eBay found success as an online auction website when it launched in 1995. It has always connected buyers and sellers globally. The company revolutionized the online shopping experience. Even though eCommerce has taken off in recent years, eBay has managed to stay relevant. This case study will explore how eBay became a top eCommerce website. It will also explore what innovations it has created to keep buyers and sellers on the platform.
Company Goals and Impact
eBay began as an experiment. Founder Pierre Omidyar launched the website “Auction Web” in September 1995. He built the site on his home computer using his code. While used technology to build the site, Omidyar was not interested in creating a robotic service. According to the company’s history, he was “dedicated to bringing together buyers and sellers in an honest and open marketplace.”
He soon made his first sale of a broken laser pointer for $14.83. It might seem like an odd thing to try to sell and an even more bizarre thing to buy. Yet, it was precisely what the buyer was seeking. This exemplifies the point of Auction Web (which changed its name to eBay in 1997). It is not just about making a transaction. It’s about bringing people together. By putting people first, eBay has been able to grow as a company. Its commitment to connecting buyers and sellers has kept it relevant in the face of new tech companies.
The broken laser pointer began the company’s journey of connecting buyers and sellers. The company’s mission statement has changed over the years. The company website states, “We Empower People and Create Economic Opportunity.” In recent years, eBay’s reach has expanded from one-off sellers. Its platform is now a primary source of income for small businesses and entrepreneurs
eBay remains committed to impacting lives as an organization. Its website details the company’s annual goals. These generally fit inside one of three categories: economic empowerment, charitable contributions, and sustainability. Interestingly, eBay’s goals do not mention a target revenue or growth for the business. Instead, every goal has the interest of benefitting people in mind.
eBay has been able to make strategic business decisions to grow as an organization thanks to its goals. It is focused on making an impact on buyers, sellers, and the world at large. Every decision centers around the founder’s initial premise. When buyers and sellers win, eBay wins.
Revenue and Business Model
Naturally, the goal of any business is to make money. eBay has been wildly successful at bringing in revenue. By the end of 1996, the company had already sold $7.2 million worth of goods. It went public in 1998 with shares priced at $18 a share. Today, it’s a multi-billion dollar company with no signs of slowing down.
Part of the company’s success is due to the simple concept. As a digital auction house, people from around the world can find and buy a wide range of products. It brought people together in a way that had never been done before.
To stay competitive, eBay needed to evolve its business model. Over two decades, technology advanced, and more eCommerce websites emerged. Today, eBay has transformed from an auction website to a full-fledged marketplace. It started by focusing on niche items. Toys and collectibles were two primary categories. Over time, it has grown to include electronics, clothes, furniture, cars, and much more. Many buyers search the site seeking a deal. The ability to bid on an item and get it at a lower-than-market price is a unique feature other sites don’t have.
Transactions occur between individual buyers and sellers. eBay makes money by charging sellers when they sell items. It’s free to list most items, which encourages people to start selling. Every listing gets charged a final value fee once the item sells, ranging from $0 to 10 percent of the price. All fees are outlined for sellers on eBay’s website. eBay also makes money off ads, including classifieds that buyers can buy for $9.95 per 30-day listing.
eBay keeps both buyers and sellers happy. Buyers have access to a massive product catalog. Often, eBay is the only place they can find specific items. They enjoy a generous return policy, fast delivery, and free shipping. Sellers get a large global audience for their products. eBay does the work of marketing for them.
As other eCommerce platforms formed, eBay needed a way to keep its competitive edge. One thing it did was start acquiring other brands. Some notable brands it has owned at one time include StubHub, PayPal, Craigslist, and Skype. Every acquisition was strategic. These companies all align in some way with eBay’s goal of connecting buyers and sellers. Integrating PayPal with eBay, for example, earned revenue for eBay twice. It got paid first when an item was sold. It then got paid when the purchase was made over PayPal, resulting in a small fee for the buyer.
Over the years, eBay has expanded beyond the one-to-one buyer and seller relationship. It now caters to entrepreneurs and business owners. Many eBay sellers are independent users who use the site to clear out their attic. In recent years, though, the company has paved the way for entrepreneurs to as well. Independent store owners can reach an international consumer base with eBay. They no longer need to be geographically limited.
eBay stays competitive by proactively helping its sellers succeed. The Retail Revival program trains retailers to market to a global audience. This 12-month program helps businesses get off the ground. As a result, they can make money for themselves and for eBay. Buyers looking to support independent retailers can choose to shop with Retail Revival brands. Some of these retailers only operate through a digital storefront. Others have a brick-and-mortar storefront as well as an online presence.
Unlike other eCommerce sites, eBay does not compete with its sellers. It does not have its own branded line that shoppers can buy. Some companies might see this as a risk for the company. It needs to rely on the success of independent sellers. However, this reduces competition on the site and enables eBay to focus on helping sellers.
Recently, the company announced a vertical growth strategy. This would allow it to focus more in-depth on specific buyers. It is an effort to help the company compete with niche marketplaces. For example, some marketplaces only sell particular products, like sneakers. eBay is testing ways to increase how much time current users spend on the site. This is considered more important than attracting new users. Encouraging existing sellers to sell more products can make the company more money. It can also improve the quality of products and the buying experience.
Security Risks and Threats
As a company that operates using independent sellers, eBay faces several external risks. Many of these risks are passed down to buyers and sellers. Anyone who wants to buy or sell items online needs to be aware of the inherent risks. Buyers risk ending up with fraudulent, broken, or unusable items. They also risk not getting their items on time. Sellers risk not getting paid for their items. They may also face inappropriate or rude buyers.
To combat these risks, eBay has had to be proactive. So, eBay has taken steps to ensure a smooth experience for everyone. The Feedback Forum allows buyers to leave feedback about sellers. It operates through reviews. Users can search for a buyer to see what other sellers have said. Sellers want to receive positive feedback to encourage buyers to shop with them. Thus, the forum aims to keep sellers honest about what they are selling. By providing positive experiences, they will continue receiving positive feedback.
Sellers can also be rated, but only positively. If sellers have issues getting paid from a buyer, they can report them using the Seller Reporting Hub. Sellers can also set buyer requirements to block buyers who meet certain criteria. Sellers can restrict buyers from certain countries. They can also block buyers who have a history of not paying for their items.
Besides risks for buyers and sellers, eBay has to consider cybersecurity. Any company that operates as a website faces security risks. Hackers threaten to get financial information or spread malware. A data breach in 2014 led to the company requesting 145 million users to change their passwords. Information leaked included names, addresses, email addresses, phone numbers, and birth dates. Fortunately, financial information was not included in the data breach.
Protocols are in place to ensure the security of financial and personal information. Users can only take advantage of these if they buy and sell directly through the website. This protects the company and its users.
Putting people at the forefront of its business means ensuring sellers are happy. Sellers have the option of many eCommerce sites to use. That’s why eBay is committed to creating a community among sellers. eBay Communities officially launched in 2013. It encourages sellers to engage with each other. They can ask questions, share experiences, and seek advice from other sellers. It has the feel of a small business community. The forum creates a shared experience for sellers who live everywhere in the world.
In addition to message boards, there is a weekly chat hour that sellers can take part in. This lets them ask eBay staff members questions directly, instead of posting it on a message board and hoping somebody will see it.
The Community also includes groups. These categorize like-minded sellers by what they are selling and their experience level. By distilling the community into smaller groups, sellers can have more meaningful conversations. They can start recognizing other members and become a digital form of co-workers. In some cases, they form business partnerships. The Community simulates a real-world retail community. eBay aims to connect buyers and sellers based on common interests and passions.
Finally, eBay hosts multiple in-person events across the country. These events bring sellers together who live in a similar geographic area. They are meant to help sellers get the most out of their eBay platform. They also offer a way for sellers to meet each other in person. At the event, sellers can form relationships that can continue in the digital space.
Finding Future Opportunities
eBay started out as an auction website. It was intended for sellers to sell to the highest bidder. As eCommerce developed, the business model has shifted to allow for “buy it now” options. Sellers can operate as digital storefronts. At the same time, the auction option is still available.
As technology has advanced, new methods for communicating with customers have emerged. These are useful for improving customer satisfaction. Chatbots are available to answer common questions. Artificial intelligence is woven into the site. This allows for more personalized experiences for all users.
The company has faced some criticism from users who do not believe their voices are heard. To continue growing, eBay will need to listen to its sellers, as they are the ones making the company money. The company recognizes the need to be ahead of the competition. It recently announced that it would be launching a “tech-led reimagining.” eBay will focus on improving the experience for both buyers and sellers through tech. Examples include accepting on-site payments, developing a content-rich mobile app experience, and launching enhanced mobile search options.
Even though it sells everything, eBay manages to keep a hold in the niche marketplace of online auction websites. It provides opportunities for collectors and enthusiasts to buy hard-to-find items. They can connect with others who share their interests.
As it continues to evolve, eBay will keep innovating new ways to stick to its original principle. It will continue providing an opportunity for buyers and sellers to connect in a free and open marketplace. Whether through a mobile app or a redesigned website, eBay needs to provide tech-rich experiences to stay relevant.
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