Professional Documents
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.vs. Amazon
eBay
Summary
History
Date
Event
Stock ($)
1995
1997
1998
1.871
1999
25.016
2000-2006
12.708
Feb 2002
20.833
Jul 2002
Acquired PayPal
15.13
2005
Acquired Skype
49.500
Collectibles
Antiques
Art
Coins
Toys & Dolls
Memorabilia
Motor Vehicles
Cars
Boats
Parts
Electronics
Cameras
Cell phones & PDAs
Computers
Entertainment
Movies, Music & Games
DVD
CD
VHS
Event Tickets
Books
Clothing
Jewelry
Shoes
Accessories
Home Improvement
Dcor
Crafts
Gardening
Motor lovers: Using credibility of leading car collector Kruse Inc., eBay
expanded its categorical offerings with eBay Motors. eBay Motors became
one of its most successful target segments with $2,500M Global Gross
Merchandise Sales in 2002.
Internet value network consists of three major groups and they are users,
communication service provider and suppliers. Each subgroup of these three
segments are called profit sites. Here we will focus on eBays profit sites and its
implications .
Market maker: A market maker acts as a neutral intermediary that provides a place
to trade and also sets the rules for the market .Thus, eBay is acting as a electronic
auction market and brings buyers and sellers together to execute transactions
through a win-win strategy. And in this way, eBay is developing new markets.
Buyers
sellers
Brokers and agents: to complete transactions, buyers and sellers depend on some
facilitating organizations like, citigroup or charles Schwab to complete transactions.
These groups are parts of eBays profit sites when eBay gets commission from these
organizations for each transaction.
Business Process
Seller Account
Creation
Listing an Item
No bids
(Auction Type) Reserve
Dutch
Buy-it Now
Bids Placed
Completing
a Sale
After-sales
Service
Regular
-eBay sends Outbid Notice if needed.
-Sellers feedback rating dictates
bidder confidence.
Online Auction
Industry analysis
New Entrants
Low
Fixed rate
mediation
Large number of customer for
longer period of time
Threat of
New Entrants
Industry Competitors:
Suppliers
Bargaining
Power of
Buyers
Intense segment
of Rivalry
Newspaper cite on the web
Bargaining every Internet directory
Power of
Every music & video retailer
Suppliers Every personal homepage
Buyers
Threat of
Substitutes
Since suppliers are
large, so threat is low.
Substitutes
More
Profit
Decreased
Costs
Transaction
Exchange
Internet property
Network externality
Mediation
Universality
Information asymmetry
Virtual capacity
Low cost
Seller
sales format
social communication
(forums, buyer/seller ratings)
Regional sites
Trust and safety
large variety
Innovative
(Bid-based auctioning systems)
Buyer
eBay created > 24 regional trading sites within countries in order to facilitate the
process of buying and selling items of local interest.
This regional focus and network externality are very much consistent because the
larger the network size, the more opportunity for buyers and sellers to have a
better match of their needs.
Localization and Internationalization of eBays services should also help make the
site more accessible in a specific region, for speakers of the native language; thus
offering the opportunity to gain new members at a faster rate
The only possible downside could be fragmentation and isolation of the individual
networks, so each new regional site must feel like part of the main eBay network
and family
eBay API
Buyers:
Get
Sellers:
Submit
Internet Properties
Coordination
Commerce
Community
Content
Communication
Mediation
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Universality
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Network Externality
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Distribution Channel
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Time Moderator
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Creative Destroyer
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Transaction-Cost Reducer
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Key Drivers
1. Network externality
The company believes that this critical mass of buyers, sellers, and items listed for sale created
a cycle that helped eBay continue to grow its user base. and one thing is very true for this model is its large
number of customers stay for longer period of time to complete transactions.
2. Mediation
In addition to providing a venue for selling items, eBay provides buyers and sellers a place to socialize, to
discuss topics of common interest, and to provide feedback on one another
3. Universality
On the Internet, amateurs and collectors from around the world, rather than locations within a reasonable
driving distance, could bid on items. And eBay is applying that latitude by connecting both parties.
4. Time moderation:
the property of time moderation assists eBay a lot by tailoring time according to customers needs.
sometimes it enlarges time period of auction according to needs of a buyer
5. Distribution channel and replacement effect:
eBay uses the traditional distribution channel without any sort of disintermediation and it is called the
replacement effect, that means, serving the same customers using the existing distribution channel.
6.Information asymmetry shrinking:
eBay reduces all sorts of information asymmetry by allowing sellers to provide all related information to buyers
to pave the way for successful transaction. So buyers are no more deprived by short of data .
Success Story:
Commission Junction
eBay in charge of payouts for specific actions (i.e. 9 cent clickthroughs .vs. $13 active user signups .vs. 5% purchases)
1 - http://www.cj.com/news/press_releases0102/press_010418.html
2 - http://www.cj.com/news/press_releases0304/press_030918.html
Amazon
Summary
Vision
To build the worlds most customercentric company
To establish a place where customers could buy anything
Located in Seattle
Close to the largest book wholesalers in Roseburg, Oregon
The sales tax rate of small state is cheaper than big state
Sites in 6 countries (US, Canada, UK, France, Germany, Japan); ship to >
200 countries
History
Date
Event
1994-1995
IPO
3.917
9.250
9.896
8.833
Mar 2, 1998
12.708
20.833
49.500
54.135
1999-2003
67.85 (mean)
2003-2007
72.29 (6-6-07)
1 - http://www.wired.com/wired/archive/7.03/change.html
Stock ($)
Online Retail
Industry analysis
Network Externality
(many customers )
New Entrants
Distribution Channel
(No control over channel)
Universality +
(existing suppliers)
(reviews/community platform)
(replacement)
Threat of
New Entrants
Industry
Competitors:
Intensity of
Rivalry
Bargaining
Power of
Suppliers
Mediation +
Distribution Channel -
Suppliers
Network Externality +
Threat of
Substitutes
Bargaining
Power of
Buyers
Buyers
Network Externality +
(large customer base)
Mediation +,
(wholesale/retail)
Universality
(regional focus)
Distribution Channel +
Substitutes
Universality
Sales Format
User
choice
Store 1
Locate
Sellers
Transaction
Store n
Sales Format
-Communication
(Reviews)
-Low Cost
-Large Variety
-Distribution
-Trust & Safety
(seller ratings)
B
Store 2
Merchant
Storefronts
Product from
Catalogue
5 Benefits of AWS
1.
2.
3.
4.
5.
S3 in a Nutshell
Idea:
AmazonS3
Bucket1
Putobject
BucketN
Getobject
Client
Put/Getobjectsintobuckets
basedonuniquekeys.
MainFeatures:
Public/Privateaccess.
Supportforlargeobjects.
Positioning: Online
Shopping
Product Review
Convenience
Information
Loyalty &
Advocacy
Order Fulfillment
Product
Recommendations
Money-back
Guarantee
1-Click Shopping
(Buyer)
Association
Low Costs
Network
Externality
Brand Image
Fixed Merchants
Strong CRM
Merchant Advantage:
Automatic Re-Ordering, etc
(Seller
)
Associates
Program
Partnering
Distributed
Web Services
Cross-selling
Diversification
Business Process
Shop=
Browse+Manage Account
Browse
(payment/delivery)
Manage
Account
Internet Properties
Coordination
Commerce
Community
Content
Communication
Mediation
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Universality
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Network Externality
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Distribution Channel
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Time Moderator
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Creative Destroyer
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Transaction-Cost Reducer
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First-Mover Success
Expensive inventory brick and mortar warehousing not required Require WEB to interface
with customers and take their orders
Key Drivers
1. Low cost platform for transaction:
The Internet is certainly a lower cost platform for any transaction, communication or negotiation than
any other electronic media. Amazon is using this platform successfully to bring buyers and sellers
together for transactions, and doing so not by charging an upfront listing or transaction fee, but by
charging a percentage of each sales, which in the long-run could be a much larger pie and better
approach for Amazon on volume; on the short-term to merchants it appears to be a win-win situation
as well as cumulative listing fees can even become prohibitively expensive in some cases.
2.Transaction cost reducer:
The Internet is reducing costs of commercial transactions dramatically by matching the right buyers to
the right suppliers, for the right product at the right time. Just-in-time (JIT) theory which dominated the
late 80s and early 90s, is taken to the extereme in Amzons business model. In this model, sellers can
learn about buyers financial standing, review history and other characteristics of a good customer.
Likewise buyers can learn about suppliers reputations, product features, and prices.
3. Infinite virtual capacity:
Internet infrastructure gives customers the feeling that it has infinite virtual capacity to serve them.
Amazon is taking advantage of their distributed infrastructure through AWS and by bringing a large no.
of sellers with large no. of products for transaction. Buyers are confident that just about anything they
want must be available on Amazon, and most importantly, the quality and authenticity will be more
reliable than eBay.
4.Creative destroyer:
The Internet is transforming the traditional retailing distribution structure; business is now conducted
by Amazon to remove the middleman of the brick-and-mortar storefront, playing a role as a creative
destroyer. Amazon is paving the way for the digital storefront, which is much more affordable and
accessible (does not require large amounts of capital to startup). In this way, it is both a creator and a
destroyer, but certainly in terms of the traditonal system it is a creative destroyer.
Side-by-Side
Technology
Business
Strategy
B2C loser
C2C winner
B2B draw
Technology
Business
Superior revenue-sharing
plan with Affiliate program
Strategy
B2C winner
C2C loser
B2B draw
Conclusion