French-Iranian immigrant, created eBay as a way to help his girlfriend sell and trade her Pez candy dispenser collection. Soon the site grew into a broader auction site where consumers could auction collectibles like baseball cards and Barbie dolls. The momentum continued, with sellers posting new and unusual items and customers coming to eBay looking for everyday products from used furniture to new digital cameras. Small businesses discovered that eBay was an efficient way to reach consumers and other businesses. Large companies saw eBay as an opportunity to sell bulk lots of unsold inventory.
By helping buyers get the best price for their items and by letting customers decide the price they want to pay for products, eBay had created a pricing revolution. By 2003, eBay was transacting $23 billion in worldwide sales in 23 merchandise categories. The site has 62 million registered users and receives 43 million unique visitors a month. Yet, eBay itself doesn’t buy any inventory or own the products on its site. It earns its money by collecting a fee for the auction listing, plus a commission when the sale is completed. With eBay’s expansion into other categories, collectibles now make up only 13 percent of eBay sales. Bay is constantly creating new categories of merchandise for buyers and businesses, like used restaurant equipment (pots, pans, espresso makers).
For example, after noticing that someone was auctioning a real Ferrari in the toy car segment of eBay, eBay created a new category: used cars.
... or services to users of the auction site. III. EBay's Business Model Ebay's business model was based on creating and maintaining a person-to-person trading community ... new product categories and geographies, developing global markets, enhancing features and functionality and fostering customer affinity. Half. com EBay has won the auction wars ...
Traditionally, used cars were sold locally, but eBay Motors created a national used-car marketplace that is now one of eBay’s largest segments. Given the reputation of used car salespeople, how could anyone trust a seemingly anonymous car seller in a distant location? Bay Motors created the following trust-building elements in its used car brokerage operations: • online reputation ratings of buyers and sellers • Escrow service for holding funds until the car is delivered n fraud-protection warranty of up to $20,000 • network of available third-party inspectors The majority of car listings on eBay are from dealers. It sounds surprising, but in fact dealers get a bargain: for $40, a dealer can reach a national audience. In contrast, dealers spend upward of $500 to get one local customer to buy one car, according to the National Automotive Dealers Association.
Thus, eBay is an amazingly efficient distribution channel for dealers. The dealers also get a better price because more people look at the car online, which increases the chance of finding someone who really wants that car. In any given month (such as April 2003), 8 million customers come to the eBay Motors site. Each auction gets an average of seven to eight bids. Roughly 75 percent of cars sold on the site are sold across state lines. And the company doesn’t just deal in collectibles and cars. eBay is positioning itself to be a global giant; part international swap meet, part clearinghouse for the world’s manufacturers and retailers.
For instance, it is trying to get its PayPal electronic payment system established worldwide and it is beefing up its U. S. site by adding new categories and big partners like Sears, Sharper Image, and IBM, all of which unload excess inventory over eBay. Although eBay began as an auction site, it has evolved to also offer a fixed-price “buy it now” option to buyers who didn’t want to wait for an auction and were willing to pay the price set by the seller. For years, buyers and sellers used eBay as an informal guide to market value. eBay became the de facto arbiter of price.
A consumer or businessperson who wanted to know the “going price” for anything from a copier to a new DVD player checked on eBay. Companies with a new product design who wanted to test its consumer appeal and pricing could try it out on eBay. In late 2003, eBay began selling sales price data on thousands of goods auctioned on the site. PGA. com, for example, uses eBay’s data to set market values for more than 2,000 models of used golf clubs. The pricing revolution gives customers control. Customers choose the price they want to pay. At the same time, the efficiency and wide reach of the site lets sellers make good margins. Bay charges a listing fee and a commission that ranges from 1 to 5 percent. Merchants report profit margins of 40 percent. Of the thousands of Internet auction sites, eBay is the largest and was profitable from the get-go. It expects to hit $3 billion in revenue by the end of 2004 and netted $422 million in 2003. In the next two years, eBay’s revenues should soar to over $4 billion in annual sales, coming mainly from the fees it collects on more than $40 billion worth of merchandise that it sells over its site. Not bad for a company that doesn’t actually sell anything.
I. Overview eBay is an online provider of marketplaces for the sale of goods and services. It also provides commerce, platforms, online payments services and online communications. It offers products and service to individuals and businesses. Established in 1995, the company operates in the US and other international markets with employs 16,400 people. eBay keeps its leadership position in the new ...