Case study on ebay.com

Lumbini ICT College
Gaindakot-2, Nawalparasi
Nepal
Case Study of E-Commerce
On
Submitted by :
Nischal Khatiwada
Puspa Adhikari
Department of Bachelor in
Computer Science and Information Technology
(Bsc CSIT)
of
Lumbini ICT College
4th
February 2017

i
Acknowledgement
We would like to express our deepest appreciation to all those who provided us the possibility
to complete this report. In performing our case study, we had to take the help and guideline of
some respected persons, who deserve our greatest gratitude. The completion of this assignment
gives us much Pleasure. We would like to show our gratitude to Mr.Sujan Adhikari for giving
us a good guideline for assignment throughout numerous consultations. We would also like to
expand our deepest gratitude to all those who have directly and indirectly guided us in writing
this
Many people, especially our classmates and team members itself, have made valuable
comment suggestions on this report which gave us an inspiration to improve our assignment.
We thank all the people for their help directly and indirectly to complete our case study.

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List of figures
Fig 1: eBay logo
Fig 2: eBay business process
Fig 3: Reselling
Fig 4: Dropshipping
Fig 5: Retail Arbitrage
Fig 6: Liquidation
Fig 7: wholesailing
Fig 8: Deep Niche

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Abstract
E-commerce plays the vital role for the government, private sector organization as well as the
consumers which address the convenient and effective process. Therefore, we performed the
case study using one of the most popular e commerce site “eBay”. This study investigates how
this website is performing its operation and how it is supporting the e-commerce. This study
entails the ease of use of the website for performing commercial activities to the consumers
and its advantages and disadvantages to the consumer, organization as well as government.
The main aim of this case study is to analyze how these e-commerce website works and how
it is supporting the e-commerce development. The objectives of this case study are to
understand how it enables the business to get their potential customers worldwide, how its sells
its goods and services to the local and remote customers.
Here, we also analyzed how eBay perform this e-commerce i.e its business process and how it
is supporting its users to perform business or commercial activities electronically. We also
investigate the various business model like reselling, whole selling. We also studied the
mission of eBay to make it more efficient in the e-commerce technology. We then analyzed its
future plans and strategy to enhance its working and services.

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Table of Contents
Acknowledgement ................................................................................................ i
List of figures....................................................................................................... ii
Abstract............................................................................................................... iii
Table of Contents................................................................................................ iv
Introduction...........................................................................................................1
Body......................................................................................................................2
Background.......................................................................................................2
Company Overview..........................................................................................3
Objectives .........................................................................................................4
Strategy .............................................................................................................4
Pros and Cons of eBay......................................................................................5
eBay Process.....................................................................................................6
Business model .................................................................................................7
Corporate Strategies in eBay ..............................................................................14
eBay Supply Chain Management .......................................................................17
eBay Supply Chain Management System – Features.....................................17
E-Seller Hub – What Does It Do? ..................................................................18
The EBay Effect..................................................................................................19
Risk factors and competition ..............................................................................22
Risk factors .....................................................................................................22
Competition.....................................................................................................23
Risk mitigating strategy......................................................................................24
Discussion and implications ...............................................................................25
Suggestions for future.........................................................................................27
Conclusion ..........................................................................................................28
Reference ............................................................................................................29

1
Introduction
E-commerce plays the vital role for the government, private sector organization as well as the
consumers which address the convenient and effective process. E-commerce helps to increase
the market shares, sales revenue, ease access at any time, achieve the branding goals and more
importantly supports the international marketplace which is very important in the modern
technological era.
Here, we investigated on the popular e-commerce site eBay. eBay launched in 1995, is one of
the most successful and popular online auction and shopping websites, providing marketplaces
for sellers and buyers to list, sell, bid and buy products and services. With hundred thousands
of the United States citizens make their living by buying and selling on eBay, and with more
than 56 million active users, in 2009, acquired many companies, e.g. PayPal, Skype,
shopping.com, wishes to stay as a leader in online distribution channels. eBay asserts "trust"
between buyers and sellers as the key to the success of the marketplace.
"The world's Online Marketplace" statement declares the company's position in the global
marketplace
The main purpose of this research was to verify a successful ecommerce business model, from
a strategic perspective. eBay Inc., hence, selected to fulfil the research requirements, i.e. an
accessible database, adequate research works, and most importantly distinctive business
model.
The reason behind this investigation or research is to understand the business process of eBay
in e-commerce world and identify the various business model supported to enhance the e-
commerce activities between the consumers by eBay

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Body
Background
eBay is the World’s Online Marketplace founded in 1995, eBay created a powerful platform
for the sale of goods and services by a passionate community of individuals and businesses.
On any given day, there are millions of items across thousands of categories for sale on eBay,
as well as on Half.com, eBay’s site dedicated to fixed price trading. About 147 million people
now use eBay. An estimated 430,000 people in the United States make all or most of their
living by selling on eBay. eBay enables trade on a local, national and international basis with
customized sites in markets around the world.
eBay’s online payment service, called PayPal, enables transactions nearly anywhere in the
world. eBay proclaims “trust” between buyers and sellers as the key to the success of the
marketplace. eBay is the “The world’s Online Marketplace”, which is its positioning
statement, and it means many things about the company’s identity.
The company market capitalization had surpassed that of even Amazon.com, making it the
“world’s most valuable Internet retailer”. Pierre Omidyar, founder, is focused to achieve
excellence in strategic management for improving the company’s strategy, sustaining the
company’s growth and business performance, and potentially expanding from online auctions
into general “retailing”, and to become “the world’s largest online mall”. This research paper
intends to study the click and click business model of eBay, whose competitive advantage
lies in its pure play strategy, a breakthrough from the traditional brick and mortar model,
which leads to sustainable growth and a competitive edge over the other retailers.
Fig1: eBay logo

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Company Overview
People come to the eBay marketplace to buy and sell items across multiple categories,
including antiques and art, books, business & industrial, cars & other vehicles, clothing &
accessories, coins, collectibles, crafts, dolls& bears, electronics & computers, home
furnishings, jewelry & watches, movies & DVDs, music, musical instruments, pottery &
glass, real estate, sporting goods & memorabilia, stamps, tickets, toys & hobbies and travel.
Members from mall over the world buy and sell on eBay.
Currently, eBay has local sites that serve Australia, Austria, Belgium, Canada, France,
Germany, Ireland, Italy, Korea, the Netherlands, New Zealand, Singapore, Spain, Sweden,
Switzerland, Taiwan and the United Kingdom. In addition, eBay has a presence in Latin
America and China through its investments in MercadoLibre.com and EachNet, respectively.
eBay offers a wide variety of features and services that enable members to buy and sell on
the site quickly and conveniently. Buyers have the option to purchase items in auction-style
format or items can be purchased at fixed price through a feature called Buy-It-Now. In
addition, items at fixed price are also available Half.com, an eBay company. eBay is
dedicated to its community of members, and has numerous services which enhance the
trading experience. Their marketplace services include:
 online payments by PayPal
 wide array of Buyer and Seller tools
 Preferred Solution Provider programs

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Objectives
As a for profit company, eBay's objectives are :
 to develop the work ethic and culture of eBay as a fun, open and trusting environment
and to keep the organization focused on the big picture objectives and key priorities.
 to build e-loyalty, for long-term profitable relationships, these set of core values
encourages open and honest communication between its members.
 is to augment its revenue from the eBay marketplaces
 attracting new users and increase the number of customers, so called acquisition.
 to active more users to bid by imposing alluring regulations, such as lowering fees for
listings items and offering proper incentives and discounts for their customers.
 to mount up the gross merchandise volume and value of transactions which are conducted
by every single active user.
Strategy
The overall eBay aims are to increase the gross merchandise volume and net revenues from
the eBay marketplace. More detailed objectives are defined to achieve these aims, with
strategies focusing on:
 Acquisition – increasing the number of newly registered users on the eBay marketplace.
 Activation – increasing the number of registered users that become active bidders, buyers
or sellers on the eBay marketplace.
 Activity – increasing the volume and value of transactions that are conducted by each
active user on the eBay marketplace.
The focus on each of these three areas will vary according to strategic priorities in particular
local markets. eBay marketplace growth was driven by defining approaches to improve
performance in these areas.
 First, category growth was achieved by increasing the number and size of categories
within the marketplace, for example Antiques, Art, Books, and Business and Industrial.
 Second, formats for interaction. eBay Stores was developed to enable sellers with a wider
range of products to showcase their products in a more traditional retail format including
the traditional ‘Buy-It-Now’ fixed-price format.

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Pros and Cons of eBay
Pros
 Ease of use :- EBay's easy-to-use selling, listing and inventory tools make it easy to
sell your products on the site -- and do it quickly.
 Immediate access to millions of potential customers :- On eBay, which has over 149
million active buyers located around the world, you have "built-in traffic and customers
-- [and often get] above average conversion rates," says James Applegath, who sells on
both eBay and his own site, Defunkd, a vintage t-shirt collective.
 Global reach :- "As a global seller, we appreciate how [easy it is to] set up [shop] on
global eBay sites and reach international markets," says Jimmy Vosika , founder &
CEO, ShopJimmy.com, which sells TV parts and lamps, TV stands, tech tools and
electronics accessories.
Cons
 Fees can add up :- Fees on eBay can vary, depending on what you sell and how you
sell it. That said, sellers typically pay 10 percent of the sale price, with a maximum fee
of $250 -- though advanced listing upgrade fees add more to the cost.
 You may not get paid :- "‘Joy' bidders, aka nonpaying bidders/buyers, are a huge
problem as many listing formats don't require a payment to make a purchase," says
Applegath.
 Favors buyers over sellers :- "Over the years, eBay has made it increasingly difficult
for sellers by tipping the scales of empowerment heavily in favor of buyers," he adds,
citing eBay's new 180-day return policy and buyers' ability to leave negative feedback,
even if the seller is not at fault.

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eBay Process
The business model popularized by eBay is simple. It is a consumer to consumer sales
platform, where buyers and sellers are connected via the internet. Potential sellers are charged
a small fee for to list items that they want to sell. These can then be viewed for free by
potential buyers. Buyers can then place a bid on the item that they choose, again at no cost.
Once bidding closes, the highest bid purchases the item much like any traditional auction.
Items are listed in categories, making it easy to locate any items of interest. Though the
experience is largely free for buyers, sellers are asked to pay two fees.
1. An insertion fee, which is charged when an item is listed and is based on the opening bid
amount set by the seller.
2. A final value fee, which is charged when the auction is completed. This can be anything
between 1.25 and 5 percent of the final sale price.
There may also be an additional listing fee, which eBay charges for additional features such
as highlighted listing, featured items or other methods which bring the seller’s listing into a
more prominent and featured position. This helps increase visibility and the number of
bidders.
Once the bids reach the preset minimum price, the website will send the seller a notification
and the buyer and seller can complete the transaction. eBay does not have any involvement
in this final transaction and at no point does the company have physical possession of any
listed items or any payments to be made.
Fig 2: eBay business process

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Business model
1. Reselling
The most basic bread-and-butter eBay business model is pure-play online reselling. It works
like this:
a) Find one or more suppliers (such as manufacturers or wholesalers) and buy products
from them by the hundreds or even thousands at a discounted rate.
b) Resell the items on eBay at a higher per-unit price than you paid.
c) Negotiate lower prices with your suppliers as you become more successful so you can
turn higher profits from each sale.
This model can require a significant upfront investment, and you run the risk of losing money
on unsold inventory. However, once you start selling an item consistently, it becomes a
reliable source of revenue.
Fig 3: Reselling
2. Dropshipping
 Find a supplier who offers dropshipping services and settle on a price per item. (No
buying in bulk here.)
 List dropshipping-eligible items on eBay.
 When somebody buys through one of your eBay listings, you collect the money from
the buyer, buy the item from your supplier, and tell them to ship it to your buyer rather
than to you.

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You have no risk of losing money on inventory and don’t have to deal with any of the
hassles of shipping or storage. The entire business is managed from your computer, with
maybe the occasional telephone call thrown in.
The biggest downside: high competition. Plenty of other people use this business model
already, and you can bet they’ve dropped their prices as low as they can for a lot of products.
You may have a tough time finding something you can dropship at a worthwhile price.
Fig 4: Dropshipping
3. Retail Arbitrage
The business model is simple:
 Find something being sold at an outrageously low price. This might be because the seller
doesn’t understand the value of the item, just wants to get rid of it, or couldn’t market
to save their life and therefore can’t get anyone to pay them the item’s value.
 Create a fantastic listing for it on eBay and sell the item at a profit.
This system can work out magnificently for talented bargain hunters, especially when
dealing with big-ticket items like used vehicles and consumer electronics.
The downsides are the high levels of risk and the need to constantly be on the hunt for new
things to sell. Some people also can’t manage it because they feel bad paying much less
than an item’s value and then turning around and selling it for a profit.

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Fig 5: Retail Arbitrage
4. Liquidation/Surplus
Liquidation works quite similarly to retail arbitrage. Let’s get straight to the steps:
 When retailers or organizations can’t sell / find a use for some of their stock (think last
season’s fashions or surplus military equipment), you buy it at a fraction of its value to
free up their storage space.
 You identify the items that are worth trying to resell and list them on eBay.
This is as risky and labor-intensive as arbitrage, but on a bigger scale.
You may need to spend hours or days sorting each lot, taking photos of the many unique
items, and creating listings for each of them. You’ll also have an extremely hard time
finding a reliable supply of new goods. Unless you can work out a special deal (such as
being the liquidator for a fashion retailer that clears out its inventory every few months),
you’ll always be on the hunt for more.
Yet this can be one of the most profitable eBay business models. Anyone with the
knowledge and instinct to turn one man’s trash into another man’s treasure has good odds
of making a killing this way.

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Fig 6: Liquidation
5. Wholesailing
Wholesaling is sometimes referred to as lot sales or bulk sales. This eBay business model
focuses on selling products in bulk instead of individually, and the products are usually sold
to other eBay business owners
To succeed on eBay we shouldn’t be retailer, we can also be wholeseller
Quite a few retailers source their items on eBay itself, taking advantage of the extensive
buyer protection to avoid the risks involved in buying through sites like Alibaba. The
margins may be a bit tighter, but for many sellers the security is worth it.
As a wholesaler, you’d supply retailers through eBay. The business model goes like this:
You find manufacturers willing to sell in extremely large quantities for extremely low
prices.
You break the items up into lots, perhaps as small as four items or perhaps as large as 1,000,
and sell them to both retailers and consumers for very low prices.
This system saves you a lot of picking and packing and dealing with buyers. However, it
does have its disadvantages.
The biggest problem is the enormous upfront expense. You might have to pay $10,000 per
shipment to get a competitive price from a manufacturer. This also means that you’ll have
tons of inventory at risk at all times.
In addition, many manufacturers won’t work with you unless you have an established and
proven business.

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These disadvantages make it a poor choice for the beginning eBay seller. But for
experienced businesspeople, it can prove highly profitable.
Fig 7: wholesailing
6. Deep Niche
Going “deep niche” means finding a small market of extremely dedicated buyers and
catering to their refined tastes. You can only succeed here if you have an extremely deep
knowledge of the subject, but it’s a great way to turn your hobby or previous work
experience into a profitable business.
Here’s how it works:
 Find something very specific you know a lot about; don’t think “comic books” or
“fishing” so much as “Deadpool collectibles” or “hand-tied flies for smallmouth bass
fishing in the northeastern US.”
 See if a market exists for related items on eBay and whether there’s enough demand for
you to work your way in.
 Source these specialty products or even create them yourself (if legal) and sell them on
eBay.

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 Prove to your customers that you know what great customer service means and make
sure that the items you sell are of the highest quality. Odds are, virtually all your
customers read the same forums or niche publications, and one bad review could sink
your whole business.
You can’t fake your way into this business model. You have to know the audience inside
and out because you’re part of it yourself; a lifelong turkey hunter, a hardcore tabletop
gamer, a collector who could easily open a museum.
Even for those who are part of the deep niche, this model does have risks. Supplies could
become too scarce even for a serious collector to continue finding enough for a business,
the fandom could die out, etc. Both the supply and the demand could easily fall through.
But, as long as you can make it last, you can make a very good living here. Your buyers can
become fiercely loyal, and few other sellers will have the knowledge needed to compete.
You may therefore have a steady stream of profit and zero competition for the lifetime of
your business.
Fig 8: Deep Niche

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7. Yard Sales
Buying quality, unique or rare products at yard sales and flea markets is a common next
step for many eBay beginners. If you live in a large town, you may be able to find items
that are free for the pick up, and there may be regular estate sales or auctions advertised
in the newspaper. Visiting these sales can be fun, and finding excellent deals or rare items
is exciting. In the beginning you may pay more for an item than you can auction it for on
eBay, but with time and specialization you will learn how to spot the best deals or haggle
sellers down on prices.
8. Consignment
The eBay consignment business model brings products to you instead of you having to go
out and hunt for them. With this business model, you advertise locally for quality products
that people want to sell. They bring the items to you and you decide whether they will sell
well on eBay. If you determine they have potential, then you work out a consignment
agreement with the seller. The consignment agreement states that you will pay them a
percentage of the auction price if and when the item sells. You take the photos, create the
auction listing, and handle the payments and delivery, so your portion of the selling price
needs to be high enough to cover those services.
9. eBay Stores
eBay Stores allows you to set up an online store that sells products at a set price, instead
of allowing people to bid in auction format. This business model is preferred by many
eBay entrepreneurs because they can determine how much profit each product they sell
will make. Many eBayers combine eBay store sales with auction sales because many
buyers prefer the thrill of "winning" an auction.

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Corporate Strategies in eBay
The whole foundation of eBay, lies on the idea that practically anything that can be bought and
sold can be facilitated through this Internet retailer, and this auction platform provider was
implementing the concept of e-commerce even more forcefully.
"We help people trade practically anything on earth and conduct commerce through the
Internet on a global basis" is certainly eBay's business model .This model was so effective and
efficient in conducting transactions that more and more people preferred to trade online, so
that they can enjoy the comfort at home or work-places and still buy things online just by the
click of the mouse.
Today eBay users can bid anything from office equipments to real estate to cars. It is
surprisingly true that "eBay has prevailed, but others have failed". The company's consistent
focus on two long-term goals that is "becoming the world's largest consumer to consumer
online auction house and building out each of the five core strategies" lead to the success of
eBay. An analysis into these strategies reveal that eBay has applied sound strategic
management as adopted from Porter and other Management experts .Its whole business
revolves around creating an environment where everyone can come and transact without any
second thought of being cheated or misguided in any form.
The first strategy is creating an insurmountable customer base, that is
(1) Establishing a larger user base
To attract new users, eBay established relationships with more than 60 websites, including
America online which gave eBay the largest access to the largest user base on the internet
and prevented AOL from entering the auction arena, bay also added dealer to person trading
and addresses the fast growing and fragmented small business market by creating a feature
called business exchange, where businesses could buy or sell new, used or refurbished
business merchandise and professional tools in their local market.
The second strategy is:
(2) eBay concentrated on local and international trading
EBay has local sites in 53 U.S markets they deliver distinct regional flavors and give users
the convenience of shopping locally for difficult –to ship items such as automobiles or

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antique furniture. The company also built a truly global presence with users in more than
150 nations.
The third strategy is:
(3) Creating a strong brand
For eBay's first few years it did not spend a single penny on marketing, relying instead on
viral marketing and its ability to piggyback on competitors ceaseless (and expensive) efforts
to retain market recognition. The company's brand building shifted though with the arrival
of new top professionals.
The fourth strategy is:
(4) Broadening the trading platform
By 1999, eBay's fourth year, a host of competitors had entered the online auction market,
while eBay had the first entry advantage, not all of its competitors were small startups, some
including yahoo and Amazon were internet significant players with extensive, established
user bases.
eBay's response was to extend its core business into other attractive niches, the company
introduced higher priced product categories, a move that would increase its profit margin
dramatically while requiring minimal infrastructure and operating expenditures. The only
caveat was that the company needed to develop a new skill set-to overcome this obstacle
eBay made several acquisitions, starting with auction house Butterfield and Butterfield, the
marriage of offline and online auction houses revolutionized the way that fine antiques and
collectibles were bought and sold, allowing users to place real-time bids for items on offline
auction house floors.
The fifth strategy is:
(5) Maintaining a strong community affinity
The company believes that fostering direct interaction between buyers and sellers with
similar interest had enabled it to create loyal, active community of users, as noted earlier
this emphasis on community building has been present since eBay's founding.
(6) Continually enhancing site features and functionality
Because eBay's strategy is to be as hands-off as possible when it comes to transactions, the
company has to provide a reliable and straight forward way for users to manage the process

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on their own, buying and selling on eBay are made easy for users to manage the process on
their own. Sellers need do little more than write a compelling description of the item up for
auction, provide a suitable photograph, and decide how many days the auction will last. To
enhance the payment component of the customer experience, an admitted difficulty for mast
buyers and sellers, bay acquired a company called Billpoint, whose online bill payment
service facilitates credit card payment between buyers and sellers.
Today, the eBay community includes more than a hundred million registered members from
around the world. People spend more time on eBay than any other online site, making it the
most popular shopping destination on the Internet

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eBay Supply Chain Management
eBay is the world’s most famous online marketplace having around 100 million buyers. If you
are selling on eBay, you must be aware that the most critical part is that it works with fixed
price listings and auctions both.
Another challenge you must be facing while selling on eBay is “Supply Chain Management”.
When it comes to supply chain management, eBay sellers need to be alert 24/7 and accurate
too. If you are working manually on all your supply chain processes, then you may face
problems in achieving your desired business goals.
E-Seller Hub, helps in integrating your online store with eBay and handle entire order
management, inventory management and supply chain management processes.
eBay Supply Chain Management System – Features
 List even thousands of your products on eBay with a click of a button. Save your time,
sell more and earn more.
 Automatically updates the inventory on eBay and other marketplaces as soon as a product
is sold. It is not at all possible to keep a watch on all the marketplaces 24/7 manually and
update the stock on real-time basis. E-Seller Hub is a boon for online retailers.
 E-Seller Hub relists a product of zero quantity so the buyers are not able to buy it. If a
product gets sold by mistake, you have to cancel that order and due to that the customer
gets highly dissatisfied. A dissatisfied customer can be very dangerous for your online
retail business.
 E-Seller Hub integrates your online retail business with different payment gateways, so
that your customer gets the facility of paying as per their convenience.
 Integrate your online business with different shipping companies, so that you can give the
facility to your customer of choosing the shipping method.
 Get complete reports about your best selling products and low selling products so that you
can take profitable decisions for future.

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E-Seller Hub – What Does It Do?
E-Seller Hub is a customized eBay supply chain management system which can –
 Manage all your orders on real-time basis
 Updates inventory on all the sales channels
 Manages suppliers
 Sends alert mails whenever any item goes out of stock
 Generates reports and insights
 Manages shipping of the orders received
 Informs your customers about the tracking information as soon as a product is dispatched
 24/7 support to your customers
E-Seller Hub also integrates with other marketplaces, online stores and shipping companies to
assure that your orders are delivered to your customers within committed time frame without
any blunders.

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The EBay Effect
Data Galore
eBay brings in yearly revenue upwards of $18 billion and employs more than 33,500 people
globally. It is, without question, “e-normous”. In its beginning stages, eBay was actually
known as an online auction site. But it’s evolved since that perception was established, back
at the height of the Internet boom.
Now, most people recognize the brand as a place you can buy virtually anything, including
a $400,000 plane. In fact, 80 percent of items sold are new products. It’s clear that eBay has
capitalized big time on its e-commerce strategy. And how it did so is pretty fascinating.
More stats, first:
Each day, eBay generates 50 terabytes of new behavioral/transactional data
 Every five minutes, a car or truck is bought via the mobile app in the U.S.
 Every 12 seconds, a women’s handbag is bought via the mobile app in the U.S.
 There have been 260 million downloads of eBay’s mobile app
Armed with what seems like almost too much data, eBay was tasked with understanding
said data to gain individualized insights about its customers and their buying habits,
characteristics, likes and preferences.
Though data was available, eBay was challenged to break down their data, dispersed by
business units and across the data warehouse. It wasn’t long before a team of data scientists
was introduced to focus strictly on customer data. Soon, it became clear that these data
scientists were spending a lot of time just trying to find data, understand it and clean it
before any actionable insights could be had. Mending this divide between IT’s capabilities
and marketing’s goals (to use data and analytics to optimize every interaction with every
customer) was in need of refinement.

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Customer DNA
Enter “Customer DNA,”a single customer repository enabled by Teradata’s Enterprise Data
Warehouse, the central system that collects all data. This allows for ultra-segmenting and
targeting based on high value, medium value and low-value information.
Now, insights to drive business decisions and set strategy were able to be had. For example,
eBay discovered that auction users—i.e. users who opted to “Bid” instead of “Buy It
Now”—are more loyal than non-auction users.
It became clear that by cross-checking previously disparate data sets, new insights would
follow. Results thus far have been staggering. Insights and models built from Customer
DNA resulted in incremental sales in the first half of 2014.
“Customer DNA is becoming the backbone for eBay.” – Patrick Hildebrand, Director,
eBay ß Text box
With enhanced data-driven marketing capabilities, eBay focused primarily on making its
email marketing super-individualized and relevant. For example, “Daily Deals” were set up
for select users—new deals based on search history sent every day. Pre-Customer DNA,
these daily deals weren’t relevant or personalized. Now, reminders on “hot items” are sent
to users, updating them on items they’re watching and the available inventory.
Emails tell recipients things like, “127 people watched this hot item in the last week. Only
8 left in stock!” They proved to be effective in generating more conversions than a
traditional sale with no deadline to buy.
“Trending items” show which keywords are being searched the most, so if a customer has
a high propensity in the category, they’ll get an email about the trending topic. First-time
buyers also receive an email encouraging them to get involved in more than buying—selling
(eBay has found that sellers are their most engaged customers).
eBay's Revenue model
The vast majority of eBay’s revenue is for the listing and commission on completed sales.
For PayPal purchases an additional commission fee is charged.

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Margin on each transaction is phenomenal since once the infrastructure is built, incremental
costs on each transaction are tiny – all eBay is doing is transmitting bits and bytes between
buyers and sellers.
Advertising and other non-transaction net revenues represent a relatively small proportion
of total net revenues and the strategy is that this should remain the case. Marketing services
and other revenues accounted for an additional $2 Billion in 2012. Another part of the
business, Skype Internet telephony, was acquired in 2005 by eBay and sold to an investor
group in November 2009 with a 30% share retained by eBay.

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Risk factors and competition
Risk factors
Fraud is a significant risk factor for eBay. BBC (2005) reported that around 1 in 10,000
transactions within the UK were fraudulent; 0.0001% is a small percentage, but scaling this up
across the number of transactions, this is a significant volume.
To counter this, eBay has developed 'Trust and Safety Programs’ which are particularly
important to reassure customers since online services are prone to fraud.
For example, the eBay feedback forum can help establish credentials of sellers and buyers.
Every registered user has a feedback profile that may contain compliments, criticisms and/or
other comments by users who have conducted business with that user. The Feedback Forum
requires feedback to be related to specific transactions and Top Seller status was introduced in
2010 to increase trust in the service.
There is also a Safe Harbor data protection method and a standard purchase protection system.
The fees model that eBay uses is often changed and this can cause problems with users, but
the impact is calculated that it does not affect overall sales. In their 2012 SEC filing eBay note:
'We regularly announce changes to our Marketplaces business intended to drive more sales and
improve seller efficiency and buyer experiences and trust. Some of the changes that we have
announced to date have been controversial with, and led to dissatisfaction among, our sellers,
and additional changes that we announce in the future may also be negatively received by some
of our sellers. This may not only impact the supply of items listed on our websites, but because
many sellers also buy from our sites, it may adversely impact demand as well'.
In common with other global platforms like Amazon, Facebook and Google, eBay note the
potential threat of the shift to tablet and smartphone platforms noting that one risk factor is:
'Our ability to manage the rapid shift from online commerce and payments to mobile and multi-
channel commerce and payments'.
There is also the common risk factors for online pure-plays of retaining an active user base,
attracting new users, and encouraging existing users to list items for sale, especially when
consumer spending is weak.

23
Competition
Although there are now few direct competitors of online auction services in many countries,
there are many indirect competitors. SEC (2012) describes competing channels as including
online and offline retailers, distributors, liquidators, import and export companies, auctioneers,
catalogue and mail order companies, classifieds, directories, search engines, products of search
engines, virtually all online and offline commerce participants and online and offline shopping
channels and networks. In their SEC filing, eBay states that the principal competitive
factors for the Marketplaces business include the following:
 ability to attract, retain and engage buyers and sellers;
 volume of transactions and price and selection of goods;
 trust in the seller and the transaction;
 customer service; and brand recognition.
Although eBay is one of the largest e-Commerce businesses, these factors also need to be
actively managed by the smallest online e-retailer.
For their online and mobile competition, they describe additional competitive
factors including:
 community cohesion, interaction and size;
 website or mobile application ease-of-use and accessibility;
 system reliability;
 reliability of delivery and payment;
 level of service fees; and
 quality of search tools.
Before the advent of online auctions, competitors in the collectables space included antique
shops, car boot sales and charity shops. Anecdotal evidence suggests that all of these are now
suffering. Some have taken the attitude of ‘if you can’t beat them, join them’. Many smaller
traders who have previously run antique or car boot sales are now eBayers. Even charities
such as Oxfam now have an eBay service where they sell high-value items contributed by
donors. Other retailers such as Vodafone have used eBay as a means to distribute certain
products within their range.

24
Risk mitigating strategy
The eBay business model relies heavily on the trust buyers and sellers put in each other.
Unfortunately, this trust is not always justified and there are instances of mishaps. To try to
mitigate these risks, the following steps can be taken by both buyers and sellers:
1. Confirm Your PayPal Address
This small step takes very little time but ensures that your PayPal shipping address matches
your credit card address. This makes eBay safer since if someone manages to access your
PayPal information, any items bought can only be shipped to you. In addition, sellers will
prefer to sell to you if you have a verified account.
2. Check Supplier Reputation
Especially in expensive purchases, it is a good idea to check the supplier’s reputation and
reviews.
3. Research Products
Some products are easy to copy and counterfeits may be sold in place of the original. Ensure
that you are aware of any required documentation or authenticity guarantees. Designer
clothes, accessories and sports memorabilia are particularly likely to be in this category.
4. Always use PayPal
PayPal is an added level of security. If the sellers does not ship the item then PayPal will
return your payment
5. Use Delivery Confirmation
As a seller, always try to use delivery confirmation to ensure that the item has reached the
buyer.
6. Read all the Information Provided
Despite long descriptions, make sure you read all specifics and are aware of shipping and
return policies. Long descriptions may have hidden details of product quality etc that could
save you the trouble of returning the item.

25
Discussion and implications
Rapid growth in internet distribution, especially the use of online auctions to sell goods,
suggests that this area needs extensive and systematic investigation. At the same time, a
literature review indicates that online auction selling has not been studied to the extent that
other areas of the internet have been investigated. Indeed, most of the information regarding
online auction sellers has been presented in the popular business press. Little empirical
research appears in the academic literature. This investigation attempts to understand the
characteristics, attitudes, and strategies of online auction sellers and should help future theory
building by providing researchers with a foundation for hypothesis development. The
exploratory research results presented here suggest several new areas of investigation. Firstly,
online auction sellers must be further analysed and classified with respect to various business
characteristics. The evidence from this study indicates that widespread diversity exists among
auction sellers in terms of key variables such as product categories sold, product type, sales
revenue, etc. Because the modest sample size in this study may pose some limitations, studies
with larger samples should be conducted to verify further the nature and extent of the diversity
in online auction seller characteristics. In particular, the differences among the auction sellers
in terms of total sales revenue and internet auction sales percentage indicate that further
classifications based on auction seller size may be necessary. Whether or not auction sellers
vary in terms of product category sold should also be a subject of future research. For example,
how do consumer electronics sellers differ from antique sellers with respect to various business
practices (e.g. inventory levels or use of alternative distribution channels)? Are internet
auctions better suited to some product categories than others?
Secondly, internet auction sales clearly represent a distinct and important distribution channel
for internet marketers, with over 71% of the sellers in this study reporting that auctions account
for over half of their annual sales volume. This finding indicates that auction selling represents
a primary, and sometimes exclusive, distribution channel for eBay sellers. Businesses that are
not using online auctions may be limiting their growth by ignoring this market and the potential
revenue that accompanies it.
It also raises the interesting question of why companies would not use online auctions. Perhaps
this distribution outlet is avoided because it is perceived primarily as a niche strategy or too
limited in terms of potential revenue. Alternatively, some companies may view auction selling

26
as too complex or costly in terms of implementation, or too much in conflict with existing
distribution policies. In either case, a logical next research step would be to investigate
businesses that no longer use online auctions or have never tried them. Certainly auction firms
such as eBay would be interested in learning why some sellers avoid this arena. Could it be
possible that some businesses perceive internet auction selling to be primarily a discount-
pricing model? If this were the case, internet marketers trying to maintain high levels of brand
equity and/or profit margins would avoid internet auction sales. This research suggests
otherwise, however. Clearly some online auction sellers are using eBay to differentiate
themselves in the marketplace and are concerned with strategic marketing variables beyond
price.
Given the unique characteristics of online auctions, the use of traditional competitive strategies
such as cost leadership and differentiation suggests that this new distribution venue could be
simply a variation on an existing theme. That is, despite the technological advances of the
internet and the resulting growth of new industries, a company’s marketplace success may still
be a function of its ability to sustain a distinct competitive advantage – whether that advantage
is based on cost or some other factor. Confirmatory research is needed to explore this concept
further. The findings related to the underlying attitudes of auction sellers also indicate that
traditional marketing strategies can be utilized in an online auction arena. That is, internet
distribution appears to adequately support at least two opposing marketing strategies – cost
leadership and differentiation. Yet there is nothing to suggest that other competitive strategies
would not be feasible. For example, an imitation or ‘me too’ strategy might be equally effective
in the online auction arena, especially if sufficient promotional dollars are invested to attract
customers to the auction site and build website awareness and interest. Moreover, a focus
strategy would clearly be possible on internet auctions as well. As suggested by Porter,
choosing a narrow segment in an industry and tailoring a strategy to serve that segment can
lead to marketplace success.

27
Suggestions for future
The following three steps will be important for eBay Inc. in the near future:
 Continue to improve data collection and server utilization measurement procedures.
Project Linnaeus will reconcile historic records of server ownership while the capacity
team institutes transparent and fair procedures to measure infrastructure utilization going
forward. This will uncover further efficiency potential by both empowering product
developers to utilize their dedicated resources more effectively and holding them
accountable for those decisions.
 Utilize cultural transition to add efficient infrastructure utilization to software/product
design goals. Although the C-suite supports the effort to integrate infrastructure, hardware,
and software design, this support should continue to be communicated to the business unit
teams in order to realize the value of these efforts.
 Incorporate infrastructure productivity measurements into incentive/cost structure to
further behavioral change. eBay Inc. is working to complete development of the show-back
in order to transition it to a full charge-back (i.e. internal transfer price for infrastructure
services charged to each business unit). The advent of the show-back will give insight into
the inefficiencies of infrastructure consumption by leader, team and individuals,
subsequently motivating them to drive more efficiency. Aspects of DSE could also be
incorporated into individual and/or business unit level KPIs so that performance, or
productivity, is tied explicitly to efficiency (Democratization of DSE).

28
Conclusion
eBay came out of nowhere to become a behemoth in e-Commerce. With an attractive and
differentiated business model that eliminates the need for a sales force and inventory, eBay
focused its efforts on its Acquisition, Activation, and Activity strategy, striving to reach its
global vision of becoming a global trading platform where practically anyone anywhere can
trade practically anything anytime. Whether it can do so depends on whether it can conquer
language barriers, government regulations, internet access, and cultural differences. It already
has its foot in the global door. Automatic update and adjust your stock level accurately as well
as efficiently handle supply chain management. Having clear picture of your stock levels,
shipping information and product tracking abilities can definitely lead to ultimate success of
your online retail business.

29
Reference
1) Armstrong, Arthur and John Hagel III. 1996. “The Real Value of Online
Communities.” Harvard Business Review. (May-June): 134-141.
2) Bajari, Patrick and Ali Hortacsu. 2000. “Winner’s Curse, Reserve Prices and
Endogenous Entry: Empirical Insights from eBay Auctions.” Working paper, Stanford
University.
3) Clay, Karen. 1997. “Trade without Law: Private-Order Institutions in Mexican
California.” Journal of Law, Economics and Organization, 13: 202-231.
4) Duh, Rong-Ruey, Karim Jamal, and Shyam Sunder. 2001. “Control and Assurance in
ECommerce: Privacy, Integrity and Security at eBay.” Working paper, Yale
University.
5) McDonald, Cynthia G. and V. Carlos Slawson, Jr. 2000. “Reputation in an Internet
Auction Model.” Working paper, University of Missouri-Columbia.
6) McMillan, John and Christopher Woodruff. 2001. “Private Order Under Dysfunctional
Public Order.”Michigan Law Review, 98: 2421-2458.
7) Melnik, Mikhail I. and James Alm. 2001. “Does a Seller’s eCommerce Reputation
Matter?” Working paper, Georgia State University.
8) Milgrom, Paul R., Douglass C. North and Barry R. Weingast. 1990. “The Role of
Institutions in the Revival of Trade: The Law Merchant, Private Judges, and the
Champagne Fairs.”Economics and Politics, 2:1-23.
9) Resnick, Paul, Richard Zeckhauser, Eric Friedman, and Ko Kuwabara. 2000.
“Reputation Systems.”Communications of the ACM, 43: 45-8.
10) Resnick, Paul and Richard Zeckhauser. 2001. “Trust among Strangers in Internet
Transactions: Empirical Analysis of eBay’s Reputation System.” Working paper,
University of Michigan.
11) Saloner, Garth, Andrea Shepard, and Joel Podolny. 2001. Strategic Management. New
York: Wiley.Snyder, James M. 2000. “Online Auction Fraud: Are the Auction Houses
Doing All They Should or Couldto Stop Online Fraud.” Federal Communications Law
Journal, 52: 453-72.
12) Woodruff, Christopher. 1998. “Contract Enforcement and Trade Liberalization in
Mexico’s Footwear

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