With 180.6 million registered users and net revenues of $4.55 billion, eBay has become the most popular shopping site for goods and services for a diverse community of consumers and businesses.31 Founder Pierre Omidyar attributes much of its success to its trust among that community of users. Originally introduced to create an efficient forum for people to trade with one another, eBay pioneered online trading by developing a Web-based community of browsers, buyers, and sellers.
Initially, eBay capitalized on increases in consumer-to-consumer (C2C) transactions through traditional channels such as classified advertisements, collectibles shows, garage sales, flea markets, and auction houses. But the company has grown beyond individual consumers with extra Beanie Babies to include merchants, small to medium-sized businesses, global corporations, and government agencies that sell office supplies, raw materials, and furniture in bulk. In addition to facilitating trading, eBay provides a place for socialization and discussion. Trading activities in individual categories often evolve into unique communities of buyers and sellers who maintain category-specific bulletin boards and chat rooms.
To make trading easier, eBay also sponsors payment services, insurance, shipping, authentication, appraisal, vehicle inspection, and escrow services. Online buyers typically enter the site through eBay's home page, which contains a listing of major product categories and featured items. (A sample page is presented in Exhibit C1.1.) Users can search for specific items by browsing within a category, and then they "click through" to a detailed description of a particular item. Users also can perform a keyword search for specific items, in response to which the site's search engine generates lists of relevant items with links to the detailed descriptions. Furthermore, users can search for a
particular bidder or seller by name to review that person's listings and feedback history or for products by a specific region or other attributes. A registered user who has found a desired item can enter a bid for the maximum amount he or she is willing to pay at that time. For those listings that offer the "Buy-It-Now" feature, the user may purchase the item by accepting the Buy-It-Now price established by the seller. In the event of competitive bids, the eBay service automatically increases bidding in increments from the current high bid up to the bidder's maximum price. eBay views its market as comprised of both sellers and buyers and has developed services to satisfy both in a vibrant trading environment. Various dimensions distinguish the two; for example, sellers range from individuals selling a few personal items to large companies liquidating excess stock.
However, both buyers and sellers can benefit from eBay's rating systems, which gather aggregated ratings from buyers after each transaction. The overall score then is available to browsers when they want to gather information about a seller. To maintain a strong sense of community, trust, and safety, eBay has fostered an honest and open marketplace in which individual users are treated with respect. The site also commits to several trust and safety initiatives designed to bolster its reputation as a safe place to trade, such as user verification, a requirement that new sellers have a credit card on file, insurance, vehicle inspections, escrow, authentication, and appraisal, as well as a well-articulated privacy statement. As a founding member of the Online Privacy Association, it also has built a reputation for leading the way to protect consumer privacy on the Internet.
Questions
1. According to the breakdown presented in Exhibit 1.5, which of the four orientations best describes eBay? Justify your answer.
2. Does eBay create greater value for buyers of collectables, beyond that provided by traditional channels? For sellers? Explain your answers in terms of greater benefits, reduced costs, or a combination.
3. Visit the eBay Web site to explore some of its features. How well does eBay facilitate the exchanges of goods? Does it have the same potential for exchanges that involve services? Explain your answer.