This case study summarizes the strategic approach used by eBay to take advantage of increased consumer adoption of the Internet. We have created it as an update for students and professional using Dave Chaffey’s books which feature this case study.
eBay describes its purpose as to ‘pioneer new communities around the world built on commerce, sustained by trust, and inspired by opportunity’. At the time of writing (in x ) eBay comprises three major businesses of the marketplace, PayPal and GSI:
- 1. The eBay marketplaces (approximately 50% of net revenues in 2012). Originally only offering auctions, by 2012, the fixed price listing format accounted for approximately 66% of eBay’s gross merchandise volume, or GMV, with the auction-style format accounting for the remaining 34% of GMV.Marketplaces also include other sites like comparison siteShopping.com (event tickets). The mission for the core eBay business is to ‘create the world’s online marketplace’. eBay has also created vertical formats, such as Classifieds, Daily Deals, Fashion, Motors (vehicles, parts and accessories), and Electronics.
- n 2007, eBay’s SEC filing noted that the success factors for this business for which eBay seeks to manage the functionality, safety, ease-of-use and reliability of the trading platform. In 2010 the strategic priorities had changed to trust, value, selection and convenience.
- 2. PayPal (approximately 43% of net revenues in 2012). The mission is to ‘create the new global standard for online payments’. Acquired in 2003 and is now a significant contributor to eBay revenue with the service incorporated in many other e-commerce sites.
- 3. GSI (accounting for 7% of revenues in 2012) was acquired by eBay in June 2011, GSI is a provider of e-commerce and interactive marketing services including websites and fulfilment centres to enterprise clients that include some of the world’s leading brands and retailers covering merchandise categories, including apparel, sporting goods, toys & baby, health & beauty and home.
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.
- 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.
The eBay marketplace is well known for its core service which enables sellers to list items for sale on an auction or fixed-price basis giving buyers the opportunity to bid for and purchase items of interest. Software tools are provided, particularly for frequent traders. Seller’s Assistant,and Selling Manager Pro, which help automate the selling process, plus the Shipping Calculator, Reporting tools, etc.
According to the SEC filing, eBay summarises the core messages to define its proposition as follows:
In 2007, eBay introduced Neigbourhoods where groups can discuss brands and products they have a high involvement with.
- Access to broad global markets
- Efficient marketing and distribution
- Opportunity to increase sales.
In January 2008, eBay announced significant changes to its marketplaces business in three major areas: fee structure, seller incentives and standards, and feedback. These changes have been controversial with some sellers, but are aimed at improving the quality of experience.