elib.kkf.hu/edip/2005_06_i/Scheidl Gergely/D_11904.doc at Yahoo:
Budapesti Gazdasági Főiskola
KÜLKERESKEDELMI FŐISKOLAI KAR
KÜLGAZDASÁGI ANGOL SZAK
ONLINE PIACTEREK MAGYARORSZÁGON ÉS KÜLFÖLDÖN
KÜLÖNÖS TEKINTETTEL AZ ONLINE AUKCIÓS OLDALAKRA
(ONLINE MARKETPLACES IN HUNGARY AND ABROAD
WITH SPECIAL RESPECT TO ONLINE AUCTION SITES)
Budapest, 2005 Készítette: Scheidl Gergely
List of Tables 6
List of Figures 6
1 E-Marketplaces, E-Commerce and I-Commerce 10
1.1 Classification of E-Marketplaces 10
2 All about Auctions 11
2.1 From Ancient Auctions to Online Auctions 11
2.2 Online Auction Sites 12
2.2.1 B2B Online Auctions 12
2.2.2 B2C Online Auctions 13
2.2.3 C2C Online Auctions 13
126.96.36.199 eBay – The World’s Online Marketplace 17
188.8.131.52.1 History of eBay 17
184.108.40.206.2 eBay’s Success in Numbers 19
220.127.116.11.3 How eBay Works 22
18.104.22.168.4 Services Offered by eBay 30
22.214.171.124.4.1 Listings 31
126.96.36.199.4.2 Seller Tools 40
188.8.131.52.4.3 PayPal 40
184.108.40.206.4.4 Standard Purchase Protection Program 41
220.127.116.11.4.5 Escrow Service 41
18.104.22.168.4.6 ID Verification 42
22.214.171.124.4.7 eBay Shop 42
126.96.36.199.4.8 eBay Live Auctions 44
188.8.131.52.4.9 eBay Toolbar 45
184.108.40.206.4.10 eBay Giving Works Fee Donation Policy 45
220.127.116.11.4.11 eBay Affiliate Program 45
18.104.22.168.4.12 eBay University 45
22.214.171.124.4.13 The eBay Shop 45
126.96.36.199.5 eBay Germany 46
188.8.131.52.5.1 History of eBay Germany 46
184.108.40.206.5.2 eBay.de’s Success in Numbers 46
220.127.116.11.5.3 Characteristics of eBay.de 47
18.104.22.168.6 Competitors of eBay 48
22.214.171.124 The Online Auction Market in Hungary 49
126.96.36.199.1 Vatera – The Leading Hungarian Auction Site 50
188.8.131.52.1.1 How Vatera Works 52
184.108.40.206.1.2 Services Offered by Vatera 55
220.127.116.11.2 TeszVesz – Competitor of Vatera? 59
18.104.22.168.3 The Future of The Hungarian Auction Market 59
List of Tables
Table 22.214.171.124.3.1 Bid Increments 27
Table 126.96.36.199.4.1.1 Insertation Fees 31
Table 188.8.131.52.4.1.2 Insertation Fees in Business & Industrial Category 31
Table 184.108.40.206.4.1.3 Insertation Fees for Real Estate, Timeshare & Land 32
Table 220.127.116.11.4.1.4 Insertation Fees for Vehicles 32
Table 18.104.22.168.4.1.5 Final Value Fees 33
Table 22.214.171.124.4.1.6 Reserve Fees 34
Table 126.96.36.199.4.1.7 Buy It Now Fees 34
Table 188.8.131.52.4.1.8 Listing Upgrade Fees 39
Table 184.108.40.206.4.1.9 eBay Picture Service 39
Table 220.127.116.11.4.2.1 Seller Tools 40
Table 18.104.22.168.4.3.1 PayPal Fees 41
Table 22.214.171.124.4.5.1 Escrow.com Fees 42
Table 126.96.36.199.4.7.1 Store Insertation Fees 43
Table 188.8.131.52.4.7.2 Store Final Value Fees 43
Table 184.108.40.206.4.7.3 Store Listing Upgrade Fees 44
Table 220.127.116.11.4.7.4 Store Picture Services Fees 44
Table 18.104.22.168.1.1.1 Bid Increments on Vatera 54
Table 22.214.171.124.1.2.1 Final Value Fees on Vatera 55
Table 126.96.36.199.1.2.2 Optional Feature Fees on Vatera 56
List of Figures
Figure 188.8.131.52. Auction of Pope Benedict XVI’s car on eBay.de 16
Figure 184.108.40.206.1.1 eBay Across the World 19
Figure 220.127.116.11.2.1 eBay’s Registered Users 1998-2004 20
Figure 18.104.22.168.2.2 Listings on eBay 1998-2004 20
Figure 22.214.171.124.2.3 Growth in Total Value of Items Sold on eBay 1998-2004 21
Figure 126.96.36.199.2.4 Growth in eBay's Net Revenue 1998-2004 22
Figure 188.8.131.52.3.1 Seller Information 23
Figure 184.108.40.206.3.2 Member Profile 23
Figure 220.127.116.11.3.3 Classification of Feedback Stars 24
Figure 18.104.22.168.3.4 Place a Bid 26
Figure 22.214.171.124.3.5 Reserve Price 28
Figure 126.96.36.199.3.6 Dutch Auction 29
Figure 188.8.131.52.3.7 Buy It Now 30
Figure 184.108.40.206.4.1.1 Gallery 34
Figure 220.127.116.11.4.1.2 Item Subtitle 35
Figure 18.104.22.168.4.1.3 Bold Option 35
Figure 22.214.171.124.4.1.4 Gift Services 36
Figure 126.96.36.199.4.1.5 Border 36
Figure 188.8.131.52.4.1.6 Highlight 37
Figure 184.108.40.206.4.1.7 Featured Plus! 37
Figure 220.127.116.11.4.1.8 Homepage Featured 38
Figure 18.104.22.168.5.2.1 Total Value of Items Sold on eBay.de 2000-2004 47
Figure 22.214.171.124.1.1 Growth in Vatera’s Registered Users 2001-2004 50
Figure 126.96.36.199.1.2 Growth in Number of Items Sold on Vatera 2001-2004 51
Figure 188.8.131.52.1.3 Growth in Total Value of Items Listed on Vatera 2001-2004 52
Figure 184.108.40.206.1.1.1 Classification of Feedback Stars on Vatera 53
There are many other people who contributed to this dissertation in many ways. I would like to
thank especially my advisor, Mária Bíró, for her generous time and encouragement, the detailed
comments and suggestions as well as her support and advice.
I wish to thank you my tutor from the Media Department, Judit Nagy, for her encouragement to
choose this topic for my dissertation work.
Finally, I would like to thank those who helped me by providing important information and data
about their auction sites, namely Szabolcs Valner, the regional director of Vatera.hu; Ype Gerbrandy
from eBay Netherlands Customer Support; Raymond Muntwyler, the marketing director of
Ricardo.ch AG from Switzerland; Birgit Praher from OneTwoSold from Austria
The advent of the Internet has changed completely our private and business life. Similar astonishing
changes took place in the B2B, B2C as well as C2C relationship with the emergence of online
auction sites. In my work I focus on the C2C auction sites, which revolutionized the C2C
relationship. Prior to online auction sites consumers could look for unique and used products in
classified ads or visit flea markets and garage sales with comparative results. eBay started as a
hobby site; now it is the leading online auction site with an annual turnover of more ten billion US$.
It accommodates millions of auctions each day with an incredible product range containing piles of
items that cannot be found elsewhere. Not only private persons realized the potential of online
auction sites, thousands of companies offer their products and services there taking advantage of
My work is based mainly on personal analysis of the online marketplaces I describe, the way they
operate, the product categories they concentrate on, their main sources of income and the services
they offer to their users to smooth the transactions. I compare the marketplaces to each other as well
as foreign sites to Hungarian ones, show the pros and cons of each site, analyse which services has
been already adopted by Hungarian sites and what should be done in the future to be more effective
and user-friendly. With the analysis of financial and selling data gathered either from public sources
or directly from the firms running the marketplaces I show the soaring of online auction sites and
forecast future trends on this market.
E-commerce is becoming more and more important in our life. With the advent of the computer and
the Internet, B2B, B2C as well as C2C businesses can be done more easily. The spread of online
auctions is also significant. Not only a lot of auction houses and Internet sites dealing originally with
another services decided to join but also the move of conventional retailers is considerable as online
selling has became a viable and more and more profitable alternative.
My work shows the most important international online marketplaces focusing on online auction
sites, describes how they work, what services they offer, analyses their activity, compares them with
the Hungarian sites, as well as looks at the extent of the impact that online auction sites are having
on electronic marketplaces.
1. E-Marketplaces , E-Commerce and I-Commerce
Markets play an essential role in the economy, facilitating the exchange of information, goods,
services and payments. They create economic value for all of the participants of the market, i.e.
buyers, sellers, intermediaries and the society at large. Markets match buyers and sellers; smooth
the progress of the exchange of information, goods, services and payments for them as well as and
provide an institutional framework, which enables the efficient functioning of the market.
The enormous increase in the use of IT and the Internet in recent years have changed the market in
many ways. One of the most significant changes is in the manner we conduct business, especially in
how we manage the marketplaces and commerce.
Although many people think that electronic commerce takes place exclusively on the Internet, it is
simply a term for any kind of commercial activity that is facilitated by electronic means. I.e.
electronic commerce may include ATMs, fax machines, bar code readers, etc. It is the process of
electronically buying and selling goods, services and information, which is having bigger and
bigger impact on our business as well as private life.
“If all financial transactions, whether buying or selling, whether focused either on the business-to-
business (B2B) or the business-to-consumer (B2C) or the consumer-to-consumer (C2C) market
using electronic technology, is called e-commerce, we can now define i-commerce as all those
transactions done via the Internet.”3 I will focus on this part of e-commerce in my work.
1.1 Classification of E-Marketplaces
E-Marketplaces can be classified whether they belong to the B2B, B2C or C2C market. Turban
suggests that “in B2B we find private sell-side (one seller – many buyer) e-marketplaces, buy-side
(one buyer – many sellers) e-marketplaces, and exchanges.” While “in B2C the major e-
marketplaces are storefronts (a single company’s Web site where products and services are sold)
and Internet malls”4 or e-malls that can be described as an online shopping centre with many shops.
However, the author does not mention the C2C marketplaces, the main topic of my dissertation.
The C2C marketplaces act as the intermediaries providing the matching services among consumers.
Although classified ad sites also belong to C2C marketplaces, their main players are the online
auction sites. In the following chapters I will deal with them in details.
Turban, E. et al., Electronic Commerce 2004: A Managerial Perspective, 2004, p39
2. All about Auctions
2.1 From Ancient Auctions to Online Auctions
Before the advent of the Internet era, auctions were the privilege of specialists. It happened rarely
that consumers took part in them. The spread of Internet and online auctions changed all that.
However, they do not offer a revolutionary pricing model. The origins of auctions are not well
known but they have roots that go back to ancient Egypt and Mesopotamia. The form of double
auction stems from haggling, in which buyer and seller each suggest prices.5
Auctions have gone through several changes since the first auction held in ancient times. In 500
B.C., in the times of Herodotus, the auctions were for the purpose of selling women under the
condition that they be married after the purchase. Reports note that less attractive women were sold
with monetary compensation given to the bidder.
The Roman Empire used auctions to liquidate property and estate goods. The auctions were held in
the “atrium auctionarium” and functionaries carried out the trading, which was followed by the
waves of bidders to indicate a bid.
Aside from the earlier accounts of the Roman auctions, they were used also in other civilizations.
There also exists evidence of Buddhist monks in China using auctions to fund the creation of
temples as it became customary to auction off the property of departed monks. The auction was an
important money-raising institution.
The earliest reference to the auction as practiced in Great Britain is from the 1595 Oxford English
Dictionary, but nothing more is known until the final years of the seventeenth century. At that time
auctions were held in taverns and coffeehouses to sell art. It is likely that such auctions were held
daily and that catalogues announcing the availability of certain merchandise, were printed. The first
catalogue used for listing items to be auctioned was used in 1717. The firm of Sotheby's was
established in 1744 and Christie's was founded in 1766.
The first auctions in America originate back to the early times in the South when slaves were often
sold at auction. Often times, the owner of the goods was not disclosed because the current social
norms did not look favourably upon auctions.
Aside from the early modern records of the use of auctions in Great Britain and America, auctions
were used in the Netherlands and Germany as well in the later part of the 19th century. Auctioning
in the Netherlands dates back to 1887 when it was used for the sale of fruits and vegetables.
Reportedly, a grower arrived at a harbour in North Holland. Upon arrival he realised that the for his
produce is strong and instead of liquidating his produce in the usually customary fashion of selling
to a specific dealer, he decided to allow the buyers to compete with each other by using an auction.
Friedman, D. & Rust, J., The Double Auction Market: Institutions, Theories, and Evidence Proceedings of the
Workshop on Double Auction Markets, 1991
In the same year, fishermen in Germany began to use auctions to sell their fish when arriving in
port. These fish auctions allowed the fishermen to rapidly liquidate their catch and spend more time
on fishing to satisfy consumer demand.6
Today we can see the results of the seventeenth resurgence of auctions as they have evolved to
occurring on the Internet.7
2.2 Online Auction Sites
Like in the classification of e-marketplaces we can divide online auction sites also to B2B, B2C and
C2C sites. While B2B and B2C sites existed even prior to online auctions, the online auctions sites
revolutionized the C2C relationship. Therefore I will introduce only shortly the B2B and B2C
auction sites and focus on C2C auctions.
2.2.1 B2B Online Auctions
B2B auctions were well-known and popular among companies with excess equipments and idle
assets, which could be sold for other business interested in them. With the advent of online auction
market B2B auction houses went online and listed their offers there to increase their market
potential. Others were introduced to markets, which had no established auction outlet. The
advantage of online auctions was that they removed the outlet stores and liquidators, which were
not so effective in selling and charged usually too high commissions. Online auctions offered a
structured, attractive, competitive selling process, resulting in better prices for both sellers and
A good example for the B2B auction sites is DoveBid, a global provider of capital asset auction,
valuation, redeployment, and management services8. Besides offline auctions on-location, they offer
a variety of online auctions where various idle assets are sold from all over the world that the
companies want to dispose of. Firms interested in excess equipments can study their upcoming sales
calendar by date, location, category, etc to find they are looking for.
Cassidy, R. Jr., Auctions and Auctioneering, 1967
Engel-Wiggans, R, Shubik,M.,& Stark, R.M., Auctions, Bidding, and Contracting: Uses and Theory, 1983
2.2.2 B2C Online Auctions
B2C sites are very popular on the Internet. A typical B2C site is a single company’s website where
products and services are sold. We can find millions of such sites on the Web, like an online
bookstore. Usually they serve as an extension of their real store to have more traffic. We can order
the products online, pay with credit card and receive the item by post within some days without
leaving our home. On the other hand, B2C auctions allowed storeowners to offer their products
directly to consumers using auctions. Their great advantage was their popularity. With effective
marketing tools they attracted a lot of consumers to the auction site, who spent their money there
browsing among the online auctions of the different stores.
A typical B2C auction site is uBid.com9 where customers can bid on computers, electronics,
watches, jewellery, home equipments, linens, travel services, collectibles and sport items.
Companies offer here their brand-name quality products at wholesale prices, where most auctions
start at $1 and come with warranty.
While the structure of this site is similar to a C2C auction site, individuals cannot sell on the site,
only buy as the number of sellers is limited. Although they use the auction format to sell items, in
other aspects they are similar to e-malls, sites where we find numerous online stores.
Finally I should note that the difference between B2C and C2C blurs often. On eBay, the major
C2C auction site around the world we can find thousands of companies that use the auction site to
increase their turnover. The popularity of the site is so high that companies offer their products even
there besides of their online and real store. In the following sections I will deal with the C2C
auction sites and show them in details.
2.2.3 C2C Online Auctions
The ability of Internet that it can lure dozens of people to one place – does not matter where are
they from – means opportunity beyond example for the online sellers. Plenty of shop owners have
already closed their “real” shops and offer their products solely on the Internet. So they save among
other things on the maintenance costs of a real shop.
Buyers celebrate the delightful atmosphere of online auctions, often so much that the bidding
become their everyday passion. A lot of auction sites offer opportunity to discuss their views about
their hobby in forums and so meet with another collectors.
People who are willing to bid should register themselves on the site, which is for free. Auction sites
besides of name, contact information and e-mail address ask sometimes for bank account or credit
card information in order to deduct the selling commission for their service. This is not yet required
in the Hungarian auctions sites. After signing in we can start immediately to bid. Even the process
of auction is not too complicated. With some click we can easily dispose of excess money or sell
things we do not need anymore and just taking up room. As you can find plenty of people with a
huge variety of interest, we can never know whether there is not somebody who is interested in an
old license plate from the German Democratic Republic10 or an old Tesla dial-telephone from 1967
made in GDR.11 These items are probably completely useless for their seller but for a GDR fan
collecting old relics from that country it may mean a treasure. Although there are no bids on these
items until now, it means nothing because bids are coming in the last 5-10 minutes on most of the
items when the bidders interested sweep down on the item. This way of bidding is on the Hungarian
sites are not prevailing but who “grew up” and experienced on eBay, is likely to do so. It is good for
the seller as if he/she finds out an eye-catching title for the item to be sold and writes a detailed
description illustrated with photos, there is a big chance that a lot of users will find the auction
among piles of other ones, pay attention and place a bid on the item pushing up the price. The
owner of the winner bid can be also satisfied if he/she could take the item on the price he/she was
willing to pay, which can be even under its value if only a few users notice the auction. I do the
same as a buyer. Depending on the speed of the Internet access – to have enough time to place the
bid and type in my password – I send my bid often in the last 20 seconds. It is called sniping on the
auction sites. By this way I can reduce the chance for other bidders to get above my offer. If even so
there is somebody who could place a higher bid, I do not become gloomy because it is more then
the price I considered to be reasonable. The briefly but meaty title and a detailed item’s description
illustrated with photos is one of the essential conditions of successful selling.
The form of auction chosen for selling of our product is another important factor. The classic form
of auction can be found on all of the auction sites. Sometimes it is called English auction. In this
case the seller gives the starting price – which can be even 1 Forint or 1 Penny –, the duration of the
auction – varying from 1 to even one 3 weeks depending on the site – and sometimes also the bid
increments, i.e. the minimum value with the actual price can be increased. In this case the winner
will be the user who has the highest offer at the time of the auction’s end. This mechanism is highly
appropriate for selling unique, special or used items or products at very good price because it helps
to sell the good on the highest price. This form of auction can be extended with reserve price i.e.
minimum price below the seller is not obliged to sell the item. It means also that the seller does not
need to have any fear that the product is sold under its price. The “Buy It Now” price is another
opportunity for the seller to increase the chance to sell the item. In this case the product can be
purchased any time for that particular price, which is of course higher then the starting price. It
represents the price, which the seller wants to sell the product on. Who prefer to sell on the
conventional way, can sell also at fixed price. This way the seller lets the buyers purchase the item
at a set price without bidding. Another form of selling the products is the Dutch auction, which is
suitable for selling multiple, identical items on the same time. And finally in the end of the auctions
the sites notify the participants in e-mail letting them know the other party’s contact information.
Otherwise the users may deal with each other directly without paying the fees for the auction site.
Therefore the auction sites usually strongly prohibit any attempt to contact the seller and buy
directly the item and they check it frequently with various methods. Upon getting the other’s e-mail
address and contact information, the actual transaction depends on the parties. The extent how
much the auction sites help the buyer and seller to put forward the transaction varies. The senior
auction site, eBay developed numerous services during the long years of existence for improving
safety and convenience, all for smoothing the procedure with comparative success. I will show
these services in details in the particular sections about the auction sites. Unfortunately these
services increasing safety and convenience are still immature on Hungarian auction sites. However,
provided both party want to make business, they have all the opportunity to do that. Problems can
occur if one of the parties fails to fulfil his/her duties. Although auction sites let the users know in
the general terms and conditions that they act only as an intermediary and are not responsible for
the items sold on the side or the behaviour of the parties. Though they may interfere in the
transaction to clear the situation or if it not possible indemnify the injured person. This useful
service can be also found in eBay. Though in all of the auction sites can be found the feedback
system, where both parties can give their feedback, i.e. grading about the other party, which shows
how much they are satisfied with the other party. So every user can get positive, neutral, and
negative feedbacks according to his/her service. A seller possessing a high number of positives
means trust and safety for the buyer. Although it cannot avoid frauds on its own, it can be a good
starting point before placing a bid.
On the other hand the majority of “frauds” are bona-fide. It may happen that first time sellers
without any experience do not describe their items precisely resulting in an embarrassing situation
that the product sent to the buyer differs from the one in the item’s description. However, even
extreme cases have occurred in the history of online auctions. Somebody wanted to sell his own
kidney on the German eBay12, another user offered her virginhood. Even these ones can be
considered as a joke as they do not damage the other party. On the other hand there are attempts to
do just the opposite, i.e. deliberately wrong somebody. The number of phishing scams sent out to
users is continuing to increase dramatically. Phishing are e-mails that lure people to bogus websites
that appear to belong to real companies. Once a consumer is lured to the bogus website, thieves will
ask for personal information such as usernames, passwords, credit card numbers, etc, in an effort to
steal his identity. eBay lunched recently an anti-phising campaign to help its users to avoid to be a
victim of phising. There will be always such nasty people trying to get personal information or
directly money on the crook from honest Internet users. However, with careful manner they can be
avoided. And Internet companies do their best to help their users in it because they are the ones
who bring the profit.
Let's say we need to get our hands on a tram, which was carrying thousands of people each day for
decades on the streets of Leipzig in Germany. Or a Queen album dedicated personally by Freddy
Mercury. Where would we start to look? Probably on eBay where we can hardly mention an item,
which cannot be found. Just to mention a current example, where could we bid on the car of the
newly elected Pope Benedict XVI? Of course on eBay. It is not a joke. The auction of Joseph
Cardinal Ratzinger’s Volkswagen Golf Convertible started on the 25th of April, 2005 on the
Germany eBay at 9,990 Euro. The seller is likely to be a young 21-year old man, which suggests his
username “gape83”. I have just heard in the news that he bought it on a used car market. The lucky
seller will earn a fortune with this auction. There are 101 bids on the car up to now, the current
price is at 41,564 Euro and there are still six days to close. As closed auctions cannot be viewed on
eBay after 90 days, I show this auction here.
Figure 220.127.116.11 Auction of Pope Benedict XVI’s car on eBay.de
And now let’s see how has eBay became the world’s online marketplace.
18.104.22.168 eBay – The World’s Online Marketplace
eBay was founded in Pierre Omidyar's San Jose living room in September 1995. But let’s go back
to the beginning to see its evolution.
22.214.171.124.1 History of eBay
While living and working as a computer specialist in San Jose, Pierre Omidyar met and became
engaged to Pamela Wesley, a hobby collector or PEZ candy dispensers, which was loved also by
children in Hungary some year before. The dispensers modelled classic cartoon characters and the
candy, which came out from the mouth of Mickey Mouse or Donald Duck was also delicious.
Although these dispensers were collected and traded by a large community across the US, also in
Boston where she came from, she was having trouble finding fellow collectors to trade with in the
San Francisco Bay Area. Omidyar decided for establishing a website for direct person-to-person
auction of collectible items. He created a prototype on his personal web page (eBay.com), and
launched an online service called AuctionWeb in 1995.
Since then the PEZ dispenser story has been retold hundreds of times, however, even Omidyar
acknowledges that this is the embellished version of eBay's founding. Actually, Omidyar was
having the same thing on the brain then other computer technicians in the Silicon Valley: what can
be the Internet used for. After a stock purchase, which was done by his broker only later and
therefore at a higher price, he though that this was not how a free market was supposed to work.
The idea came across his mind that a better market mechanism should be created. His solution was
an online auction. He did not know much about how real auctions worked, had even never attended
an auction personally. He just considered them as market mechanisms that would naturally create a
fair and correct price for stocks or for anything, which somebody wants to sell. He simply
proceeded from the fact that if there is more than one person interested in a particular item, let the
one win who is willing to pay more for it. And it enables the seller to sell the item at the market
price. Omidyar had to do the programming for his perfect marketplace in his spare time. He just
created categories as they occurred to him, e.g. hardware and software, electronics, antiques and
collectibles, books and comics, automotive, and miscellaneous as he had no real idea what people
want to sell. The name he chose was as practical as the site itself: AuctionWeb.
Since it was only a hobby, he offered the services of his auction site for free. As he had no money
for advertising, he posted announcements on newsgroups and “What’s New” pages that tracked
new sites. And his site started to attract more and more visitors who started also auctions as it was
free. The word-of-mouth publicity worked also well, computer fans and bargain hunters were
sending each other the URL of AuctionWeb lead to steadily increase of traffic. Toward the end of
1995 thousands of auctions were running on his site and it attracted more than ten thousand
Omidyar was still offering the service of his auction site for free because his expenses were
almost nothing. However, by the end of 1995 his page attracted so much traffic that was slowing
down the system of his Internet provider. Although AuctionWeb was not a business, in February
1996 his provider began charging him US$250 a month, the rate for a commercial account. Simply
out of necessity he started to charge AuctionWeb users final value fees after successful auctions.
Soon envelopes with cash started to arrive in his home mailbox. Although the amounts were not
large, he realised by the end of February that the sum of amounts received from users exceeded the
US$250 charged by the Internet provider. He did not know that it was the beginning of the success
story of eBay. Hundreds of envelopes were coming. In March revenues rose to US$1,000, in April
to US$2,500, in May to US$5,000. In June revenues hit US$10,000 13. At that time Omidyar decided
to quit his day job and devoted himself to the auction site. He employed more and more employees
because he was not able to deal with the huge traffic alone. In 1997, Omidyar changed the
company's name to eBay and began to advertise the service aggressively. In 1998 when eBay was
going public on the New York Stock Exchange, the site had more than a million registered users.
As other online ventures came and went, eBay has continued to grow and prosper. In 2004 eBay’s
consolidated net revenues totalled a record US$3.27 billion, listings reached 1.4 billion, while the
total volume of all successfully closed on eBay’s trading platforms was US$34.2 billion14, all
representing a steep year-over-year increase.
eBay is represented all over the world. With eBay's vision and global business strategy, the
company continues to expand its service and brand abroad. It is not uncommon to hear about eBay
users in Germany buying items from users in Australia, or users in New Zealand buying from others
in the UK. Currently, eBay has country specific sites in Austria, Australia, Belgium, Canada, China,
France, Germany, Hong Kong, India, Ireland, Italy, Malaysia, the Netherlands, New Zealand, the
Philippines, Singapore, South Korea, Spain, Sweden, Switzerland, Taiwan and the UK. Moreover,
eBay is also represented in Argentina, Brazil, Chile, Colombia, Ecuador, Mexico, Peru, Uruguay
and Venezuela in association with the MarcadoLibre sites.15 The countries can be seen on the
Cohen, A., The Perfect Store: Inside eBay, 2002
eBay’s Fourth Quarter and Full Year 2004 Financial Results
eBay: Company Overview, January, 2005, p26
Figure 126.96.36.199.1.1 eBay’s Presence Across the World
Source: eBay: Company Overview, January, 2005
And the international expansion has not been stopped. eBay announced the launch of eBay Poland
(www.ebay.pl).16 The competition is expected to be high if we take into consideration the already
existing strong market players like leading online auction in Poland, the Allegro (www.allegro.pl).
It would not be the first instance when eBay would have to go out from the market because of the
strong rival. It occurred also in Japan where Yahoo ruled the entire online auction market and eBay
had no chance to reach a potential market share. It will turn out how successful will be eBay in
188.8.131.52.2 eBay’s Success in Numbers
Often a picture is worth a thousand words therefore I decided to show eBay’s success in details with
the help of diagrams where the fantastic growth can be clearly seen.
eBay increased the number of registered users from 40,000 in 1996 up to 135 million by the end of
2004 by internal growth and its worldwide expansion strategy. The steep raise of registered users
can be seen in the Figure 184.108.40.206.2.1.
eBay Press Release on April 22, 2005: eBay Launches Service for Poland
Figure 220.127.116.11.2.1 Growth in eBay’s Registered Users 1998-2004
Source: eBay: Company Overview, January, 2005
The number of listings on the auction site was 300,000 in 1996 and topped at 405 million towards
the end of 2004. This enormous increase by 1350% in eight years shows the Figure 18.104.22.168.2.2
Figure 22.214.171.124.2.2 Growth in Listings on eBay 1998-2004
Source: eBay: Company Overview, January, 2005
The total value of items sold grew from US$7 million in 1996 up to US$34.2 billion by the fourth
quarter in 2004. The continued profitable growth is shown in the Figure 126.96.36.199.2.3 from 1998 to
2004 in the following figure.
Figure 188.8.131.52.2.3 Growth in Total Value of Items Sold on eBay 1998-2004
Source: eBay: Company Overview, January, 2005
If we divide the fourth quarter data from 2004 of total value of items sold by the number of listings
from the same quarter it turns out that the average selling price on eBay was approximately US$84
in the end of last year. However, it is only a rough figure if we take into account that among the
millions of items listed there are cheap coins for some dollars as well as rare oldtimers for several
hundreds of thousands dollars.
eBay is one of the very few Internet companies, which is profitable from its first month of operation
and unique in its success. Just take into account that even in the first month Omidyar had net
revenue of more than US$250. It was just the beginning as eBay’s net revenue was US$3,271,000
by the end of 2004. This increase is shown in Figure 184.108.40.206.2.4 on the next page.
Figure 220.127.116.11.2.4 Growth in eBay's Net Revenue 1998-2004 (in US$000)
Source: eBay: Company Overview, January, 2005 & Annual Report 2002
18.104.22.168.3 How eBay Works 17
First of all we have to register ourselves on the site. The registration is absolutely free and takes
only a few minutes. Besides of personal data such as name, address, phone number and e-mail
address we have to enter on the American eBay site 18 either our credit card number or bank account
information too. Buyers do not pay anything to eBay, it serves only as a proof that your personal
information are valid. However, it varies from site to site even on eBay. In Germany and on other
European eBay sites we can let eBay send us a letter with confirmation code to the address we
entered during registration. Once we get it and confirm our registration by entering the code
received by post, we can start to bid. However, for selling we still need to give our credit card
number or bank account data to let eBay collect the fees for listing and selling on the site. It is
advised to create a separate e-mail address depending on the frequency of bidding or selling. In the
registration process we have to choose a user ID too, i.e. the name that all other users see. And
finally we have to enter our password, which is required in the future for all important steps. We
can create here also a personal page about us to let the other users know our interests, hobby, items
we sell, etc. If we have a personal page, it is signalled by a “me” logo, which can be easily seen
after our user ID. It is shown in Figure 22.214.171.124.3.1.
In this section I refer only to the US eBay at http://www.ebay.com
Figure 126.96.36.199.3.1 Seller Information
After the user ID there is always a number with or without a star in brackets. It is the feedback
score received after transactions from the other party. Every eBay user has a member profile
including a feedback score as well as comments from other users we have bought from or sold to. It
is can be seen in Figure 188.8.131.52.3.2.
Figure 184.108.40.206.3.2 Member Profile
The user called “atsnotes” has currently a feedback score of 2381, which means that the user
received positive feedback from at least 2381 other eBay members. The feedback system is very
easy. We receive +1 point for every positive comment, 0 points for every neutral and -1 point for
every negative comment. Moreover a star with different colours shows also our current feedback
score. The meaning of the colours is shown in the Figure 220.127.116.11.3.3.
Figure 18.104.22.168.3.3 Classification of Feedback Stars
Feedback is one of the most important aspects of trading on eBay. Consistent positive feedback lets
other users know that we are honest and dependable. Likewise, too many negatives will turn off
buyers and also sellers may have worries to make business with us. Buyers will usually bid more
often and pay higher prices if we have a lot of positive feedback. Therefore a strong positive
feedback is essential.
To collect positive feedbacks as well as experience the best way is to buy some items, which we are
interested in. Without buying one cannot become a good seller. We can learn from other sellers,
which practices are wise to follow and which mistakes should we avoid.
All items listed on eBay are classed in well-constructed categories and numerous subcategories.
The categorization is essential if we take into account the enormous number of new listings each
day. At this moment more than 14 million auctions are running on eBay.com, which refers only to
US. Exact number cannot be told because thousands of auctions start and close each and every
minute. The main categories are as follows:
• Antiques • Computers & Networking
• Art • Consumer Electronics
• Baby • Crafts
• Books • Dolls & Bears
• Business & Industrial • DVDs & Movies
• Camera & Photo • eBay Motors:
• Cell Phones • Entertainment Memorabilia
• Clothing, Shoes & Accessories • Gift Certificates
• Coins • Health & Beauty
• Collectibles • Home & Garden
• Jewelry & Watches • Sports Mem, Cards & Fan
• Music Shop
• Musical Instruments • Stamps
• Pottery & Glass • Tickets
• Real Estate • Toys & Hobbies
• Specialty Services • Travel
• Sporting Goods • Video Games
• Everything Else
Even from this professional categorization can be seen that eBay is a serious auction site, not to
mention the incredible varieties of subcategories.
There are several ways to find an item of our interest. We can browse the categories where thanks to
the well-done subcategorization everything is easy to find. There is indeed something for almost
everyone on auction sites. Other way is to find an item is the use of eBay’s search engine by entering
the keyword(s). We can search in titles as well as descriptions and refine our search results. These
engines are easy to use and mostly effective. We can search items, stores as well as members and sort
them by various aspects. Furthermore, there are auction search engines specialized in searching of
hundreds of auction site’s listings. A good example is http://www.asearch.de listing approximately 130
auction sites’ items.
Once we found an item of our interest it is advised to check the product description to learn more
about it. These points should be checked:
• Item description: If something is not clear, we can always ask the seller directly.
• Item condition: Each circle has their established grades, which refer to condition.
• Transaction terms:
o Refund policy of the seller if the item is damaged
o Duration of shipment
o Payment options
o Cost of shipping (almost always the buyer pays for it)
• Seller profile
• Location of the item
If there any questions that are not answered by the description we can always contact the seller
directly. We need just to click on the phrase “Ask seller a question”. By this way you can also appraise
who helpful and honest the seller is.
If everything is clear we can take our next step, place a bid on the item we are interested in. The
bidding process is also easy to understand. By clicking on the button called “Place bid >” the
following window appears:
Figure 22.214.171.124.3.4 Place a Bid
In this case the current bid is US$250 for this cell phone, which is at once the opening bid because
otherwise US$250 would not be enough to exceed another bidder’s offer. By entering our bid two
things happen. We have to type our user ID and password in to confirm our bid and in a short time we
will receive an e-mail from the auction site that confirms our bid.
However, placing a bid and getting a confirmation does not mean automatically that we will win the
item. Depending on the remaining time and the attractiveness of the title and description it may easily
happen that somebody places a higher bid then ours. In this case we get at once another e-mail from
the auction site with the actual price. Provided we are still interested in the item, we can place a higher
bid, minimum the actual price plus the bid increment. This term refers to the particular next step in
price needed to place a valid bid and it gets higher and higher when the item’s price exceeds a
particular limit. In other words it “is the amount by which a bid will be raised each time the current bid
is outdone. It is predetermined based on the current high bid.”19 These amounts and the bid increments
can be seen in the Table 126.96.36.199.3.1.
Table 188.8.131.52.3.1 Bid Increments
This means that if the product’s price we are bidding on is currently at US$256 and we place a bid of
US$257, our bid will be refused because the bid increment is US$5, i.e. we must bid a minimum of
US$261 in order to receive a valid confirmation.
In case of hot items it may happen that other users outbid our offer several times. A useful and
interesting feature of eBay and other auction sites can help us, called proxy bidding. Provided we are
desperate to have an item listed on the auction site, we can place even a much higher bid then the
current one without letting other users know our maximum offer. Let’s say we really need the above
cell phone that starts at US$250. We are willing to pay even US$320 for this mobile phone. What
happens if the current price is at US$256 and we enter our offer of US$320? The price will change to
US$261, i.e. increase by the bid increment that is US$5 between US$250 and US$499.99 and the
computer will bid for us. Whenever another user bids on the cell phone, the computer will
automatically increase our bid to the other user’s offer plus the bid increment and let us know about
the bid in e-mail. Should be the interest so high that it exceeds even our maximum offer of US$320,
the computer will not bid for us anymore.
During looking for an item we can see sometimes after the actual price that the reserve is not yet met.
A reserve serves as a minimum price (which is not the minimum starting price) below which the seller
does not sell the item. The amount is secret until it is not met. This is why a seller does not have any
fear to list a several million years old elephant skull fossil with a starting price of US$1. This item can
be seen as an example for reserve price in the following figure.
Figure 184.108.40.206.3.5 Reserve Price
The current bid is US$4,475 and it is still not a valid offer because it is lower than the seller’s reserve
price. Once somebody exceeds the reserve the phrase “(Reserve not met)” will disappear and the
owner of the highest bid in the end of the auction will win the fossil. This is how reserve price works.
Sellers use reserve first to do not risk a valuable item to sell it under price, second to create interest.
Once a user placed a bid he/she usually starts to feel that the item already belongs to him/her. If
somebody overbids him/her, he/she places again and again a higher bid because of this feeling. Run to
the extreme and paying an unreasonable high price because of the auction fever should be avoided.
There are small tricks that make the difference in bidding and help us to win the desired item. Users
usually bid in round numbers like US$11.00 or US$15.50. Therefore it is wise to place a bid with a
few cents more than a round number, i.e.US$11.03 or US$15.52. Sometimes only on these few cents
depends whether we win the auction. Another trick is bidding in last minute called sniping that I have
already mentioned. In other words do not bid too early and too high. It is better to wait until the
closing minute and place the bid in the last 20 seconds.
After the end of the auction the winner receives e-mail from the auction site with all the important
information about the seller and vice versa to contact each other and put forward the deal in the reality.
Usually sellers require payment in advance. Once the payment arrived the seller sends the buyer the
item via post or the buyer can take it personally but it is possible usually only if both party lives in the
same city. It this rare case even the payment can be given personally. Payment can be done in many
ways depending on the country where the seller and buyer are. In the US the most popular methods of
payment are checks, money orders, credit cards, cash on delivery (C.O.D.), PayPal or eventually
escrow service. While the first means of payment are evident, I will deal with PayPal and escrow
service in the next section.
Now after the introduction to the basics of eBay I would like to show the types of auctions in details.
The typical auction is the classical, sometimes called English auction where the winner takes the item.
Though there are another more special auctions whose system may not be clear at first sight:
• Reserve auctions
I have dealt with this kind of auction already in this section in detail.
• Dutch auctions
They are for selling multiple, identical items on the same time. Provided we want to sell
10 rainbow pencils with rubbers, we can list them 10 times or we can put them all in a
Dutch auction. Sometimes it is useful to put the items in separate listings to achieve
higher prices but it can be very time consuming and we rather turn to Dutch auction.
However, there are some rules to be taken into account:
No reserve price is allowed
No proxy bidding is allowed
Available only for sellers with a feedback score of more than 50
The winners in a Dutch auction buy the item at the lowest successful bid. To
understand it better I show it with an example in the following figure.
Figure 220.127.116.11.3.6 Dutch Auction
Provided there will be 2 bidders for the 10 available items and they place the
• Bidder “A” bid for 7 items at AU$3.0020 of each
• Bidder “B” bid for 4 items at AU$3.50 of each
In the above case the lowest successful bid will be AU$3.00. Therefore the outcome of
the auction is as follows:
• Bidder “B” wins 4 items at AU$3.00
• Bidder “A” wins 6 items at AU$3.00
• Buy It Now Auctions
When we see the “Buy It Now” logo next to the listing or on the item page, we can
purchase the item instantly for the given price without waiting for the end of the
auction. The following figure shows this opportunity.
Figure 18.104.22.168.3.7 Buy It Now
22.214.171.124.4 Services Offered by eBay
eBay offers numerous services and features to help to sell our items and ease the transaction. Although
they are not for free, they increase the chance to sell our item at a good price.
While browsing and buying are free of charge, selling is not. eBay charges insertation fees after listing
our items as well as final value fees once it is sold. The total cost of selling an item is insertation fee
plus the final value fee. Let’s see what kind of fees should we pay and what do we get in exchange.
• Insertation Fees
Although there are auction sites that do not require paying insertation fees, on eBay it is
not the case. We have to pay for listing our items depending on its starting price. They
are charged as a percentage and not refundable. If the auction closes without any
successful bid, we loose this money. The insertation fee is based on the starting price of
the item as follows:
Table 126.96.36.199.4.1.1 Insertation Fees
For Dutch auctions – when we list multiple items – the insertation fee depends on the
opening value of the items, i.e. the starting price multiplied by the quantity of the items.
Items listed in the Business & Industrial category; real estate, timeshare, land as well as
vehicles are subject to other fees and are shown in the following tables.
Table 188.8.131.52.4.1.2 Insertation Fees in Business & Industrial Category
Table 184.108.40.206.4.1.3 Insertation Fees for Real Estate, Timeshare & Land
Table 220.127.116.11.4.1.4 Insertation Fees for Vehicles
• Final Value Fees
If the item sells, we are also charged a Final Value Fee as a percentage that is shown in
the following table.
Table 18.104.22.168.4.1.5 Final Value Fees
For Dutch auctions the Final Value Fee is calculated by taking the Final Value Fee of
the lowest successful bid and multiplying it by the number of items sold.
• Optional Feature Fees
While the above fees are essential to list our item, there are optional features to help
increase bids and the chances to sell the item.
o Reserve Price
As we have already discussed reserve price helps to stimulate bids because we
can start the auction even on one cent while we do not have to sell the item
under the reserve price and take the risk of selling the item under the price we
desire. The cost of this feature is shown below.
Table 22.214.171.124.4.1.6 Reserve Fees
o Buy It Now
As already discussed, buyers can purchase the item in this case instantly for the
given price without waiting for the end of the auction. To use this feature, we
have to possess at least 10 feedback ratings and pay the following additional
fees when we list our item:
Table 126.96.36.199.4.1.7 Buy It Now Fees
o Listing Upgrade Features
Advantage of gallery items is that they stand out in the list with a photo,
which is clearly seen below.
Figure 188.8.131.52.4.1.1 Gallery
Listing Designer helps users who are not experienced in HTML by
adding attractive themes and layouts to the listings and so creating a
With Item Subtitle we can give additional, more descriptive information
to the buyers about our item beyond what would fit in the limited space
of the title. Moreover it stands out in the list of items, which can be seen
Figure 184.108.40.206.4.1.2 Item Subtitle
The function of this feature is the same, attracting attention on our item.
We can see it on the following figure.
Figure 220.127.116.11.4.1.3 Bold Option
This feature gives us the convenience to list our item at anytime starting
at the time we want. So we can list our item even in the afternoon, which
will start and end in the evening, in the peak time when the potential
buyers are more likely to be online.
10 Day Duration
We can list our items for 1, 3, 5 and 7 days. However, if we want to
gather more attention and list it for 10 days, for an additional fee we can
If we consider that our item is suitable for a gift too, we can let the
buyers know and list it with an eye-catching gift icon shown below.
Figure 18.104.22.168.4.1.4 Gift Services
This eye-catching feature impales our listing with a coloured band to
stand it out as it is shown below.
Figure 22.214.171.124.4.1.5 Border
This feature makes our listing more attractive with a coloured band,
which can be seen in the next figure.
Figure 126.96.36.199.4.1.6 Highlight
This useful feature assures the stand out in search results as well as in the
category listings by listing it featured prior to normal listings. If a buyer
browses in the category where our item is, he/she can see it for sure
because of its prominent place among the featured items as we can see in
the following figure.
Figure 188.8.131.52.4.1.7 Featured Plus!
Gallery and Homepage Featured
To attract even more attention we can use these features. Besides being
always prior to the normal listings in these cases our item will appear
also in the special featured section above the general picture gallery and
in case of Homepage Featured our item will rotate in the special display
on eBay’s home page as it is shown in the next figure.
Figure 184.108.40.206.4.1.8 Homepage Featured
List in Two Categories
This feature let more buyers see our item and generate more interest in it
as our item can be found in both categories.
As we can see the above features emphasise our item and so create bigger
interest in it, which raises the chance to sell the item at a good price. Their costs
contain the following table.
Table 220.127.116.11.4.1.8 Listing Upgrade Fees
o eBay Picture Service
While the first picture is always free of charge in the listing, for each additional
photo as well as special picture features we have to pay. The Picture Show
serves as a slide show where our pictures run. Supersize Pictures let the bidder
see our item see in high resolution XXL picture, in 800x600 pixels that allows a
closer look on the item. The Picture Pack offers us the maximum exposure. Here
we can add up to 12 pictures to our auction in XXL size with Picture Show,
moreover, our item is placed also in eBay Gallery. These features costs are as
Table 18.104.22.168.4.1.9 eBay Picture Service
22.214.171.124.4.2 Seller Tools
The more auctions we start the most time do they consume. After an extent it is worth to use an
auction manager program, which helps us to list, follow and get through our numerous auctions. eBay
offers a several selling manager tools with different features designed for different needs. They all help
make us much more efficient at listings and managing our sales.
eBay’s basic listing tool called Turbo Lister saves time and helps us selling more by creating
professional looking listings, managing and organizing our listings quickly and uploading thousands of
items in bulk. We can use it alone or in combination with other already prized sales management tools
with more useful features. The Selling Manager, Selling Manager Pro, Seller’s Assistant Basic and
Pro beyond the above features show which post sales activities should be done, contains e-mail and
feedback templates to communicate more effective with the buyers, allows bulk relist, printing of
invoices and shipping labels directly from sales records, inventory management, which reminds us
when our inventory is out of stock, free listing designer, etc. While the Turbo Lister is free of charge,
the more serious selling manager programs can be tried out also during the free 30-day trial. After it
we have to pay the following monthly fees:
Table 126.96.36.199.4.2.1 Seller Tools
PayPal enables us to send payments quickly and securely online using a credit card or bank account.
We can sign up for an account on the site. Besides giving our personal data and e-mail address that
will serve as an online bank account number, we can choose how we would like to fund our PayPal
account. Alternatives are bank account or credit card. Once the registration is completed, our PayPal
account is ready to receive and send payments to any eBay user who accepts PayPal. Paypal has many
advantages. The transfer occurs immediately and it is convenient, the status of our transfer is traceable,
by using credit card our card number is in secret and the other party sees only our e-mail address and
last not but least PayPal offers buyer protection. With PayPal Buyer Protection, qualified
purchases are eligible for up to US$1,000.00 coverage at no additional cost.
In PayPal there are personal accounts as well as premier and business accounts with more features.
While the personal account is free of charge, it cannot accept debit or credit card payments. However,
when we decide to choose a premier or business account to offer more convenience in payment for our
buyers, PayPal charges commission after receiving payments. The fees charged by PayPal are showed
Table 188.8.131.52.4.3.1 PayPal Fees
184.108.40.206.4.4 Standard Purchase Protection Program
If a buyer did not receive the paid item but the payment was not done via PayPal, he/she can claim for
indemnification too. This protection program reimburses buyers for eligible transactions when a
product was purchased on eBay and paid but either not received or was received but significantly not
as described. “The maximum reimbursement for any claim is US$175.”21 This feature makes the
transactions more secure for the buyer.
220.127.116.11.4.5 Escrow Service
This special service means perfect security for both buyer and seller. Escrow is available for any
purchase but typically is used for purchases of $500 or more. It does not make any sense in case of
cheap items as the service is quite expensive as it can be seen in the following table.
Table 18.104.22.168.4.5.1 Escrow.com Fees
Though it protects buyers and sellers from fraud. The buyer sends the payment to the escrow company
that notifies the seller that payment is received and the product can be sent to the buyer. Once the
buyer receives the item and confirms to the escrow company that it is in order, the seller gets the
money from the company. eBay strongly recommends to use its approved escrow service called
Escrow.com as unfortunately there are fraudulent escrow services too.
22.214.171.124.4.6 ID Verification
To get ID Verified through eBay is an extra sign of security for buyers. If we decide to get ID
Verified, a company working together with eBay confirms the member's identity by cross checking
their contact information across consumer and business databases. It is not a credit check, it establishes
only a proof of identity. ID Verified members have an advantage that next to their username and
feedback score even an ID Verified logo with a characteristic check-mark appears. The cost of the
verification is US$522, deducted from our eBay account.
126.96.36.199.4.7 eBay Store
Advanced sellers may consider opening their own eBay store. This feature was introduced in June
2001. In our professional-looking store we can show all of our items categorized and tell the buyers
more about our business and activity on our own customized pages. We get our own web address so
we are able to drive our buyers directly to our store. We get free monthly sales and traffic reports with
graphical analysis. Disadvantage of store items is that they cannot be found in regular search results in
eBay. However, as I have already mentioned earlier there are auction search engines specialized in
searching of hundreds of auction site’s listings and they are able to search and list even in eBay store
items. Although the maintenance of an eBay store alone is not a good idea, it may integrate completely
our eBay business provided we use it smartly. If we keep listing eye-catching items with well-
sounding titles on eBay, we can drive the traffic directly to our eBay store as save a lot on insertation
fees. Just take into account that listing an item in our store costs just US$0.02 for 30 days and the
starting price does not matter while the insertation fee for an item starting at US$1 costs US$0.35 and
the duration is limited for 7 days. In our eBay store we can list our expensive items without paying any
additional fee. If we list hundreds of items each month we can save tremendous amount of
money. Moreover, the listing upgrade features and the picture service costs also much less. And once a
buyer won an item or purchased something he is likely to seek for more items to save on postage.
Even eBay’s Cross-Promotional Tool helps us drive the buyers to our store. After the item description
of our each and every auction there are pictures showing our further items. We can set which items are
shown and once the buyer clicked on it, he/she is already in our store with hundreds of other items
listed for a very low fee. Moreover, after placing a bid the buyer comes again to a page where out
cross-promoted items are shown. Although we have to pay a monthly fee for our shop and the final
value fees are a bit higher compared to normal listings, the first 30 days are for free of charge and with
a bit creativity and smartness we can double our traffic on eBay and save a lot. In order to see the
difference in fees in the next tables I show the cost of an eBay store.
Table 188.8.131.52.4.7.1 Store Insertation Fees
Table 184.108.40.206.4.7.2 Store Final Value Fees
Table 220.127.116.11.4.7.3 Store Listing Upgrade Fees
Table 18.104.22.168.4.7.4 Store Picture Services Fees
22.214.171.124.4.8 eBay Live Auctions
Besides of its millions of auctions eBay offers even live auctions and let us join and participate in
auctions on the floors of some of the world’s greatest auction houses. Without being there we are able
to bid on these items too in live at http://www.ebayliveauctions.com. Even the categories suggest that
these auctions are for advanced users:
• Antiques & Decorative Arts • Entertainment
• Art • Jewelry & Timepieces
• Automotive • Real Estate
• Books & Manuscripts • Sports
• Coins • Stamps
• Collectibles & Memorabilia • Wine
• Dolls & Toys • Everything Else
Buyers can browse in the list of coming auctions and sign up for the particular auction of interest to
be able to participate.
126.96.36.199.4.9 eBay Toolbar
Users can download and install the eBay Toolbar to the browser desktop, which offers many useful
features. We can search for items, be alerted when an auction of our interest is going to close, reach
eBay’s home page, the eBay stores, etc. This feature is for free of charge.
188.8.131.52.4.10 eBay Giving Works Fee Donation Policy
The eBay Giving Works program is dedicated for charity listings on eBay. When we sell a Giving Works
item and donate 100% of the final sale price to a member non-profit organization, eBay will donate the
insertion and final value fee to the non-profit organisation selected in the listing.23
184.108.40.206.4.11 eBay Affiliate Program
Within the frame of the affiliate program eBay pays commission for anyone who places eBay’s banner on
his/her website or promotes eBay in other ways and drives new active users to the site. Affiliates get up to
US$1324 for each new active user signed up in eBay.
220.127.116.11.4.12 eBay University
The aim of eBay University is to teach its users the way to sell on eBay. The first classroom was organised
in June 2000 and since then they are held regularly. eBay experts and experienced power sellers who can
answer any question hold the classes. We can visit one of the regularly held university classrooms across
the US or take an online course from our home. Classrooms are held from 9.00 am to 3.30 pm and cost
US$5925, while an online course cost US$19.9526, which is available on CD-ROM available for the same
price in the eBay Shop.
18.104.22.168.4.13 The eBay Shop 27
eBay offers for its fans clothes and accessories like t-shirts, pullovers, caps as well as home and office
gear like mugs, umbrellas, key rings, pens, all with the famous eBay logo.
22.214.171.124.5 eBay Germany
eBay Germany is the first site established in Europe by eBay and today the most important European eBay
site with the largest number of registered users and items listed and the biggest profit.
126.96.36.199.5.1 History of eBay Germany 29
The success story of the German eBay started with the establishment of the company alando.de AG in
February 1999. In March alando.de started its online activity and became quickly the leader C2C Internet
auction platform in Germany. In June alando.de merged with eBay and became the eBay marketplace for
the German-speaking area and starting point of all German-speaking eBay sites30. At this time the site had
more than 50,000 registered user.
While the “Buy It Now” feature was introduced in November 2000 in the American eBay, the eBay
Germany started it in June 2001 called “Sofort-Kaufen!” After the successful introduction of eBay Stores
on the American eBay, eBay Germany started to offer eBay Shops from October 2001. From March 2002
eBay Germany introduces the auction format at fixed price, which was followed by eBay US only four
month later. In May 2002 took place the first eBay University in Germany. In November 2003 eBay.de
became the most popular site in Germany. In April 2004 eBay took over the site mobile.de to sell cars,
motorbikes and accessories at motors.ebay.de. In June the worldwide online payment system PayPal was
integrated to ebay.de to let also German users pay via PayPal. And eBay.de keeps growing.
188.8.131.52.5.2 eBay.de’s Success in Numbers
Since its start in 1999 eBay Germany multiplied all its key financial indicators. The total value of items
sold in 2004 was US$7.6 billion. In the 4th quarter of 2004 alone more than 80 million items were listed,
while the average number of items is around 4 million. Another interesting data is that German Internet
users spend 12.5% of their online time on eBay.
The growth of total value of items sold on German eBay is also stemless. Although the following figure
shows only the 3rd quarter’s data of each year, not the full year’s figure, the steep growth is even so
eBay Austria (http://www.ebay.at) and eBay Switzerland (http://www.ebay.ch)
Figure 184.108.40.206.5.2.1 Total Value of Items Sold on eBay.de 2000-2004, Q3 (million US$)
220.127.116.11.5.3 Characteristics of eBay.de
Thanks to eBay’s international expansion philosophy all eBay sites around the world have the same
design. The features and services offered by various sites depend on their development status. While
smaller sites of smaller markets like eBay.se in Sweden do not have so big variety of service like
eBay.com, eBay Germany do not have to be ashamed. The scale of its service and features offered for its
users are as large as on ebay.com. Of course the fees for services are different, also because of the fact that
everything runs in Euro, but roughly the same fees are charged if we convert them to US$. Therefore I do
not want to list all of the services again, just mention some differences, which are mainly country-specific.
As the usage of credit cards is Germany is not so common like in the US, the payment of commission
occurs normally with bank transfer. Also the ID Verification occurs with the help of the German Post 31
and usually not with the help of our credit card.
Unique service on eBay.de is the work of sales agents, who help for less experienced users or for non-
Internet-users in selling their excess items for a small commission, which is normally 5-10% depending on
the selling price. They are likely to sell our item at the highest possible price because of their experience
and smartness. As these agents are also eBay users, theoretically everybody can become an agent provided
he/she comply the safety conditions.
18.104.22.168.6 Competitors of eBay
Currently eBay has very low direct competition. There are hundreds of auctions sites around the globe but
none of them can compete with eBay’s popularity and its quality services. They may mean competition
only in the market of a particular country. Just take the case in Poland where eBay started recently its
auction site in a situation where Allegro.pl is the strongest online auction site with considerable market
share. However, usually it is not the case. Where eBay has its country specific site, normally dominate the
market, like in Germany for example. There are small auction sites but they are not able to compete with
In the US market the only auction sites worth to mention as possible competitors are Yahoo! and
Yahoo!32 is mainly an Internet portal with numerous features. One feature is the online auction called
Yahoo! Auctions33. Although they started this service too, it does not belong to their core activity. The
structure and functioning of auctions are similar to eBay but if we compare the items listed, it becomes
clear that they Yahoo! does not mean competition to eBay. There are exemptions but only a few, like in
Japan, where Yahoo! dominated the market almost the entire market at the time of eBay’s appearance and
it turned out soon that eBay has no chance to lure significant share of users from Yahoo!
The other company, Amazon.com sells mainly used and new items at fixed prices in non-auction format.
So it can be classified as an e-mall with the difference that also individuals can list their items to sell.
On the other hand, search engines can mean indirect competition. Buyers looking for bargains not
necessarily in auction form can use search engines to quickly locate the lowest-priced items on the
Internet. While we can find everything with Google34, there are search engines specialized in comparison
of prices of any product we are looking for.
22.214.171.124 The Online Auction Market in Hungary
After the astonishing success of eBay, there were several attempts to introduce the C2C business and
online auctions in Hungary with comparative success. Several sites started in the early years have closed
their sites already because of the lack of interest. On www.kalapacs.hu we can find now a completely
other site, while the URL of www.netauckio.hu does not exist anymore. There are currently also sites,
which won’t exist in the next year in my opinion. Although on www.arvereslap.hu and
www.licit.honor.hu we can find a working platform able to list auctions, we can hardly find a running
auction, not to mention the lack of bids. On www.eeebid.hu there are about 700 running auctions besides
the offering of a CD store with more than 14,000 listings at set prices, however, the seller does not reply
on questions, mails, even when we win an auction.
We can find sites, where several strategic changes occurred, like www.axio.hu. The site started with
online auctions in 1999. Later it started to deal in renting online stores and the number of auctions dropped
significantly. Recently, however, the site changed its name to Axio Art and deals only in antiques, arts,
collections, jewellery and old books and furniture. They became a B2C auction site listing the items of
famous Hungarian auction houses like BÁV Rt. Aukciósház, Polgár Galléria és Aukciósház, etc.
Common characteristic of these sites that they appeared early on the market and because of the lack of
interest they either stopped their activity or changed strategy.
One of the barriers hindering the spread of online auctions in Hungary is the lack of use of credit cards,
which is the most common method of payment in the US and also popular in Western Europe. In the
growth of online auction market is a serious barrier when the cash on delivery is the only possible method
of payment. A lot of buyer asks for shipping the item they won on C.O.D because of the lack of trust.
Later, when they have more experience and get to know a seller, they do not hesitate to do a bank transfer
and pay in advance.
The majority of Hungarian Internet users afraid of auctions like rather another form of C2C business,
namely the online classified ads. Apronet, the leading Hungarian classified ad site, attract 18,000 people
each day on the average35. The site has usually more than 65,000 ads33, and each day 3000 new ads are
posted. Although the site introduced the ads placed in auction form too, mere 10% of the sellers used this
way of listing. Now we do not find any auction.
126.96.36.199.1 Vatera – The Leading Hungarian Auction Site
In spite of all these predominantly negative tendencies Vatera36 exists continually and keeps growing.
Private persons founded Vatera in December 2000. Erik Csupor, the director of Vatera Hungary Kft and
Szabolcs Valner, the regional director are optimistic as since last year the company is profitable. It could
be reached only with strong and strenuous work and great losses during the first 3.5 years. They trust to
this model, which proved to be successful in the US, Europe and Asia, taking into account the typical East
European mentality that everybody is looking for bargains. It is justified by the investment of US$650,000
in the Hungarian, Czech and Polish Vatera in the summer of 200237. Vatera dominates 90-95% of the
Hungarian market according to their own surveys. The number of registered users is growing continuously
and in the end of 2004 it reached 57,66635. This growth can be seen in the next figure.
Figure 188.8.131.52.1.1 Growth in Vatera’s Registered Users 2001-2004
Source: Information from Vatera.hu
Information from Vatera.hu
The same can be said about the number of listings in Vatera, which topped at 940,000 in 2004
while the items sold exceeded 100,00033 last year. The growth in the number of items sold on the site is
shown in the next figure.
Figure 184.108.40.206.1.2 Growth in Number of Items Sold on Vatera 2001-2004
Source: Information from Vatera.hu
The most astonishing growth occurred in the total value of items listed on Vatera. While it reached
316,398,891 HUF38 in 2003, it topped at 1,217,510,209 HUF34 which is a 385% growth within a solely
year. The following figure shows this steep rise.
Information from Vatera.hu
Figure 220.127.116.11.1.3 Growth in Total Value of Items Listed 2001-2004 (in 000 HUF)
Source: Information from Vatera.hu
The outstanding growth is mainly due to the interesting combination of cheap or unique products in the
listings, which cannot be found elsewhere. It lures a lot of people who will visit the site frequently to
follow the auction and look for other bargains. And in spite of the astonishing results, Vatera’s aim is the
18.104.22.168.1.1 How Vatera Works
As all the existing auction sites around the world can be derived from eBay, the ancestress of online
auction marketplaces, no wonder that they are similar in their functioning and structure. Of course the
number and exaction of their services are different, depending on the seriousness of the maintainer and the
extent of investment, though the basic structure is always the same. Usually newly created auction sites
cannot attract enough Internet users to establish a functioning marketplace because of the lack of services
of quality and users are more likely to visit another already well-running auction sites, like Vatera. The
leading Hungarian auction platform gained enough experience during its 4.5 years of existence, not to
mention the tremendous amount of money invested in the company for marketing and infrastructure.
Because Vatera based on the same idea like eBay and offers more or less the same services, I would like
to just list them and deal with the differences more detailed.
The registration process is much easier in Vatera compared to eBay. During the free registration we
have to give only our personal data like name, address, phone number and e-mail address, choose a user
ID and password. Credit card or bank account data is not compulsory at all. We may give our bank
account data to let the company deduct the commission after the sold items directly from our Hungarian
bank account but we can pay with postal order or bank transfer upon receipt the invoice. On the one hand
privacy is good, on the other hand can lead to frivolity of buyers. They can give false data in the
registration and bid on several items just for fun without payment without any serious consequences. Once
they collected too much negative feedback scores from the angry sellers, can create another username and
continue their deteriorative activity. Fortunately it happens rarely.
Vatera has the same feedback system like eBay. The feedback score is showed also with stars but in a
different way. The following figure shows how.
Figure 22.214.171.124.1.1.1 Classification of Feedback Stars on Vatera39
„közötti pozitív visszajelzésnél” in English: between … and … positive feedback score
Vatera has also well-constructed category structure with numerous subcategories, which is
continuously expanded. At this moment more than 71,000 auctions are running on Vatera. Of course exact
number cannot be told because of the frequent start and close of auctions. The main categories are as
• Antiques & Arts • Consumer Electronics
• Baby • DVDs & Movies
• Books & Magazines • Cars & Motorcycles
• Business & Industrial • Sport & Health
• Camera & Photo • Home, Office & Garden
• Cell Phones • Jewelry & Watches
• Clothing & Fashion • Music
• Coins & Banknotes • Stamps
• Collectibles • Toys
• Computers • Everything Else
Vatera’s search engine works the same too, we can items, stores as well as members and sort them by
various aspects. The bidding process is also the same, we can use proxy bidding too, however, the
bid increments are different. These amounts and the bid increments can be seen in the following
table. On Vatera, however, sellers can set their desired bid increments too.
Table 126.96.36.199.1.1.1 Bid Increments on Vatera
Reserve price can be used also on Vatera, called minimum price. The payment takes place usually
also in advance. The most popular methods of payment is cash on delivery (C.O.D.) because of its
safety, bank transfer and if the parties come from the same city, cash in a personal meeting, where the
buyer gets also the item purchased. On Vatera we can find the same types of auction like the classical
English auction, Dutch auction, reserve price auction and Buy It Now auctions extended with a
“Flash Price” how Vatera it calls.
188.8.131.52.1.2 Services Offered by Vatera
The services, which Vatera offers for its users are also very similar to eBay’s. While the major
differences are shown in the following section in details, the similar services are just listed.
• Listings on Vatera
Although Vatera’s main source of income comes from sellers, the auction site does not
charge fees for listing an item, i.e. there is not insertation fee like on eBay and sellers has
to pay fee only after items sold. Even this final value fee was introduced after 3.5 years of
existence of Vatera. There was a great disgust among the bigger sellers, however, each of
them agreed that Vatera could not maintain itself and offer quality service from nothing.
Vatera introduced the fee in a very friendly way. They invited all the power sellers to a
cosy pub, discussed all the details and took into account the opinion and suggestions of
o Final Value Fees
Sellers are charged only with final value fee as a percentage that is shown in the
Table 184.108.40.206.1.2.1 Final Value Fees on Vatera
Closing Price Final Value Fee
Item not sold No Fee
Below 20,000 HUF 6% of the closing value (max. 1,200 HUF)
1,200 HUF plus 4% of the remaining closing value balance
20,000 - 100,000 HUF
(max. 4,400 HUF)
4,400 HUF plus 3% of the remaining closing value balance
100,000 - 250,000 HUF
(max. 8,900 HUF)
8,900 HUF plus 1.25% of the remaining closing value
Above 250,000 HUF
o Optional Feature Fees
In Vatera the cost of optional features is not so high. The next table shows it in
Table 220.127.116.11.1.2.2 Optional Feature Fees on Vatera
Optional Feature Fee
Bold Listing 125 HUF
Item in the beginning of the listings40 125 HUF
Lengthening the auction with 5 minutes 90 HUF
Gift icon next to the item 40 HUF
Item listed in the weekly newsletter 1600 HUF
Item showed on the homepage Upon agreement
New feature on Vatera is that our auction lengthens with 5 minutes if in the last 5
minutes a bid comes. It serves in the situation when a lot of bidders want to buy the
item and they send their offer in the last minutes to win the auction. Another useful
feature is the appearance in the weekly newsletter sent the thousands of Vatera
members. It means a good publicity, which increases the chance that our item will
be sold for a good price.
While on eBay sellers have to pay additional fees for reserve price and buy it now
price, it is for free on Vatera. Even gallery pictures are for free of charge and we
can place up to 3 high-resolution pictures in the item description.
Contrary to eBay, in the duration of listings we get a much bigger variety. We can
list our items for 1, 2, 3, 4, 5, 6, 7, 8, 9, 10 days as well as 2 and 3 weeks and none
of them cost extra fee.
Correspond to the Featured Plus! in eBay