George Mason University
An Analysis of eBay
eBay has changed the landscape of micro auction from consumers to consumers. It is the fastest growing C2C auction site with more than 90 percent market share. The success factors for eBay are – flexibility and ease with which consumers can transact with each other, very efficient and least cost transaction mechanisms, and finally reliability of payment systems. Consumers consider eBay as the largest electronic garage sale where millions of buyers see the products of sellers. Performance indicators of 2002 of eBay that were discussed thorough out the paper, clearly indicate that a revenue of $14.87 billion ($470 per second), 12 million listed items over 18,000 categories, in four countries, is highly impressive.
Revenue model of eBay is beneficial to both sellers and users as the sellers pay a minimal fee to list their products and when they are sold a transaction fee is collected. This satisfies sellers as they don’t mind to pay 5 to 10 percent of sales revenue to eBay. Buyers are happy as a third party keeps track of payment systems and delivery schedules and funds from buyers are released only after delivery takes place. This is a win win situation for both buyers and sellers. Most importantly eBay’s model facilitates micro transaction which consumers highly appreciate.
From eBay’s point of view, it was a successful model as they don’t have to bear any inventory costs, which was the cause of down fall of many B2C businesses. Those who succeeded are not making much money like Amazon.com as they still have to bear inventory costs, in spite of their efficient inventory management controls in the value chain systems.
Based on these observation we conclude that eBay will have a great success
in the years to come. Particularly after the acquisition of half.com there is
no credible competition for eBay. We believe that eBay should use these factors
to their advantage and not become a “fat cat”, i.e. get lazy and
not plan ahead to be on the cutting edge competition which IBM missed when PC
market was emerging. We raise two concerns about the future of eBay.
1. On the downside, the ongoing trail against eBay by T.G. Woolston may create some problems for eBay if federal court rules that eBay violated the intellectual property rights of the patent of Mr. Woolston. An out of court settlement may be likely but if it costs too much to eBay, either one time or on an ongoing basis, it might take away the margins of eBay’s users which might lead other companies to find new cost effective technical solutions.
2. The security systems are not still 100 percent tramper proof. Our group has demonstrated spoofing is still a problem, by sending an email from one of our student accounts to our group account, requesting information for PayPal by mimicking as if the email originated from PayPal. If we could do it so easily, one could imagine that it would cast doubt about the integrity of security systems of eBay. If these problems are not sorted out trust of eBay would be eroded. We recommend that besides sorting out problems after consumers are cheated (by putting in place a listing of buyers and sellers who have been robbed of) it is better to avoid a problem as much as possible by closing the loop wholes in credit card/payment systems to the best of their abilities (as there is no full proof mechanism on the internet as given sufficient resources most of the systems could be hacked) without jacking up the costs too much.