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Future Strategies of eBay
eBay was founded in 1995 by Pierre Omidyar as "AuctionWeb," part of a larger personal site that included, among other things, Omidyar's tribute to the Ebola virus (Wikipedia, 2004). The site belonged to Echo Bay Technology Group, Omidyar's consulting firm. He had tried to register the domain name "EchoBay.com" but found it already taken, so he shortened it to his second choice, "eBay.com." eBay is headquartered in San Jose, California. Meg Whitman has served as eBay's president and CEO since March 1998.
eBay has transformed traditional businesses through technology and understanding consumer needs (Cohen and Lopez, 2002). eBay transformed the ideas of low growth, private party newspaper classified businesses into an auction business. eBay has also revitalized traditional automotive advertising. Recognizing that businesses needed to move obsolete or slow-moving items, but not to "advertise" broadly, eBay created new outlets for major business-to-business and business-to-consumer players.
The eBay marketplace makes it easier and more cost efficient to connect buyers and sellers (Cohen and Lopez, 2002). It has connected millions of people worldwide, allowing them to communicate and exchange merchandise at a minimal cost.
eBay has many creative marketing programs targeting the company's millions of registered users (Meyers, 2003). For example, buyers of Star Wars toys and collectibles can enter codes at a special Jedi Master section of the eBay site and accumulate points that can be used for future purchases. In addition, through eBay's strategic marketing partnership program, branded companies like Dell and IBM have built eBay "stores."
One of the main ingredients to the success of eBay is the rating system that grades every individual and organizational seller and buyer (Meyers, 2003). Ratings are developed based on the number of successfully completed transactions, providing an assurance program to avoid unethical transactions. Consumer confidence in eBay is the strategic advantage that allows brand marketers to confidently entrust their brands to eBay's unique auction-based marketing experience.
Currently, eBay's smaller merchants feel that they are having difficulty competing with well-known companies in the same market. When potential bidders see two different computers offered on eBay with one auction having a single seller named "techietom" and the other being backed by a large company like Dell, intuition holds that there will be a higher reputation with Dell (Wells 2002). Some preliminary investigation supports the observation that the smaller firms and individual merchants are having a hard time making their reputation strong because they don't have the support and reputation of a well-established company.
From eBay's perspective, it is in their best interest to keep growing and most critics agree that "eBay must move beyond these small-time merchants, without abandoning them." (Wells, 2002). Smaller businesses perceive companies like Sears as a threat, but eBay's argument is that they get treated like every other merchant and must pay the same commissions and fees. However, a good alternative strategy for the future would be to retain smaller merchants and promote their businesses, perhaps by cutting them a break.
eBay's strategy thus far has been to attract mass-market merchants of consumer products (Steiner, 2002). However, it has recently increased its strategic focus to include consumer services. For example, in 2002, eBay announced a new travel-booking service in a deal with Priceline.com. The new travel booking service provides eBay customers the ability to book flights, hotel and car reservations in an auction format or a "Buy it Now" fixed-price format. The company has also added a "timeshare marketplace" in its eBay Real Estate category, developing relationships with three major players, including a consortium of vacation ownership developers and one of the largest resellers of timeshares in the industry.
Offering services is one more step in eBay's strategy of going from "World's Largest Flea Market" to "World's Largest Mall" (Steiner, 2002). However, there is a great deal of room for the company to expand and explore alternative strategies.
According to eBay CEO Meg Whitman (Business Week Online, 1999): "We started with commerce, and what grew out of that was community. So we think of ourselves as sort of a community-commerce model. And what we've basically done is put in place a venue where people can be successful dealing and communicating with one another. But we also want to expand the kinds of merchandise sold on eBay. The Butterfield & Butterfield [Auctioneers Corp.] acquisition helps us accelerate our entry into the premium segment. And then we also want to get into the kind of merchandise that is not necessarily shippable because it's not economic to ship or you want to see it before you buy it. So cars, boats, RVs, things like that. We're also looking at the kind of merchants who sell on eBay. In the beginning, this was strictly about individuals doing business with one another. What happened is that some of those individuals actually became small dealers. They quit their day jobs to sell full time on eBay. Now, we have a lot of merchants who keep their storefronts but in fact their most profitable distribution channel is eBay."
As part of its strategy for the future, eBay has making many changes to its site and improving its usability. As eBay continues to grow, usability will be the key to stability and performance. Therefore, eBay main strategy should be making the site easier to use and consistent.
ebay began exclusively as an auction site. However, quarterly and annual reports show that a large portion of the company's sales are by fixed price and Buy It Now sales, rather than solely by auction.
ebay's initial attraction was the opportunities that it provided. The thrill of bidding on an auction and competing was a major draw for buyers. For those selling, the seller enjoys full control over the lowest price that they accepted, yet also had the possibility to sell their items at a much greater cost than anticipated. For retailers, eBay provided access to a worldwide market and allowed even small businesses the opportunity to become international.
eBay's monopoly of the online auction industry gave it a major advantage. Nearly all buyers flocked to one specific place to buy and sell. This meant that listing on eBay accessed just about the entire online auction industry. If an item was desirable, it would very likely be found by those who wanted it, if they were online.
However, recently eBay decided that expansion lay in retail, and the shift to retail has changed the face of eBay significantly, as retail and auction sellers have different needs. In a nutshell, auction sellers need a simple marketplace that introduces buyer to seller and allows the marketplace to dictate the real value of the item being offered. Retail sellers, on the other hand, appeal to the impulse buyer and the buyer seeking instant gratification.
This has created somewhat of a conflict, as sellers' needs now differ to the point that auctions and the listing of differing items have now become inefficient on the Ebay site. Therefore, as a new strategy, eBay could separate retail from auction by creating two sites -- one exclusively for the use of auction type sales and for retail. Because the systems employed could be far more basic structures, would keep the auction site both more efficient and cheaper to run, and with a simplified listing process would make sellers more productive and mean more fees for eBay.
Customer support is a major part of eBay's strategy (CRMXchange, 2000). The company's recent surveys show that the majority of its users would recommend eBay to a friend. And eBay recently received the "Best Customer Satisfaction" award from Satmetrix. The company's accomplishments have been largely achieved on a strong and robust technology platform that consistently delivered at least 99% up time. However, while the company has made significant technology progress, its ongoing strategy should include constant efforts to…[continue]
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