Online Auction
...though not the recognized leader of the online auction industry, Yahoo has some strong alliances and an overwhelmingly huge customer base. · FairMarket focuses on business producer-based auctions and is the recognized leader in that market. The focus of their product line was on name brand labels and rapidly became the leader in the area. They charge a percentage fee for all auctions that go through their site. They are lacking in customer service and website ease of use. · AuctionWatch, an eBay clone, is the fastest growing site with 250,000 registered users and had 1.7 million unique visitors in March of 2000. With numerous private investors, and a business model close to that of eBay, the site stands to compete directly with eBay with some extensive marketing campaigning. · GO Network Auctions was owned by the Disney company and often sold Disney products including hard to find items. The site was considered to be easy to navigate and they also provided a customer guarantee against fraudulent listings. The auction site has signed a deal with eBay to have their merchant products sold solely through the eBay branded websites. · Auctions.com had several customer service based features including 24-hour support and fraud protection. The site has set its eyes on global auction dominance and has taken an aggressive campaign to see it dream come to fruition. · Niche auctions were functioning on a smaller level, offering only a few key categories on their site in hopes to become the recognized leader of that market. o Likely strategic moves of competitors · eBay may seek to reclaim the 20% of the market share it had lost to newcomers such as Amazon and Yahoo. A reduced price schedule or increased seller incentive would help increase listings. It was once estimated that 4% of listers accounted for 80% of listings. A strong focus if incentives for these sellers would keep these users at eBay and would also increase site hits and total sales. · Amazon.com relied heavily on its previous users to make a shift from the retail section of its website to the auction section. New shoppers may be shifting from the actual retail section. A strong focus on bringing in more ‘professional’ listers would increase listings and revenues. If an auction has the items that people want, they will buy it. There is very little brand loyalty in the industry. Buyers and sellers are seeking the best deal and easiest to use website they can find. Amazon has already established itself as the leader in user friendly online purchasing and should continue that line. · Yahoo! Auctions currently works on revenues from advertising. Some effort should be placed on letting the public know it is offering a completely free auction service. Another possibility would be to charge a fee based on the cost to bring the auction from its inception to its conclusion. The fee would be only one or two dollars regardless of selling price. Revenues from advertisers would continue to increase due to the influx in sellers and buyers. · FairMarket has the sellers needed to be the industry leader but is lacking in ease of use and customer service. A more hands on approach to customers to make them feel more at home would prove to be profitable. · AuctionWatch has the advantage of being able to see eBay and follow in their footsteps. The eBay clone could soon be the industry leader with a creative marketing campaign, and some incentives for listers and buyers to register and use their services. · Go Network Auctions has signed with eBay to become co-branded and may soon only offer eBay run auctions through their website. This would create increased users and browsers on their website. · Auctions.com has set its sights on growth. The company should start to consume smaller auction sites in order to increase its market hold. · Niche Auctions serve smaller communities and can only be successful if the communities they serve trust and honor them. They can continue to offer a service to users with limited profitability due to economies of scale. 5. Key Success Factors o Extensive product information – detailed product descriptions with pictures and other information about seller and payment/shipping methods o Site ease of navigation – ease of use and ability to properly navigate site o Innovative offerings – dynamic offerings to create the need for customers to return on a regular basis o Retention of seller loyalty – creating the desire for sellers to place their listing on the site and not shift to another o Offering superior after the sale service – offering answers and services to both buyers and sellers after the sale o Attention to customer needs and preferences – developing the site in a way that the user feels more comfortable and uses the site longer to more often o Fraud protection – protection against bad buyers or sellers in case of fraudulent activities o Favorable image or reputation – a positive appearance to users and potential users o Overall low cost – sellers are looking to make as much money as possible. Increased seller fees may cause the seller to look somewhere else for a comparable service. 6. Overall Industry (Un)attractiveness o The Online auction industry is profitable and growing at a rapid pace. Industry leaders have situated themselves and may not budge easily when it comes to taking their sales. Removing them from their thrones is not impossible but a new or developing company would need to create either a new market for sales or take some of the current market. Some shifts are occurring with the recent development of the newer auction companies but to still be there when the dust settles will require a household name in the auction industry, which leaders such as eBay, Amazon.com and Yahoo have already done. Internal Analysis Company Analysis: 1. Present Strategy o Financial analysis o Market share - The present strategy used by eBay has managed to gain and maintain the top market share in the industry. The strategy has seven specific objectives. · The first is to grow the eBay community and strengthen the brand. This will help attract new members and maintain the existing eBay community. · Second, eBay will broaden the company’s trading platform by growing existing product categories, promoting the new product and offering services for specific regions. · Third, is to provide services like user verification and insurance along with other services that will increase community trust and safety. · Fourth, the enhancement of Web functions and features, this is accomplished by personalized features like About Me. About Me allows users to create their own home page free of charge. · The fifth feature is Gallery, which allows people to showcase their items as pictures in a photo catalog. · The sixth objective is to expand pre- and post-trade value-added services like escrow services and shipping arrangements. · Finally the seventh objective is to develop international markets. o Sales Growth - The company has developed three main growth tactics: “build strategic partnerships in all stages of its value chain, actively sought customer feedback and made improvements based on this information and actively monitored the external environment for developing opportunities.” This strategy gained an 80% market share in the beginning. However, due to the competition and development of eBay’s competition, the market share fell to 60% in 1999. The biggest competitors that helped deteriorate eBay’s market share were Amazon.com and Yahoo. eBay has been making money since it opened in 1995. The sales have grown at an exponential rate. The merchandise sales were 7 million in 1996, and grew to 2.8 billion in 1999. The sales are expected to continue their growth. Along with the continued sales growth, there has been and will continue to be growth in the number of users. They have grown from 41,000 in 1996 to 10,006,000 in 1999 with no signs of becoming stagnant. 2. SWOT Analysis o Company Strengths - eBay has numerous strengths that allow the company to maintain such a huge market share. The first to be mentioned is the chairman and founder Pierre Omidyar. Pierre formed eBay in 1995 and the company has soared. Pierre created the world’s largest Web-based community of consumer-to-consumer auctions. Pierre is a strength because he the visionary of eBay. The second best thing that Pierre did was picking the best leaders for his company. They have made all the difference. · eBay has the world’s largest Web-based community of consumer-to-consumer auctions. · eBay had listed over 3 million items in over 3,000 categories. · eBay’s Web site had approximately 10 million registered users. · There is an average of 1.8 million unique visitors daily. · eBay members list more than 375,000 items on the site every day. · eBay was the pioneer of the person-to-person online auction. · Their financial stability is a strength. · Jeffrey Skoll with his MBA and business background. · The small to medium size businesses that use eBay as a primary distribution channel. They account for only 4% of eBay’s population but are responsible for 80% of eBay’s total business. · Margaret Whitman’s experience in global marketing. · Capable board of directors with notable members. · The simplicity of buying and selling goods on their site. · They offer two types of bidding: a single bid or automatic bid, which is where you can set your top bid and the system will move your bid up with the new offers. · There is no fee for bidding. · eBay’s system because the features and ease of use. · The Feedback Forum; this builds trust among buyers and sellers and helps to establish reputations within the eBay community. This Forum helps to overcome users initial hesitancy about trading over the Internet. · The user agreement prohibits actions that would undermine the integrity of the Feedback Forum. · Listed as the “Hot IPO of 1998” by Bloomberg Personal. · “Best IPO in the U.S. market in January 1999” by Euromoney. · eBay’s Board of Directors saved the right to issue as many as 5 million additional shares of preferred stock. · Not having inventory and being able to operate a marketplace without the need for a traditional sales force. · eBay’s many strategic alliances: First Auction, AOL, Kinko’s, GO.com, Collecting Channel, AutoTrader.com, Parcel Plus, I-Escrow, Mail Boxes Etc, Billpoint, Wells Fargo, E-Stamp. · Custom Home pages for each category. · Hired enthusiasts to be leaders and ambassadors of chat rooms. They paid them a thousand dollars a month. · SafeHarbor program provides addition safety-guards. · Personalized options like “My eBay” and “About Me”. · Maynard Webb helped to minimize the down times on crashes. · International customized home pages allowing users to trade in their own currency. · Ranked number one by Gomez Advisors in the following categories: Ease of Use, Customer Confidence, On-Site Resources, Relationship Services, Overall Score. · Ranked number one for types of auction sites by Gomez Advisors: Bargain Hunters 8.43, Hobbyist/Collectors 7.98 and Sellers 7.94. · Honors and Awards: Best Internet Auction Site, Electronic Commerce Excellence, Top E-Commerce Program/Service, Editor’s Choice Award and Top 50 CEOs. o Company Weaknesses- the company’s weaknesses have helped cause the loss of 20% of eBay’s market share. Some of the weaknesses are mentioned below. · The ability of consumers to lie in the Feedback Forum. · eBay estimates that less than 1 percent of the millions of auctions result in a fraudulent activity. However, this would still be above 10,000 auctions. These fraudulent activities include: misrepresentation of goods, trading in counterfeit goods or pirated goods and false bidding. · User confidence in eBay’s reliability after the site crash that stayed down for 22 hours because of the lack of backup capability. · The continued crashes that occur on the site. o Company Opportunities - There are several opportunities facing a company with as much capital as eBay. Here are some opportunities that might interest eBay listed below. · Global expansion with the desire to create a worldwide community of eBay members. · Estimated growth of worldwide Internet users is 320 million by 2002 and 500 million by 2003. · Enormous growth potential for eBay in the online auction industry. · Regional Auctions to broaden the user base. This allows eBay to take advantage of the 50 largest metropolitan areas. · To broaden the trading platform by develo...