ASSIGNMENT (eBay)

Name: Rajdeep Laha

Course Name: Retail Management

Course Code: OMR 707

Date: 09.12.11

1. What are the advantages and disadvantages from the buyer’s and seller’s perspective of purchasing merchandise through internet auctions like eBay?

eBay is the largest auction site of the world. It is an online auction and shopping website in which people and businesses buy and sell a broad variety of goods and services worldwide. It is now a multi-billion dollar business with operations localized in over thirty countries. Millions of collectibles, decor, appliances, computers, furnishings, equipment, domain names, vehicles, and other miscellaneous items are listed, bought, or sold daily on eBay. There are many advantages and disadvantages of trading online both from seller’s and buyer’s perspective.

The various advantages of buying through eBay are as follows:

a) eBay has an unlimited number of products to choose from. For instance, the buyer can buy real estate, cars, clothing, toys, pet supplies, home décor, entertainment items, and much more on eBay. The buyer will get anything that they are looking for within reason of course.

b) eBay has advanced security measures and systems which prevent any type of deceiving, hacking, stealing or credit card fraud. Since the site allows both parties to use their PayPal account which is another secure service of EBay, the site enforces the maximum financial security for both of them. This makes shopping at EBay secure and efficient for what it offers the users of security and ease-to-use.

c) Items on EBay are in general semi-free of fees, commissions and taxes. The fact that EBay is an international service makes international trade which benefits from different pricings in different countries and currency differences extremely easy and possible. It’s therefore easy for a European to purchase an Eastern carpet or artifact from China or Japan. Prices of foreign goods tend to be cheaper than ones exported due to the fact that merchants will usually add high profits to such goods. Also, the buyer would avoid a lot of or all of the taxes that they have to pay for exporting such goods.

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d) eBay is easy to use. If the buyer wants to buy something then they need to create a free eBay account and immediately after that they can start searching for products that they are looking for.

e) The buyer can get those things which they never thought will get at a very reasonable rate.

f) If the buyer is not satisfied with the products that he has bought then he can give feedback on the items purchased. He can give feedback even if he is happy with the item bought by them.

The disadvantages of buying through eBay are:

a) eBay’s customer service is very poor. The forum is censored and if the buyers are facing with company’s policies and they have encountered any problem then they cannot raise their opinion through this forum.

b) The scam rates are increasing day by day in eBay. If a buyer encounters a fraudulent seller, it can take months for him to get a refund, especially if he has to wait for Paypal to arbitrate the dispute.

c) EBay has a strict keyword policy. For higher ranking, buyers have to use the appropriate keywords when listing or searching for items. New buyers who do not understand of this tight keyword policy may use the wrong keywords, resulting in lower search rankings.

d) There is no restriction in becoming a seller at eBay for trading purposes. So the number of fraudulent sellers at eBay is increasing day by day whose only purpose is to cheat the buyers without actually delivering the products to them.

The advantages of selling through eBay are:

a) The sellers can list an item and as long as their keywords are solid, price is fair and your listing clear, it will sell even if they do literally nothing else to market it. eBay has its fans and regular buyers who watch categories and keywords and, for most items, this means a sale with no additional work

b) eBay’s auctions are still the best place to sell rare items or items for which the sellers aren’t sure of the value. 

c) eBay has brand recognition and built in trust.  When the buyers buy something from eBay, they aren’t really buying it from eBay but buying it from an individual seller. But many buyers don’t think of it that way and, however subliminally, they feel more comfortable buying from a company they are familiar with then a company they’ve never heard of. This gives the seller an extra edge in making the sale because they are more likely to purchase through eBay then if they saw the item elsewhere.

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d) There is seller and buyer protection. This goes both ways. Protection for the seller and mediation through eBay is a big plus for the seller as it offers some safety in the event of a problem buyer, but it’s also a selling point on the other end. Buyers are more likely to purchase if there is less of a risk of their being cheated, scammed or otherwise left without money or item.

The disadvantages of selling through eBay are:

a) eBay is expensive. Fees are some of the highest and most complicated around and can cut into the profits of the sellers.

b) eBay’s policies are less flexible and these policies dictate and require the sellers to take only certain kinds of payments, limit what keywords they can use, put only certain text in their listings and prevent them from cross marketing to other platforms

c) There are restrictions on what the sellers can sell. The sellers are not permitted to sell electronic artwork or eBooks outside of Classified Ads.

d) There are a large number of complicated programs and policies that sellers have to contort their businesses to fit through or risk limited exposure for their items, higher fees or other penalties. Sellers can waste a lot of time worrying about things like Detailed Seller Ratings when they could be focusing on selling.

e) It’s harder to sell items that aren’t keyword driven or already of interest. Artists, crafters and authors will especially find that, unless the item they are selling is something well known and often searched for or related to a popular keyword, it will be hard to attract buyers on eBay. It’s a keyword driven marketplace so items have difficulty standing out without a connection buyers might already be searching for.

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2. Will a significant amount of retail sales be made through Internet auctions like eBay in the future? Why or why not?

I don’t think significant amount of retail sales will be made through internet auctions like eBay in the future.

Retail sales are mainly for products of daily necessities and mainly constitute of FMCG products, necessities apparels etc. These products normally have low levels of involvement as the perceived risks of purchasing such products are considerably low. The consumer requires these products to be available extensively and intensively i.e they should be placed within the consumer’s arms reach in the market. Internet sales are mainly for products which are more selective than convenience products and the involvement is higher and thus the perceived risk of purchasing is also higher. Normally high quality clothes, consumer durables, collectibles and other items which are moderately expensive are bought through internet auctions. Such products require some amount of comparison, inspection and selection amongst similar items before arriving at the purchasing decision. Thus internet auction gives consumer the liberty of comparing, selecting and purchasing from the comfort of home and at any convenient time.

Therefore products bought through retail sales and internet auctions will be different and thus internet auctions will not take place for retail sales.

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3. What are eBay’s competitive advantages? Will it be able to withstand the competition from other auction sites like Yahoo! and Amazon’s auctions?

eBay offers extensive offerings of products in different categories like collectables, vehicles, real estate, office equipment etc. The brand name eBay is synonymous with online auctioning. It is reputed as a safe and reliable company. The foundation of eBay lies on the fact that they help people to trade anything on this earth through internet. eBay allows customers to create individual auctions and online stores in order to sell used and new products. This process is facilitated by the ability to create communities of interest, providing secure services, and a peer review process in a global environment. eBay sees itself as facilitator for product related transactions over the internet.

The competitive advantages of eBay can be said as follows:a) eBay's person-to-person trading network grows in value and strength with

each new user. Sellers attract buyers, more buyers attract more sellers, and the result is a trading network that can't be duplicated by the competitors. But in a world where competitive advantage typically erodes over time and often quickly, the value of an almost-guaranteed permanent business advantage cannot be underrated. eBay is well on its way to becoming a legalized monopoly.

b) eBay is the ideal combination of a high-profit, lightweight software business and a durable consumer franchise. eBay's software-based trading platform gives it the Microsoft-like advantages of high profit margins, no inventory, and unlimited scalability. But eBay is exposed to much lower innovation risk than Microsoft. Millions of consumers buying and selling on eBay make that business much more predictable. In this way, eBay has the long-term staying power of Coca-Cola's franchise. Therefore eBay is a high profitability, high scalability, high predictability, a brand name known and loved by millions of consumers.

c) eBay can be termed as global business with no cultural barriers. Not all businesses travel well. Gap's casual American fashions aren't well received in every country around the world, especially Europe. In contrast, the most valuable businesses in the world serve a basic human need that applies globally, regardless of culture. Nokia's wireless handsets serve people's basic need to gab wherever they go. Coca-Cola's beverage portfolio of colas, juices, and water are found wherever anyone is thirsty. In the same way, eBay's person-to-person commerce platform appeals to all people, as far as the Internet extends. Already, eBay is present in 30 countries across the world.

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d) eBay has got a synthetic low-cost provider advantage. This one is a bit off-the-wall, but eBay is clearly benefiting as a mass market provider of lower-cost second-hand goods that compare favorably in value to full-priced new products. Through lower prices, eBay is able to tap consumer demand that otherwise would go untouched. All low-cost providers benefit in this way. eBay is the source for second-hand goods. It is a legitimate low-cost provider across many of its product categories.

e) Management of eBay always emphasis on convenience initiatives. The company created a host of tools and services that make person-to-person trading highly convenient. Buy It Now is a feature which allows the seller to pick a price at which the buyer can simply pay up and end the auction on the spot. Another service is eBay's Motor vehicle inspection service, which, through a partnership with Saturn, allows an automobile seller to get a 136-point inspection which is then made available from a link on the seller's auction page.

With these competitive advantages, eBay will definitely withstand the competition from other auction sites like Yahoo! and Amazon.

Ebay will be able to withstand the competition from other auction sites like Yahoo! and Amazon.i) eBay has a wide product category on every segment and also depth in

every product category, which its competitors like Amazon and Yahoo! cannot match. eBay provides extensive offerings of products in different categories like collectables, vehicles, real estate, office equipment etc.

ii) The Brand name “eBay” is synonymous with online auctioning, its brand equity is much higher than its competitors. It enjoyes a first mover advantage and is highly reputed for being safe and reliable. The other competitors like Yahoo! and Amazon are trying to replicate the business model of eBay.

iii) Its competitors attempted to gain market share from eBay by launching their own auction sites. eBay’s ability to connect with its target group gave it the competitive edge it needed to keep its rivals away.

Amazon attempted to lure customers with guarantees of product quality and Yahoo! attempted to lure customers with offerings of commission free auctions, yet eBay attracted more sellers than any other auction site simply because it had the most buyers.

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iv) Sometimes it happens that the seller list an item on Amazon for weeks or months and finds no buyers for it. On the other hand, the advantage of eBay is that there are millions of buyers from across the world constantly searching the eBay databases for items that they want.

v) The advantage of eBay is that it allows buyers to bid on the item. After the bids accumulate, the seller will receive the profit at a buyer friendly price.

vi) Unlike eBay, there are very limited branding opportunities available on Amazon and Yahoo! for standard sellers.

vii) Amazon and Yahoo! have set shipping prices which often does not cover the actual shipping costs. Instead, shipping credit does not even cover the commission fees that Amazon charges. eBay allows the seller to set their own shipping price, which they can include a small handling fee if necessary. This is beneficial to sellers who have to package the item with special material to prevent shipping damage.

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