much on younger shoppers, that is, those in the age bracket of 16 to 24 years. The company allows consumers who are under 18 years old to set up accounts and access eBay. These consumers buy vintage T-shirts, schools supplies, and many more products. The company believes majority of online users are between 16 and 24 years old (Bensinger, 2012). The company spends a lot of money in looking at ways of bring younger people in. They believe these young people are increasingly savvy and desirable consumer segment. Many technology executives privately acknowledge that minors are substantial parts of their business (Bensinger, 2012). However, the website has not considered putting in more efforts in looking at ways of bringing people in the age bracket of 25 to 35 years. Online shopping has grown significantly in recent years and many people prefer it. Many people are driven by factors such as greater variety of goods on offer, widespread usage of mobile phones by consumers to access the internet, and the increasing comfort of online users to transact (Boyce, 2006). Majority of people between 25 to 35 years have completed their studies and are very comfortable with using improved search engine functionality, able to conduct price comparison of various products, and are in a better financial position to acquire smart phones and tablets. Smart phones and tablet are the best in online transaction since they allow any time/location accessibility as well as barcode scanning (Bunnell, 2001). The company has to derive ways of gaining more consumers in the 25-35 years bracket. These consumers are able to transact online because of lower prices for shopping online, and the convenience offered by shopping online (Capala, 2013). EBay offers third party auction to these consumers. They offer access to international customer base to sell merchandise quickly easily at low costs. EBay allows people to sell old, damaged, returned, or refurbished merchandise (Ennico, 2007). For any business to occur, products should be available 24 hours, seven days a week. EBay provides the people with online auction, where products are readily available. The website offers information about a product category, and enables the consumers’ search costs to be reduced dramatically even while the number of available options increases. Buyers will experience 6-15% savings from transacting online in EBay. However, EBay charges customers for auctioning in its site (Collier, 2009). In-Depth Interview To collect primary data, the researcher conducted in-depth interviews with consumers of eBay within the age group of 25 to 35 years old. Five respondents gave their beliefs, attitudes, experience, and use of eBay. An in-depth interview was appropriate because they are useful in providing detailed information about a person’s thoughts and behaviours. For this research, there was need for offering a more complete picture on the services of eBay. Therefore, in-depth interview was used to provide context to the outcome data (Boyce, 2006). Four respondents argued that they transact their online business with eBay through their laptops and personal computers. This means that majority of the eBay customers transact using laptops or personal computers. All the respondents argued that they used PayPal while paying for eBay purchases. All the respondents argued that they prefer shopping online in order to look for the following goods. The goods are in order (from the most preferred to least preferred) Electrical and electronic items such as computers, computer accessories, and such. Clothing, footwear, and personal accessories such as jewellery, watches, and such. Recreational goods including sporting items, toys and games, music and computer games. Books and magazines Furniture and house wares Pharmaceuticals, cosmetics, and toiletries Alcohol Items such as flowers and stationary Hardware and garden supplies Majority of the respondents argued that selling online could help a business reach new markets and increase the sales and revenue gains. They believe eBay is a site that enables businesspersons find sales leads, announce calls for tender, and to offer products for sale. The respondents believed searching for products on an online platform can save time and money by allowing a person to search for the best prices without having to do all the leg work. All the respondents were businesspersons, and they used eBay to find new suppliers, post buying requests or search for products and services. They argued that the benefits of using eBay include lowering costs associated with selecting suppliers, establishing prices, ordering, and finalizing transactions. Additionally, they used eBay to support efficient information exchange between buyers and sellers. All the respondents were loyal to eBay because of various factors; offers in-store returns, offers special incentives and discounts to online customers, utilize both on and offline marketing strategies, ensures orders are accurate, ensure timely shipping of orders, responds to customer’s queries on times, they have made purchasing easy and stress-free as possible, they provide online receipts after transactions, they clearly total costs including shipping costs, they show stock availability and estimated delivery time, the website informs them of all the steps eBay has taken to ensure the security and privacy of their information, remind users of the orders they have ordered when they are checking out, and practice good customer service. The respondents acknowledged eBay’s search capabilities. When they were transacting on eBay, the respondents were able to use the advanced search function. They were able to focus on their product search in terms of variety of criteria. The criteria include the product name or description, price range, seller identity currency, and new or used products. The respondents were able to obtain price information for recently completed transactions. That said, the respondents were able to form an expectation of the likely availability and selling prices of products sold on eBay. Furthermore, they were able to determine if they would buy the goods from an authorized retailer. The respondents stated that eBay allowed them to provide feedback on sellers according to their level of satisfaction with the transaction. The respondents were able to view the feedback when they were viewing products for listings. In this case, they were able to assess the reliability of a seller before agreeing to buy. The respondents argued that, by shopping online, they were able to enhance their choices. In eBay, there are a large number of listings from local, national, and international sellers. Additionally, the respondents believed by using eBay, they were able to discover new prices, and formed new markets. EBay has a transparent platform, and this assists in the formation of market-clearing prices for variety of products. Buyers and sellers, according to the respondents, easily assessed the prices of products listed in eBay. This facilitates price discovery. EBay is useful in opening up of new markets that would not otherwise exist. This is the case for second hand products as well as niche products such as stamps, jewellery, where buyers are not easily found. The respondents argued that by providing market for second hand products, eBay facilitates recycling. According to the respondents, eBay facilitates cross-border trade. It connects buyers and sellers from different countries. According to statistics from eBay, almost 7% of sales involve buyers and sellers from different countries. Effectiveness of eBay E-Commerce is becoming increasingly more important to people. Despite many people still considering it to be in its infancy, the world is experiencing rapid growth of the internet. Statistics indicate that over 40 million households have transacted online. At least 30 million in the US have bought and sold goods more than $40 billion in the internet. This means e-commerce has become, and will continue to become a full business model for most companies (Bunnell, 2001). Bunnell (2001) indicated on the importance of understanding online consumer behaviour. This understanding is very crucial for the success of e-commerce. This is the reason why the respondents were very loyal to eBay. They argued that eBay understood their needs and wants. Another study by Collier (2009) analyzed six dimensions of consumer perceptions of service quality. These include content of the website, ease of use, accuracy of the content, timelessness of response, attractiveness of the site, and privacy. Many books also echo the stated dimensions (Anttiroiko, 2008; Bensinger, 2012; Economics, 2008). These books state that the dimensions have significant impact on online consumer behaviour. For instance, there have been increased concerns on the privacy and security of internet transactions. Additionally, managing consumer relations is also a concern to many. Collier provided evidence why the contents of the website have a major influence on the consumer behaviour. There have been even attempts by the respondents of the in-depth interviews to explain why websites need to ensure quality in their contents. Studies have shown how there are several different determinants that help attract customers on an online platform. EBay is an example of a company that has been successful in retaining and attracting customers. EBay has a strategy of presenting a lower starting price in order to invite more bidders willing to bid on the item. This increases the likelihood of a transaction occurring (Ennico, 2007; Gramatikov, 2012). This report has presented findings of a study to investigate the nature and scale of e-commerce. The paper specifically analyzed eBay, an e-commerce company in the US. The paper has found out that e-commerce is becoming part of economies around the world. It is growing day in day out in importance become consumers are becoming increasingly familiar and confident with online shopping. EBay is a very important player in e-commerce and host an online trading platform in various countries. By using eBay, consumers benefit from price savings, enhanced consumer choice, reduced search and transaction cost, price discovery, formation of new markets, small business creation, and facilitates cross border trade. Recommendations for further research Future researches and studies should investigate why online consumers are becoming increasingly sophisticated and have higher expectations than the consumers have of the past. The studies need to explain what marketers expect from consumers who transact online. There is need for future research that will discover and examine factors impacting outcomes of e-commerce auctions. Additionally, these future researches have to discuss the variations in online auction execution. The studies will discuss the different forms of online transactions that have emerged and the market mix in online business. References Anttiroiko, A.-V., 2008. Electronic Government: Concepts, Methodologies, Tools, and Applications: Concepts, Methodologies, Tools, and Applications. s.l.:IGI Globa. Becherer, R. C., 2004. Characteristics and internet marketing strategies of online auction sellers , s.l.: The University of Tennessee at Chattanooga. Bensinger, G., 2012. 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