eBay: Buy it. Sell it. Love it.

SID: 480366827

eBay logo

Image: John Radin, Flickr, All rights reserved

 

8 November, 2019

By Bella de Groot

eBay is an international online marketplace that facilitates consumer to consumer sales.  Utilising the interconnectivity of the internet platform, eBay has managed to extend their buying and selling service to all corners of the globe. Drawing on the role of web technologies, a critical analysis of eBay and its transformative impact on the online shopping industry will be discussed in this essay.

Initially, I will begin to examine the function and historical developments of eBay to assess the impact of the internet on economic, political, social and cultural aspects of our lives. I will then move on to provide insight into eBay’s business model and internet ecology before providing an in-depth discussion surrounding eBay’s innovative internet transformations.

What’s eBay for?

Named as the marketplace of contemporary society, eBay is an ecommerce shopping site in which users can shop anything from expensive collector items to second-hand clothing (Collier, 2014). This multibillion-dollar San Jose based company offers an online auction and shopping website where individuals and businesses can sell or purchase a wide range of goods and services internationally (eBay, 2019).

Social transformations, for example the arrival of the user-generated Internet, have moved practices of production and consumption into the centre of economic value creation and are therefore intrinsic to all versions of capitalist and non-capitalist economies (Denegri-Knott & Zwick, 2012). This means that sites such as eBay are inherent examples of sharing goods on online platforms for economic benefit.

It is important to be aware, however, of the ways in which companies like eBay frequently market their goods sharing businesses, often using phrases such as “fast, mobile and secure” to promote their product experiences (eBay, 2019). While this may be true to an extent, eBay fails to realise that the nature of their exclusively online marketplace means that those who do not have access to the internet or technology are consequently marginalised (Castells, 2002).

In the sense of our social world, the process of producing and consuming goods online has the potential to bring buyers and sellers together, albeit, through economic transaction. While eBay may compete against other online marketplaces, Alexander Halavais (2013, p.7) argues that the seeming “disintermediation it provides still encourages the continued commodification of online interaction.” Hence, in addition to its economic effect, eBay has been transformative in furthering our understanding of how the internet is used in our social world.

How eBay came to be

Born in 1995, eBay began as a site “dedicated to bringing together buyers and sellers in an honest and open marketplace” (eBay, 2019). Originally named AuctionWeb, founder Pierre Omidyar listed (and sold!) the first item online: a broken laser pointer. By the end of 1996 the total value of merchandise sold on AuctionWeb reached $7.2million and Omidyar decided to hire Jeff Skoll as President. To honour Omidyar’s wishes to create an ‘honest marketplace’, the Feedback Forum was introduced to allow users to rate their transactions and create a virtual community of openness. This demonstrates the impact of the Internet in creating a space for online social interaction between buyers and sellers. The key features of social groups are often supported and even extended through online communities, in eBay’s case via chatrooms and discussion boards, despite having different boundaries (Rice, 1987).

Picture of Pierre Omidyar, eBay CEO.

Image: Michelle Andonian, Flickr, Some rights reserved

In 2001, eBay Stores was introduced as a new online storefront directory so users could launch and customise their own online businesses for a small fee. Over the years Omidyar continued to expand eBay to Germany, Australia and the U.K and the site is currently operating in 180 countries worldwide.

As a philanthropist himself, Omidyar writes in Harvard’s Business Review, stating that eBay strives to make a positive impact with the money they earn. In 2001 they unveiled Auction for America, with 100,000 users raising more than $10 million for the victims of September 11. By bringing together an online community to support such an important cause, eBay has had a profound social and cultural impact and continues to support over 30,000 charities.  Check out the video below that demonstrates eBay’s charity efforts thus far:

Video showing eBay’s charity goals for the upcoming years

Source: eBayInc, Vimeo, All rights reserved

Behind eBay’s innovative business model

According to Barber Spencer (2013) a business model is a framework that assists in working out how to use your product to make something of value for a consumer whilst simultaneously gaining an economic benefit for yourself. It is the process in which certain actions are performed to create a product or service which is then delivered to the customer. A successful business model demonstrates the motive behind the system and how it works to capture value (Spencer, 2013). The convenience and accessibility of an internet-based business model has likely contributed to the astronomical success of eBay in which online peer-to-peer interactions have surpassed the traditional garage sales and flea markets with a new and improved web interface (Chircu & Kauffman, 2013). Let’s break it down:

  1. First of all, an item is listed on eBay with an Insertion Fee that the seller must pay (usually 30c-$3.30)
  2. Then fees are charged for additional listing options to promote the item
  3. After that, the Final Value fee is charged after the seller’s auction (normally 1.25% to 5% of final sale price)

(Collier, 2014)

eBay’s humble beginning as an auction house is the perfect example of how the Web facilitates new community based business models (Molesworth & Denegri-Knott, 2008). By bringing together buyers and sellers to execute transactions eBay is able to broaden their market. When developing the company, Omidyar was able to detect a product gap that no traditional provider filled and through technological innovation was able to deliver something unique to the marketplace (Chircu & Kauffman, 2013). Pierre Omidyar and John Donahoe now constitute the two largest individual shareholders whilst Benchmark Capital Management Co. and The Vanguard Group Inc, are the two largest institutional shareholders (Pines, 2019).

Infographic of eBay transaction process

Entertainment Corner, All rights reserved

Over time, eBay’s business model has faced many developments. There has been increased measures to ensure security and avoid fraud by adopting PayPal for transactions. There’s also been changes to the feedback system to better suit professional sellers and private buyers (Molesworth & Denegri-Knott, 2008). The system is transaction based, meaning the auction must be completed before feedback can be left. Comments and ratings are visible to all potential future buyers so sellers must do their best to ensure a positive experience for the customer (Resnick et al, 2006). In fact, a good reputation on eBay often results in higher prices for sellers (Melnik & Alm, 2002). The feedback system also sheds light on the role that peer-to-peer marketplaces play in connecting individual sellers to the market and is partially responsible for the success of the company’s business model.

The new Web 2.0 brings about the notion of “free labor” (Terranova, as cited in Denegri-Knott & Zwick, 2012), a concept, in this case, in which photographing and listing personal items on eBay is experienced as enjoyable and empowering by the poster, regardless of it being a central element in eBay’s attempts at capital accumulation. Innovative technology and the Internet have allowed for sellers to reach diverse groups of people while still maintaining control over their personal online marketplace. The low fees charged by eBay mean that the company is able to avoid excess costs and provide its users with the best possible transaction experience.

eBay’s internet ecology:

Paul McFedries (2003) understands an internet ecology to be the “relationships and interactions between people and the online environment, in particular the Web.” He uses a metaphor of animals foraging for food to describe how web users navigate the Internet to find the information or product they are searching for. People aren’t merely users, but informavores (consumers of information) who satisfy their needs by foraging within the information food chain (McFedries, 2003).

Taking advantage of the interconnective features of the internet, eBay situates itself as a key company within the e-commerce marketplace industry, an industry that centres on the buying and selling of goods. From offering the oldest pair of Levi’s jeans in the world, to antique collectables, to brand new electronic products from named brands, eBay has also become a major competitor within the retail and consumer industries. As a result of indirect network effects and individuals’ online reputations, eBay’s market shares aren’t likely to erode in the future (Haucap & Heimeshoff, 2014).

Companies such as Amazon, Alibaba, Magento and Walmart are direct major competitors of eBay, providing similar services in which consumers can also purchase or sell a range of goods online. The defining factor for eBay however is their auction style selling method which is part of the capitalistic nature of the site. An item is only worth precisely what a buyer is willing to pay for it. Unlike Amazon, eBay doesn’t market their own products on their site and hence, there is no motivation to hide private seller’s products.

The main suppliers of eBay are private sellers, just regular people who sell new and used items for money. However, over time eBay has expanded to accommodate businesses who wish to market their products on an online marketplace. Haucap and Heimeshoff (2014) argue that the higher number of sellers and increased diversity of good offered, the more attractive the trading platform appears for future buyers. They continue to add that eBay isn’t regulated by governments or regulatory retail bodies, it is instead self-regulating like many other industries (Haucap and Heimeshoff, 2014). However, von Blanckenburg and Michaelis (as cited in Haucap and Heimeshoff, 2014) argue for a stronger intervention into the competition law rules that regulate industries like eBay. eBay’s key partners include automated online payment system: PayPal, online communication service: Skype and ticketing vendor: Stubhub (eBay, 2019).

Below is a diagram of Airbnb’s internet ecology:

 

eBay Ecosystem:

 

eBay- The world’s largest online marketplace born from the internet?

The ever-growing transmission of internet networks, internet access and internet-based products and services are available to more and more people by the day (Haucap and Heimeshoff, 2014). As a result, internet applications have been transformative in revolutionising transactions for both businesses, private sellers and consumers. The internet has allowed eBay to locate a gap in the online marketplace industry and capitalise on it. The internet’s effects on lowering transaction fees and improving competition have been widely recognised and as a result, innovative service providers such as eBay now have lowered search costs which allows users to experience a positive shopping experience online (Haucap and Heimeshoff, 2014).

eBay listing for Graffiti Street art stickers

Image: eltoro215, Flickr, All rights reserved

By creating such a user-friendly interface, eBay has effectively created value through increasing productivity for network members and encouraging future users to take part in the online retail experience. An example of this is eBay’s Seller Assistant, which helps new sellers to prepare professional online listings (Iansiti & Levien, 2004). Establishing appropriate performance standards for buyers and sellers is demonstrated through the feedback system which provides rankings which can help to promote trust of sellers for potential buyers. Users that are rated negatively are excluded from the platform to avoid any forms of fraud or misconduct and this allows eBay to establish accountability between buyer and seller (Iansiti & Levien, 2004).

Here, eBay’s transformative effect was in establishing a collaborative platform that introduced a new market of internet-based producers and consumers. The convenience and accessibility of the online service meant that traditional physical marketplaces began to feel pressure to adapt and change to cater to the growing influence of the internet (Iansiti & Levien, 2004). Prior to eBay, buyers seeking products had to leave their homes to purchase goods. Now, however, eBay provides a space in which they act as the mediator between seller and buyer on an easily accessible online platform. The interconnectivity of the internet platform has provided an avenue in which individuals can make money off items they no longer have any use for and as a result, eBay has revolutionised the way we buy and sell.

By integrating web technologies including discussion boards, easy online payment and messaging systems, eBay has provided a simple and easy to use platform for everyday users to list items for sale or to browse products to purchase (Castells, 2002). These technologies have even had social transformations by allowing users to connect with one another over items. Collectors in particular have created discussion boards around comics, stamps and other collectable items to provide a space in which they’re able to discuss their interests (Castells, 2002). As a result, eBay has been innovative in expanding our understanding of how the internet is used in our social world. The mobility of internet platforms like eBay means that those who may have been unable to leave their house to shop now have the convenience of accessing a hugely diverse marketplace from the comfort of their couch.

eBay reviews on duvet set

Image: vironica ee, Flickr, All rights reserved

Additionally, eBay shares the value that it creates with members of its ecosystem in a highly affordable manner. It only charges users a small fee to coordinate their trading activities and is flexible enough to allow sellers to customise their listings to their own preference (Iansiti & Levien, 2004). Incentives such as the PowerSeller label, which creates immediate confidence in the seller, reinforces standards for sellers that benefit the entire ecosystem of the marketplace. Furthermore, the popular trading of second hand goods on eBay demonstrates the sustainability efforts of the company.

For many dedicated eBay sellers, the marketplace has become a socially transformative platform that many have turned into forms of employment (Collier, 2014). The user-generated platform has moved practices of production and consumption into a means of economic gain, benefitting users all over the world (Denegri-Knott & Zwick, 2012). The internet has provided an accessible and customisable middle ground in which eBay connects potential buyers to sellers.

Overall, eBay has been instrumental in providing a successful ecommerce platform that allows for the trading of goods between users. The online business model establishes a sense of community and trust for buyers and sellers whilst also promoting feelings of belonging through their user-friendly community. By taking advantage of the interconnectivity the internet has to offer, eBay has established a means of ensuring the ethical sale of ecommerce goods.

 

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