Why is eBay the Most Successful Online Auction? -Solution

 

Title: Why is eBay the Most Successful Online Auction?

(4180 words)

 

Introduction

 

 

The use of online auctions has made it possible for  individuals to obtain and purchase their needed and wanted items directly, without the hassle of traveling and physically looking for the products. With the use of eBay, customers are able to purchase their products regardless of distance, quantity, weight, age, and location, through their credit cards and online banking accounts. Thus, the use of eBay promotes convenience and easy access to consumers. With the importance and significance of the operations of eBay, this paper discusses success in terms of online auctioning, and investigates how eBay has become the largest online auction house.

 

The use of the World Wide Web has become one of the inevitable ways in obtaining and gathering relevant information regarding a myriad of subject matters and issues. Its use is most popular among the society, most especially the younger generation, who perceive the Internet as one of the most helpful tools in terms of education and communication. Because of this, the growing importance of the Internet has been extended to other aspects, including business and marketing.  Aside from communication and education, the use of the Internet is being maximized and utilized in terms of business and marketing, such as being done by the eBay company, with their online auction. Through o

 

 

Background of the Study

 

This research was conducted to investigate the success of eBay with its online auction, and to know the reasons why it has become the largest online auction house. Its headquarters is located at San Jose, California in the United States of America. The site is managing its online auction, from where people shop, purchase and sell goods and services online, all throughout the world. Pierre Omidyar, a computer programmer, founded the eBay site on September 3, 1995 as AuctionWeb, as part of a larger personal site (2007), and since then, the eBay juggernaut has been rolling its way. It is really very astonishing to think that this website was created to sell Pez dispensers and other kinds of collectibles, and would become the leader in the market of e-commerce ( 2002).

 

In addition, many observers, who have seen eBay grow to the position that it has attained now, commented that there is no force able to stop it from becoming the world’s most successful online auction site. Its business process creates a business model, which does not require the carrying on of any inventory, but rather has its share of the profit margin from every transaction that it does. The operation of the company is done by the means of its market mechanism. With this business process, eBay is able to sell anything and everything that is legal, and which does not violate its policy regarding restricted items. Thus, this research project will introduce and demonstrate that eBay is the most successful website that highlight online auction, and that no existing competitors will be able to compete against this eminent online auction house.

 

 

 

Research Objectives

 

The focus of this research project is addressed in the following objectives

  1. To examine the success of eBay
  2. To administer a SWOT Analysis (Strengths, Weaknesses, Opportunities and Threats)
  3. To identify the competitors of eBay
    1. Direct Competitors
    2. Indirect Competitors
  4. To identify how competitors compete with eBay

 

 

 

Literature Review

 

It has been reported that electronic commerce or e-commerce is becoming increasingly important to consumers, sellers, and entire communities (2005). In addition, although it is still considered in its infancy, Internet usage and online marketing are already growing explosively. As a proof of this, during 2003, approximately 40 million households in the United States made at least a single purchase from the Internet (2005). With this, online marketing has become and will continue to become a full and complete business model for other companies, and with the increase of companies that invest in such a business, including Amazon.com, eBay, Yahoo!, and Netscape, this type of business model has proven a success (2005). Research suggests that online sellers are making successful efforts to increase consumer usage of their Website (c 2005).

 

The increasing importance of e-commerce and the use of the Internet, led many online companies, such as eBay to engage in online auctioning. It has already been mentioned that the online operations of eBay started in selling Pez dispensers, and from then, the online auction has continued to buy and sell other stuffs that would interest consumers. Ten aspects are attributed to the success of eBay, namely, commitment, well-spent funds, an effective and persistent marketing and public relations, great products or services to sell, not selling of junk, great customer service, efficient and pleasant facility, polished listings and photos, paying attention to details, and good recordkeeping (2006). These ten aspects are perceived to be contributory to the success of eBay in the industry as the leading online auction house, and determine its edge over its competitors.

 

The success of eBay has inspired other online companies to engage in the same business, of perceiving the same attention that it receives from consumers. With this, several competitors can be pointed out, which are also online companies that engage in the same services that eBay offers. Aside from Amazon.com, Yahoo! and Netscape (2005), several other online companies have also emerged, including Ubid.com, bid-alot.com, uauction.com, auctionfire.com (  2005), and Google ( 2007). However, the competition against eBay is not only based on e-commerce and the use of the Internet, for many still use conventional methods in advertising and selling their products and services, thus, points out the indirect competitors of eBay. The indirect competitors of eBay include online stores, retail outlets, physical auctions such as galleries, shops, boutiques, and estate sales, newspaper classified ads, radio and television ads, bulletin boards in stores and offices, billboards, cable TV channels ( 2005), and other forms of media. From this, it can be seen that eBay has many direct and indirect competitors, which somehow lessens the amount of consumers that are being helped buy and sell their stuff. However, despite the presence of a number of competitors, eBay is still considered the largest online auction house that is being accessed by most consumers.

 

This issue leads many researchers and analysts to recognize the importance and significance of e-commerce as a primary factor of generating an online community. Through online communities, such as those developed groups that access eBay, help introduce and promote specific brands of products and services. It has been reported that in the traditional brand relationship, communication flows between the vendor and the consumer, while with brand-based online communities, the potential dialogue flowing between consumers is achieved through real time ‘chat’ taking place in chat rooms, and through asynchronous discussions that play over days, weeks, and months in discussion forums or bulletin boards (2001). From this, it can be understood that word-of-mouth and online conversations contribute to the information of consumers, on where to access their needed products and services in the Internet. This, thus, enables eBay consumers to spread its use and convenience to other consumers. Consequently, this allows consumers to access the website, to obtain products and services from it, thus, enhancing the use and convenience of eBay.

 

 

 

Methodology

 

As stated, the purpose of this research study is to study the facts that prove to be the probable reasons for eBay, being the most successful online auction. In order to complete an efficient study of the project, the research study uses a descriptive research method, which uses observations and surveys. Specifically, a quantitative descriptive method was used, because it plainly and distinctively specifies both the independent and dependent variables under investigation. This study should be based on surveys and statistical treatments, so basically, the quantitative approach suits well with it.

 

The researcher designed a questionnaire to demonstrate the popularity of eBay against the popularity of other online auction sites. Through the questionnaire, it can conduct a survey of fifty (50) respondents, which includes family members, friends, and colleagues, with an age range of 18 and 50. The purpose of the age range is because this particular age range is the group of users who mostly have access to the Internet, compared to the rest of the population. This indicates that the study uses a simple random sampling method.

 

This study was carried out within a period of two to three weeks, with the assistance of friend, to help with data gathering and analysis. The sample size of the research study includes fifty respondents only, to show that eBay is already popular within this small number of respondents. It also shows that the popularity of eBay within the given age range is regardless of the number of respondents that will be included in the research study. In terms of data distribution and gathering, the survey questionnaire will be personally distributed to the residences of respondents, or sent through electronic mail. Hence, the collection of the primary data will be obtained using the research method discussed. On the other hand, the secondary sources of data will come from published articles related to the topic, including books, related academic journals and magazines, and online sources. In addition, analysis and interpretation of the data will be done using graphs, charts and tables, and with the use of simple statistical computations.

 

 

 

Results and Findings

 

As mentioned, the primary data to be used in this research study was obtained through a questionnaire, which demonstrates the popularity of eBay and determine the probable factors that determine the success of eBay. The respondents of the research study include family members, friends and colleagues, with an age range of 18 to 50 years olds. A total of fifty (50) respondents were considered in this research study. Several aspects from the questionnaire were considered for the analysis of the results, which are believed to emphasize the purpose of this research study.

 

Among the number of respondents, majority belong the age range of 18 to 25 years old, having 18 respondents. Fifteen respondents belonged to the age range of under 18 years old, 9 respondents belonged to the age range of 25 to 45, and 8 respondents belonged to the age range of 45 years old or more. Along with the age of respondents is their gender. From the data obtained, 23 females and 27 males responded to the survey. This is shown in the figure below (Figure 1).

 

Figure 1. Chart showing the age ranges and gender of respondents.

 

Another aspect that must be given emphasis is the particular reasons respondents like eBay. Majority of respondents, with 17 responses, like eBay because of the number of products and finds that eBay provides. Twelve respondents like eBay because of rare finds, while 7 respondents like eBay because of its shipping terms and insurance. All three aspects like the products are alphabetically arranged, the products have pictures and details, and its modes of payment, have 3 respondents each. Respondents also liked the fact that the website is easy to navigate and its signing account, which had 2 respondents each. Lastly, only one respondent liked the fact that the products are placed in categories. This is shown in Figure 2.

 

Figure 2. Chart showing the aspects that respondents like about eBay.

 

In addition, the data as to why the respondents perceive eBay as successful is important. Majority of the respondents, with 10 respondents each, believe that the success of eBay is attributed to its large selection of items and the buyer’s experience. Next in line is the image the website created, having 9 respondents. The next factor responsible for its success is the seller’s feedback, having 8 respondents, while 6 respondents believe that its reputation is the attributable for its success. Five respondents believe that eBay is easy to use, while 2 respondents like the website being safe. In addition, no respondent perceived the aspect of fun, payment options, free registration, website design, website promotion, and others as contributory to its success. This data is shown in the graph below.

 

Figure 3. Chart showing the perceived attributes for the success of eBay.

 

 

Another factor that determines the success of eBay in its industry is the satisfaction that customers get from its services. According to the data collected, twenty of the respondents stated that they are satisfied with the service, while eight respondents are very satisfied with the service. Ten respondents said that they are dissatisfied, while seven are very dissatisfied with the service of eBay. Three respondents are undecided and two respondents said that the question is not applicable. This is shown in the table below.

 

Table 1. Table showing the rate of satisfaction of respondents on the services of eBay

Very Satisfied Satisfied Undecided Dissatisfied Very Dissatisfied Not Applicable  

Total

8 20 3 10 7 2 50

 

If separately computed, a total of twenty-eight respondents are satisfied with the services offered by eBay, while 17 respondents are not satisfied. From this data, it can be seen that more respondents are satisfied than not satisfied with the services of eBay. A total of five respondents are either satisfied or not satisfied from the services.

 

An important aspect to take note of is the attributes that affect the importance of selecting products on eBay, which includes quality, cost, quantity, brand name, and familiarity. The respondents ranked the five different attributes according to its importance to them, and according to the data collected, quality ranked the first, having a score of 18. Cost ranked second, which gave the score of 15, brand name ranked third, with the score of 10, and familiarity ranked fourth, with the score of 4. Among the five attributes, quantity ranked the last, which gave the score of 3. This data is shown in the table below.

 

Table 2. Table showing the ranked importance of attributes in selecting products in eBay

Attributes Quality Cost Quantity Brand Name Familiarity  

 

Total

Rank 1 2 5 3 4
Score 18 15 3 10 4 50

 

 

 

Discussion

 

The results obtained from the collaboration of the data gathered through the questionnaire presents significant outcomes in relation to the objectives of the study. The primary goal of this research study is to determine the factors that affect the success of eBay in the market, using its SWOT analysis, its competitors, and how competitors compete with eBay.

 

From the results, it can be emphasized that the popularity of eBay transcends age, occupation, nationality and race. The results indicated that eBay is most popular among respondents who belong to the age range of 18 to 25 years olds. This means that respondents in their early and mid 20s are the ones more exposed to the website compared to other respondents belonging to other age ranges. From this, it can be understood and correlated that respondents belonging to the specified age range purchase and visit eBay more often compared to other respondents. It is probable to also indicate that these respondents, being young and more determined to earn money from their employment, they are the ones who have the capacity to purchase items from eBay. This can be supported by the fact from recent surveys, 80 million US Internet users visit eBay ( 2006) and probably make some purchases. In the United Kingdom, survey indicates that eBay UK is one of the most visited websites of Internet users with the ages of 18 to 24 (  2006). In relation to this is the fact that more male respondents are included in the study compared to female respondents. However, this data does not indicate that more males purchase from the website. In addition, the data does not also indicate and suggest that males earn more than females. This just proves to show that eBay is more popular to the male gender compared to females, belonging in the age range of 18 to 25 years olds.

 

The results of the survey questionnaire indicate that the success of eBay is attributed to the number of products listed in its website, followed by the fact that consumers can purchase more rare finds in eBay compared to other online auction websites. This result corresponds to the findings of Mansfield (2006), who listed ten aspects that are attributed to the success of eBay, and “great products or services to sell”, is one of them. This is further supported by the data gathered, which indicates that the presence of large selection of items is the aspect most liked by its consumers, which is also supported by the statement of  (2006).

 

In addition, the results of the study also indicated that among the important attributes of purchasing a product from eBay, the quality and the costs of products are among the attributes, which received the highest rank from the respondents. This means that among other attributes in purchasing items, the quality and the costs of products are much given importance. These findings are further supported by the study done by  (2005), who found out that the top factors customers consider before choosing a product are price, quality, technology and features respectively. Although in this study, the primary consideration is price, quality, nevertheless, ranks second, which does not present a significant difference with the findings of this research study. However, the study done by  (2003) indicates that not all Internet users purchase items or stuffs from online auction websites, such as eBay with the fear that online shopping may not be safe, and for not having the confidence of knowing how to do it. This study also suggests that only about 3.1 to 3.2% of online surfers who visit the website make a purchase ( 2003), which negates the observations of this study.

 

Last aspect that must be given importance is the satisfaction that consumers get when purchasing from eBay. The results of this study suggest that twenty-eight respondents are satisfied with the services of eBay, while seventeen respondents feel otherwise. From this data, it can be observed that more respondents are satisfied with the services of eBay, compared to the not satisfied ones, which clearly indicates that the rate of use of the website is directly proportional to the satisfaction of its users. The satisfaction of the consumers of eBay is being focused upon by its services depending on the complaint of clients. This is done through eBay’s Feedback system, which means establishing a user’s reputation, its Independent Feedback Review, which allows evaluation of transaction, and through its Standard Purchase Protection Programme Process ( 2006). Through these strategies, eBay is able to sustain and maintain its consumers, thus, aiming at their satisfaction and rendering effective and efficient service. With these, the time and efforts of its founder, Pierre Omidyar did not go into waste. According to one of his interviews, he emphasized that what eBay did was to create a new market, which was already there before. He pointed out that this new market is a global one, for the kind of goods that are usually traded at flea markets and garage sales. From these goods, trade has progressed into computer electronics, computers, computer equipments, sporting goods, and many others (2000).

 

The results and findings of this research study are further emphasized using a SWOT analysis. The SWOT analysis presents a systematic and organized presentation of data that would support the findings of this research study and the perceived findings of other authors.

Figure 4. SWOT Analysis of the Success of eBay

 

 

However, despite the success of eBay among its users, as indicated in this research study, the presence of its competitors should not be neglected. It has already been mentioned that direct and indirect competitors of eBay exist in the market, where direct competitors refer to other online companies that engage in online auctions, and indirect competitors, which refer to other forms of media and communications that use conventional methods in selling, buying and advertising products. With the presence of such competitors, it can be understood that not all consumers are able to become exposed with the products and services offered in eBay. This just means that eBay does not totally maximize its use in its participation in e-commerce. From this, the strategies or ways of how competitors compete with eBay can be pointed out. Primarily, competitors compete with eBay by developing and introducing online payment services similar or more improved than PayPal, which is the online payment service of eBay. With this, consumers are offered more convenient services to compete with PayPal. Second, competitors also offer similar products and services that eBay offers to compete with the bids and prices of products in posted or listed in eBay. Because consumers are delighted with the extent of product variety (2005), many Internet users would be encouraged visit other websites for much lower prices and bids. Third, competitors develop and offer additional features in their websites, such as online dating and information services. Competitors perceive these to be their edge from eBay, and aims to defeat the website in this aspect. These additional features and services also encourage consumers to visit other websites. Lastly, competitors compete with eBay by having more exposures using the different forms of media, including magazines, newspapers and print advertisements. They offer cheaper and more affordable prices, which enable consumers to have greater variety and selection. With these strategies, consumers have more choices, variety and selection, which somehow contributes to the decline of the use of eBay in terms of auction. From this, it can be understood that despite the popularity and success of eBay as the leading online auction website worldwide, some inevitable and uncontrollable factors can still be determined, which contribute to the decrease in the maximization of its use. However, in terms of overall evaluation and analysis, the success of eBay is unparalleled to other online auction websites.

 

 

 

Conclusion and Recommendation

 

            This research study was successful in addressing its goals and objectives of examining the success of eBay, of identifying its strengths, weaknesses, opportunities and threats, of identifying its direct and indirect competitors, and of identifying the strategies of competitors in competing with eBay. Based on the considered number of respondents, this research study was able to determine that eBay is most popular with citizens belonging in the age range of 18 to 25 years old, and with more male respondents than the number of female respondents. However, as mentioned earlier, this data does not indicate that more males purchase from the website, and does not indicate that males earn more than females. This just proves to show that eBay is more popular to the male gender compared to females, belonging in the age range of 18 to 25 years olds. Another aspect that was emphasized in this research study is the fact that one of the strengths of eBay is the number of products and services that it offers its consumers, for one of the consideration of online consumers is the large number of products they can find in eBay. The importance of this aspect is the fact that variety of products is attributed to the success of eBay in the market and in its industry. Moreover, the discussion emphasized that quality and price are two of the most important aspects that consumers give importance to when purchasing a product or service. This aspect is thus, related to the satisfaction of consumers with the products and services offered and rendered in eBay. Majority of the respondents are satisfied with the products and services of eBay, thus, contribute to the fact that its success is due to the word-of-mouth of its users, being satisfied with its services. From this, it can be understood that this satisfaction is being extended and communicated to their peers, which enable many consumers to use the services eBay offers. In terms of overall analysis and evaluation, this research study has been able to perceive that the success of eBay depends on the satisfaction of consumers, on the number, quality and prices of products and services that it offers, and on the population being referred to. Furthermore, this study was also able to conclude that the success of eBay is unparalleled, for being the leading online auction website.

 

For the improvement of this research study in future endeavors, recommendations include the increase in the number of respondents that the study can consider. This entails more in-depth analysis and evaluation, and more time to accomplish. Another recommendation is to consider other factors from the questionnaire, aside from the discussed aspects in the study. The analysis and evaluation of other aspects may offer and provide more enlightenment and understanding of the success of eBay in its industry and in the market. In addition, future research study regarding this topic must include another item in the questionnaire, such as other online auction websites visited and used by consumers. This would enable the researcher to understand what aspects are lacking from eBay. Moreover, the researcher can evaluate and analyze the existing complaints against eBay, which encourages consumers to visit and use other online auction websites. Lastly, the research study also recommends the increase in the advertisements eBay can use to further market and promote its products and services to the public. With additional advertisements, eBay would be introduced and promoted to more consumers.