Case Study Questions

Chapter 11

1. Contrast eBay’s original business model with its current business model.

eBay started out as a pure play “all auction” Web site, which was a novelty at the time. It relied on millions of small sellers cleaning out their attics to sell unwanted goods. It then morphed into a more professional seller environment where small retailers would purchase goods from others, and then re-sell on eBay at a profit. In 2009, eBay’s revenues stalled, and Amazon’s model of “fixed price” retail grew in popularity as the novelty of the auction format declined. The current business model relies more on professional retailers and large online stores to sell products at fixed prices, just like Amazon. eBay has also broadened its business model to include providing e-commerce infrastructure services.

2. What are the problems that eBay is currently facing? How is eBay trying to solve these problems?

The key problem is continuing to drive revenue growth. eBay’s revenue growth had stalled in part because the small retailers using eBay could not generate the sales volume eBay requires. As a result, eBay has shifted to emphasize larger scale and professional large volume retailers. Moreover, eBay has had to overcome its own brand: widely known as an auction site, it was initially difficult to create a new brand image more similar to Amazon’s as a site which sells just about everything at a fixed price. However, eBay is continuing to move in that direction, and successfully: it now derives 70% of its revenue from traditional e-commerce.

3. Are the solutions eBay is seeking to implement good solutions? Why or why not? Are there any other solutions that eBay should consider?

eBay clearly has to meet competition from Amazon and Walmart. The online culture has changed, people are more impatient, and when they want a product, they want to purchase immediately.
There are few other options for eBay, which is now seeking to present itself as a “general” retailer that also offers auctions.

 

4. Who are eBay’s top three competitors online, and how will eBay’s new strategy help it compete? Will eBay be providing a differentiated service to customers?

 eBay’s top competitors are in both the non-auction and auction market. In the non-auction market, Amazon, Walmart, Costco, Sam’s Club, and similar mass merchandisers are top competitors.
In the B2B auction market, eBid, uBid, and Liquidation.com are the primary competitors. In consumer auctions, eBay has no serious competition.