Topic 8 Questions

Topic 8: Online Auctions Questions

1.       eBay is one of the only major internet “pure plays” to consistently make a profit from its inception. What is eBay’s business model? Why has it been so successful?

eBay’s business model is the brokerage model. It is so successful because it allows customers to purchase items that are no longer in stores or not in stores close to their region. They can also purchase items at a cheaper price than stores and customers tend to have a better experience as they have control of the situation – i.e. they provide feedback about the seller for future customers.

2.       Other major websites like Amazon.com and Yahoo! have entered the auction marketplace with far less success than eBay. How has eBay been able to maintain its dominating position?

eBay has been able to maintain this success by the way it is operated.  eBay has a larger range of stock compared to Amazon.com and for the most part tends to be cheaper than retail stores. eBay also allows customers to bid for an item, the highest bidder winning the auction and this effectively taps into people’s competitive nature.

3.       What method does eBay use to reduce the potential for fraud among traders on its site? What kinds of fraud, if any, are eBay’s users most susceptible?

eBay produces security information on their website for customers to be aware of security risks when purchasing items online.  They also provide feedback and complaint areas where customers can complain if they feel they have been cheated in any way. Some examples from their website include; only using safe payment methods such as PayPal, to never trade outside the eBay site as items purchased outside the site are not eligible for buyer protection, to never use western union, MoneyGram or other instant wire transfer services and if an offer sounds too good to be true, it probably is. eBay’s users are most susceptible to identity thief, seller’s fraud, buyer’s fraud and fraudulent emails.

4.       eBay makes every effort to conceptualize its users as a community (as opposed to, say “customers” or “clients”). What is the purpose of this conceptual twist and how does eBay gain something by doing it?

eBay does this to make everyone feel equal and not be put pressure on them. eBay wants customers to return to their website so they interact as a ‘community’ to let people have a good experience and feel welcomed.

5.       eBay has long been a marketplace for used goods and collectables. Today, it is an increasingly a place where major businesses come to auction their wares. Why would a brand name vendor set-up shop on eBay?

Brand name vendors may choose to set up an online presence as well as a real world presence. This may be part of a marketing strategy where it allows customers to be aware of multiple locations where the brand is located, compared to just one store in one region. This allows customers to have access to the brand 24/7 from whatever location they may be from. This may also let customers bid on the brand, in the hopes of purchasing the brands at a cheaper price than what they would have compared to retailed prices.

6.       I have a few businesses, and I have used eBay for about 12 years on and off. Currently I have about 600 books listed. I stopped selling on eBay for a few years but they changed the rules this July and it is viable again (for me). What do you think changed?

This was caused by changes from the introduction of a new policy in July 2010. eBay overhauled the ‘Accepted Payments Policy”. This meant that it gave the option to offer a number of trusted payment options, allowing customers to recognise safer and protected methods of payments. This also allows a certain amount of insurance and intervention on behalf of eBay if they were to be a corrupt transaction.