Is eBay Dying as the Result of the Incapability to Change?
eBay is a U.S company which offers C2C transactions on the internet. Through eBay, the customers could sell, buy, or auction different types of items. Founded in 1995, eBay has been one of the first companies to reach a success resulting from the dot-com bubble. The company has its headquarters in San Jose, California and its revenue in the year 2012 was reported with $14 billion. The company’s future seemed to be promising, yet it still faces some of the threats by the existence of Amazon. Before analyzing the difficulties that the company is facing, let us discuss some background information of the company like history, founder, and its success.
How eBay Was Born
eBay allows a platform for the activity of selling and purchasing retail goods, which interests people as it is more convenient to buy products from the comfort of their homes compared to going to the market. It can be said that the beginning stage of eBay was not straightforward.
It all started with the computer programmer Pierre Omidyar, an Iranian American, whose idea was to start a website aiming to auction the used, broken, and second-hand stuff.
So, it started on September 3, 1995, with the name of the Auction Web. At first, Omidyar was not serious about this website and just considered it as one of his side hobbies. Yet the traffic on his site gradually increased and soon his internet service provider even asked him to upgrade his account with a view of accommodating the rising amount of traffic to the site.
Because the up gradation cost him around $250, he started to ask the users to pay fees to get access to the site. Surprisingly, people were happy to pay and kept on using the site more frequently. Thus, eventually, Omidyar decided to hire an employee who would handle the cheques that were coming to his office for the payments. And that is the story of how Chris Agarpao became the first employee of eBay.
The growth was so fast and phenomenal that the company began to need someone who could offer the proper structure for the company to grow and make the right use of the public interest that was gaining day by day. In 1996, its first president, Jeffrey Skoll, came in the scene. In January 1997 alone, 2,000,000 auctions were hosted on the site which was impressive since the number was 8 times more than the whole number of auctions in the year 1996.
In September 1997, a change was made to its name to eBay.com that we all know nowadays. That very year, the company was funded from venture capitalists Benchmark Capital with the amount of money of $6.7 million. One year later September 21, the company announced to go public. On the first day itself, the share price increased up to $53.50, which made Omidyar and Skoll become the billionaires overnight.
In 1998, there was another change to the top positions when Meg Whiteman became the CEO as well as President of the company. This woman was indeed a big name in the business world, having also served as the executive at Disney, Dreamworks, and Procter & Gamble. Under her guidance, every detail was looked into and upgraded to create a better user experience.
In no time, eBay started to expand and include many more categories apart from the auction category alone. As the business grew and gained more profits, the company acquired PayPal in October 2002. Three years later, Skype was purchased by eBay for $2.5 billion and then sold again to Microsoft in 2011 for $8.5 million. Moreover, to meet the local demands and limitations in certain countries, eBay also released different individual websites suiting for various countries. In 2008, the number of registered users of eBay went up to millions, the company employed more than 15,000 people and generated the revenues around $7.7 billion in the same year.
eBay of Today
Today the company is selling everything that is not prohibited under that country’s law, from appliances, domain names, software, vehicles to furniture. Additionally, it also offers the latest products with discounts regarding the rage and excitement of the auction.
The auctions on eBay attract not only people who wait for buying used goods at lower rates but also those who are fond of collectibles. In other words, eBay has been one of the best sources for customer’s needs. The model was so popular that it had been copied and used in several countries like India and Japan before eBay has entered and begun with their local websites there.
Some products like tobacco, alcoholic beverages, drugs, and weapons are not allowed to sell and purchase on eBay. In terms of charity, eBay is also used as a way for the seller to donate any amount that they received from their selling activity for their favored charity. Moreover, eBay users could easily pay and receive money through PayPal, Paymate, ProPay, Moneybrookers, and escrow(dot)com.
Every auction or sale that is made on the website, eBay could generate its revenue by taking a commission. And that depends on if it is a fixed rate product or product up for auctions. Sometimes, other than the shipping charges, eBay could charge up to 10% on the sale amount.
Today eBay is considered one of the biggest companies that sell products online. With its huge customer base, eBay has attracted even the top companies to showcase their products there with the view of getting the global audience’s attention.
By selling broken laser lights and old appliances, eBay has gradually grown into a global marketplace where anyone could find almost anything at an affordable price. Currently, it is one of the top 20 sites that are most visited on the planet and has become a superpower on the internet with millions of transactions taking place on its portal daily.
However, although eBay has experienced such impressive growth, during its journey, it also faced up with numerous problems. And people are wondering if eBay is still an effective platform for trading stuff.
Business Adaptability in International Markets: eBay’s Failure in China
In 2002, while acquiring EachNet, eBay decided to enter the Chinese market. When the websites were launched, they seemed to be promising and the owners expected a huge success from it. By contrast, they failed miserably due to applying the same business model that they were using across the world to China where there were significant differences in cultures.
#1: A different environment
First, eBay was not able to recognize the differences in the Chinese business environment. Most of their manager staff were people from Germany and the United States, which resulted in the language barrier and insufficient understanding of the local market.
While their major competitor, Taobao, managed to hire Chinese people to handle their business.
With their knowledge of the culture, those Chinese could offer the best understanding and the solutions for the company. In fact, the name of the platform also has a significant meaning that means to dig for treasure. Although eBay also tried to name itself under a Chinese name, yet it did not sound as catchy as Taobao one.
#2: Ineffective marketing tools
In China, it is so important to have your brand known by everyone and this can have a significant impact on your business. One problem that eBay did not realize was that it did not have the same strength in China as it was in the U.S. This explains why even diffusing several ads on television did not catch much Chinese’s attention.
#3: Few payment methods
Buyers were not so interested in online payment, instead, they were more into paying upon receipt of products. eBay should have adapted to this trend and delivered other types of service instead of insisting on their current payment method.
While Taobao collaborated with most of the Chinese local banks aiming to carve out a strong secured network for online banking. eBay only allows its consumers to pay via PayPal, credit card, and some debit cards of local banks. The limitation of online payment choices somehow discouraged consumers to purchase goods on the website.
#4: Poor customer relationship
To better understand why eBay failed in China, Taobao’s strategy is worth mentioning. Taobao knows that building a reliable relationship is the determinant key to create something called “swift guanxi”. Thus, they worked hard to fit in this Chinese culture, which is to build a close and pervasive interpersonal relationship.
Taobao’s goal is to prioritize and create high-quality social interactions and the exchange of mutual benefits. This principle is so crucial for any business wanting to be successful in China.
Besides, Taobao keeps things as simple and convenient for the costumers as possible. There is even a section of instant messaging, which allows the customers to ask for more information about the products that they want to purchase with the sellers. And the American company failed in this aspect where they ignored the Chinese consumers’ need to be listened to.
What Is Wrong with eBay?
It seems like eBay is not only failing in China but also in its own territory. There are more complaints towards the company in terms of fees, relevance, and financial performance, which could be summarized as seller grievances, buyers not being engaged, and investor unrest.
eBay seller grievances
It can be noticed that the fees are getting higher than ever on eBay. Before the fees to run an entire eBay, business ranged from 6% to 8% including the shop subscription plus the PayPal fees. Today even with the free insertion fees, you might have to pay double or triple of the previous amount and still need to donate a couple more percent to eBay’s coffers through eBay Promoted Listings.
With that high fees, what can be expected from eBay is the massive sales. By contrast, eBay’s growth has experienced some lagging recently. All over the world, eBay is getting fewer sales for the seller than a year ago, and still, it asks for even higher fees. There might not many complaints about the sky-rocketing sales, but people do complain about their shrinking sales that lead to that they are not making an income.
When it comes to picking up a second-hand dishwasher or selling a caravan, people would think about Facebook. Or if they need something to be delivered tomorrow, Amazon seems like the best choice. And undoubtedly, eBay is lacking these which are speed and convenience that result in missing out on C2C sales.
It can be said that second-hand dishwashers, caravans, and something delivered tomorrow are not the core strengths of eBay. But at the same time, when consumers are shopping elsewhere, they do not consider eBay for other purchases. For decades, it is the loyal buyers who occasionally sell on eBay, but sadly, it is letting these customers slip away.
To be more relevant again, eBay needs to change and become the default place for the buyers who are in need of starting their search for anything. Facebook and Amazon used to be described by the Times that: “Both companies create the experiences which are vastly different from eBay’s clunky bidding system and faffing around with shipping. In this digital age when convenience is put on top, eBay is, well, inconvenient”.
The Times says the act of giving money back to shareholders like dividend as “an admission of defeat – a sign proving that you’ve run out of ideas”.
Thus, what eBay needs to do is to have more fresh ideas. Sell-offs might make it more bite-sized for acquisitions, but eBay should return to its strength which is the marketplace for anyone to buy and sell almost anything.
The Times assumes that eBay with an idea that was so good and simple did not show any changes over the years. While Amazon tries its best to deliver as fast as possible or Facebook obsessed about the local sales. By contrast, eBay has not put much effort into managing shipping and offering convenience. Indeed, they just allowed the Chinese sellers with poor-quality shipping to flood the marketplace. Their focus on the new fixed price products somehow lost their unique ability which is to connect the consumers with something to sell with consumers who wanted to buy.
The Bottom Lines
In the end, eBay is still such a giant that performs better in certain areas like in the UK compared to their worldwide results. And even though they might be in a difficulty to compete with others, they are still able to generate a pot full of cash, which draws the attention of plenty of investors.
On the flip side, if eBay continues failing its customers without any improvements, it could easily find itself sold to the highest bidder. While the marketplace might not be in that serious problem, it should be cautious as once one potential buyer comes to the table, the others will normally follow. And if someone makes an eBay best offer, that is attractive to the shareholders, there is likely nothing eBay Board could do. Thus, what eBay should do is to change itself. And how they could do that depends on their desire to serve and provide the best service for the customers. The future is unknown but still, we all hope a dominant eBay will once again rise as the top marketplace for selling and buying anything.