Ebay and Amazon caselet


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Ebay and Amazon caselet

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Ebay and Amazon caselet

  1. 1. eBay Caselet Group 6 Aegidius Savio Mondol Anushree Mazumdar Cyril Victor Pousali Mukherjee Prabar Rakshit Ranjeet Singh Suman Kumar Dey Tamasree Sutradhar
  2. 2. 1. EBay‘s business model and drivers of revenue stream/profitability Ans With more than 100 million active users globally, eBay is the world's largest online marketplace, "where practically anyone can buy and sell practically anything.Their collective impact on ecommerce is enormous: In 2011, the total value of goods sold on eBay was $68.6 billion — more than $2,100 every second. The Business Model of eBay is an online person-to-person trading community on the Internet, using the World Wide Web. Buyers and sellers are brought together in a manner where sellers are permitted to list items for sale and buyers to bid on items of interest, also both sellers and buyers are able to browse through all listed items. The items are arranged by topics, where each type of auction has its own category. eBay has both streamlined and globalized traditional person-to-person trading, which has traditionally been conducted through such forms as garage sales, collectibles shows, flea markets and more, with their web interface. This enables easy searching for buyers and enables the sellers to immediately list an item for sale within minutes of registering. eBay automatically notifies the buyer and seller via e-mail at the end of the auction if a bid exceeds the seller's minimum price, and the seller and buyer finish the transaction independently of eBay. The binding contract of the auction is between the winning bidder and the seller only. Ebay’s Business Model: 1|P a g e
  3. 3. E-bay operated three primary business segments- Marketplaces, Payments, and communications. Auctions Marketplace: At it‘s core, eBay offered a marketplace that connects buyer and seller. The company had localized websites in 24 countries, as well as partnership and investments in an additional 15 markets. The company‘s stated goal was to pioneer communities around the world built on commerce, sustained by trust and inspired by opportunities. Expanding into fixed price sales: It grew beyond its core auction and introduced fixed price trading with acquisition of retail site Half.com and the addition of a ―Buy it Now‖ feature.eBay launched eBay stores which allow sellers( including large retailers) to offer goods through fixed price storefronts on the company‘s platform. Improving the Buyer seller experience: Launch the feedback forum- a rating system that allowed buyer and sellers to grade each transaction and offer a brief comment on the experience. The company focused on offering more efficient and effective payment method. It offer the ―Best Match‖ search for buyer and seller. Drivers of revenue stream/profitability:  PayPal Will Continue To Drive eBay’s Growth  They expect PayPal users to grow as eBay continues to integrate Paypal into its adjacent Marketplaces platforms such as ‗Shopping.com‘ and ‗Rent.com‘. Increasing penetration of PayPal on third-party merchant platforms will also help. PayPal led from the front in 2012, with revenues growing by roughly 25%. This revenue growth was accompanied by a similar growth in Total Payment Volume (TPV), which further jumped 21% in the first quarter of 2013 (year-over-year). They believe that eBay‘s simultaneous efforts to expand its global and offline presence will continue to fuel PayPal‘s growth in the near term. Marketplaces Gaining Popularity & Focus On Improving Conversion Rate  Conversion rate is a key focus area for eBay as it seeks to increase the success of sellers in converting listed items to sold items. The company has implemented a number of features to increase the conversion rate. Its revamped website interface makes it easier to browse through the selection, and the integration with its mobile platform will be valuable. Marketplaces business continued to grow at a healthy pace in Q1 2013, and the company attributed the strong performance to continued site improvements such as streamlined registration and checkout.  In 1999 ebay offered more than two million items for auction. 2|P a g e
  4. 4.  It operated on the three primary business segments – Marketplaces, Payments, and Communications.2|P a g e  It consisted of website operations, payment processing and customer support which helped ebay to scale its operations rapidly into other markets outside the U.S.  It also launched a pure auction marketplace and the launch of ebay store. 2 .Amazon‘s business model and drivers of revenue stream/profitability Ans AMAZON’S BUSINESS MODEL: Amazon is one of those organizations being run by the elements of the investment community for the benefits of the consumers. AMAZON uses the internet to get maximum leverage out of its fixed assets , and once it achieves enough volume of sales, the sum total of profits from all those sales exceed its fixed cost base, and it turns a profit. The platform of Amazon is very profitable. When other people sell products on Amazon marketplace, the gross margin is huge. Amazon has boundless ambition, it wants to play in the global retail market. Thus it has decided to continue to invest to arm itself for a much larger scale of business. But the investments are huge as the capital required in such a business is pretty high in order to make the business grow which has to ship millions of packages to customers all over the world. Amazon has always tried to focus on to be the Earth‘s most customer-centric company. 3|P a g e
  5. 5. The three primary customer sets they serve are: Conumers Sellers Developers In 1997 the company had focused on lower prices across all the product range but from 1998 to 2000 they extended product lines and ranges as they were facing stiff competition. Amazon stared investing aggressively in its supply chains and distribution. It spent heavily on infrastructure and fulfilling costs as well. ENHANCING THE CUSTOMER CONVENIENCE: The review system worked well for Amazon. It allowed users to post and read product reviews. This review system was a boon. EXPANDING INTO A PLATFORM: Amazon started expanding beyond its retail model into a platform for e-commerce.the auction business launched by it was another turning point. It also launched zShops which was an online supermall that offered small and medium size merchants the ability to operate the store fronts within Amazon‘s site for monthly fees and per sale commissions. Furthermore new innovations towards providing service continued making it reach to more and more customers and clients. GROWTH DRIVERS:  Customer centric company focusing on 3 sets of primary customer sets: consumers, sellers and developers.  Heavy investments on supply chains and distribution network  Billions of capital expenditures on distribution and warehouse facilities as well as into customer services centres.  Investment in technology, infrastructure and expansion of product categories and new lines.  Free shipping policy on orders of $99 or more.  Launch of PRIME program: unlimited two day shipping for an annual fee.  Launch of the auction business in 1999.  Launch of zShops: online supermall  Adopting the ―Single Store Strategy‖ in 2000.  Launch of FBA (fulfillment by Amazon) : allowing third parties to use the storage and vast distribution of Amazon.It was the services and the new innovations brought in by Amazon that helped it to grow globally and financially. 4|P a g e
  6. 6. 3. Compare eBay and Amazon business models and areas of interaction Ans COMPARISON eBay eBay operated in three primary business segments- market places, payments and communications  At it core eBay offers a market place that connects buyers and sellers. It is an online person to person trading community on the internet using the world wide web.  Buyers and sellers are brought together in a manner where sellers are permitted to list items for sale and buyers to bid on items of interest, also both sellers and buyers are able to browse all listed items.  eBay automatically notifies the buyers and sellers via email at the end if a bid exceeds the sellers minimum price and the sellers and buyer finish the transaction independently of eBay.  eBay grew beyond its core auction business in 2000 and introduced ‗fixed price‘ trading with acquisition of retail site i.e half dotcom and the addition of a ‗buy it now‘ feature in its tradition business.  eBay launched eBay stores in 2001 which allow the sellers including large retailers such as Home Deport to offer goods through fixed price store fronts on the company‘ platform.  Key services for buyers and sellers- o Feedback forum- Encourage users to provide feedback rating and comments on other users with whom they trade. o Safe Harbor Programme: It provides guidelines for trading and investigates users complains of possible misuse of eBay platform and take appropriate actions o Verified Rights Owner Programme ( VeRO) : This programme help to protect community members from purchasing items that may be counterfeit or unauthorized. o Customer Support: Buyers and sellers get the opportunity to contact with the company through various means including email , online text chat and telephone o Pay Pal : It facilitates online exchange of funds. Amazon Amazon followed the retail model. It was launched online in 1995 as Earth‘ Biggest Bookstore.  In 1998 the company entered the music and video business extending the retail capabilities it had developed for books.  The company‘ stated goal was to be Earth‘ mot customer centric company .
  7. 7. 5|P a g e Hence offering low price across their entire product range.  Amazon rapidly launched new product line and features and to support that aggressively invested in in its supply chain and distribution network which improve the co‘s capability.  Amazon spent heavily on Technology and content which included its technology infrastructure and expansion of product categories and fulfillment cost.  Enhancing customer convenience Amazon allowed users to post and read product reviews. They launched a favourite customer feature which resulted to be a boon for the company and helped in increasing sales.  Expanding into a Platform In 1999, Amazon took its first step toward expanding beyond its retail model into a platform for e commerce. AREA OF INTERACTION  Amazon launched its auction business which was similar in many respect in eBay offering but also guranteed purchases up to $ 250 in the event of fraud.  Like eBay Amazon also launched stores known as zShops, but with certain modifications, i.e online supermall that offered small and medium sized merchants the ability to operate storefronts within Amazon site for a monthly fee and per sale commissioners unlike eBay who charges fees for simply listing and commissions provided only in case of completed transactions.  Amazon visitors would see zshops label across the top of the page that would take them to a directory organized by product and merchants could pay extra to have their names and logos featured more prominently. 4 .Amazon moved to a retail and platform business model. How did Amazon overcome the barriers to entry in the third-party seller market? Ans At first, for Amazon customers were defined as ―buyers‖, but since the introductionof its marketplace initiative, third party sellers were equally important customers. This change of perspective is reflected in Amazon‘s ―single storestrategy‖. Under this concept, Amazon presents its own merchandise alongside its partner merchants‘ offerings on the same product detail page
  8. 8. abolishing the previously existing store frontiers. 6|P a g e Amazon shifted its business scope to be an ―e-commerce platform‖, fulfilling B2C and hosting C2C and B2B transactions. When Amazon expanded its product range, it used the reputation transfer method by which companies strive to transfer previously acquired reputation from one branch to another. Moreover, Amazon provides structures to third-parties in the field of auctions and zShops that engender institution-based trust: By means of institutional mechanisms such as feedback features, escrow services, and credit card guarantees, Amazon achieved to build a trustworthy marketplace and to encourage online transactions. Due to their time advantage, pioneers in EC (e-Commerce) can realize significant FMAs by setting standards, and protecting innovations by patents and copyrights.Amazon has pioneered proprietary technologies for its web site management, search, customer interaction, recommendation, transaction processingand fulfillment services and systems. Amazon patented its 1-Click technology, as well as its Bid-Click auction bidding process, 195 and in 2000 was also granted a patent on its Amazon Associates Program and on its book recommendation service Book Matcher, which generates automatic recommendations based on customer purchases. Amazon licenses components of its EC platform to third party sellers and hosts third-party sellers‘ websites providing its shopping technology. Amazon realized a FMA (First Mover Advantage) with the concept of syndicated selling through its Associates and Syndicated Stores programs. The members of the Associates Network, including Internet companies such as AOL.com, Yahoo, Netscape, Excite and the AltaVista Search Service, recommend Amazon products to their own visitors and earn a referral fee and a commission in case of completed purchases. Amazon participates in cooperative advertising arrangements with some of its vendors, and with other third parties. Using primarily their own proprietary technologies, as well as technology licensed from third parties, they have implemented numerous features and functionality that simplify and improve the customer shopping experience, enable third parties to sell on Amazon‘s platform, and facilitate their fulfillment and customer service operations. Their current strategy is to focus its development efforts on continuous innovation by creating and enhancing the specialized, proprietary software that is unique to their business, and to license or acquire commercially- developed technology for other applications where available and appropriate. Amazon continually invest in several areas of technology, including their seller platform; A9.com, Their wholly-owned subsidiary focused on search technology on www.A9.com and other Amazon sites; web services; and digital initiatives.‘ Another form of partnership referred is the Amazon Marketplace which enables Amazon customers and other retailers to sell their new and used books and other goods alongside the regular retail listings.
  9. 9. 7|P a g e A similar partnership approach is the Amazon ‗Merchants@‘ program which enables third party merchants (typically larger than those who sell via the Amazon Marketplace) to sell their products via Amazon. Amazon earn fees either through fixed fees or sales commissions per-unit. This arrangement can help customers who get a wider choice of products from a range of suppliers with the convenience of purchasing them through a single checkout process 5) What should eBay‘s future strategy be ? And why? Ans: Talking about the future strategies of eBay the two major options for countering competition form Amazon was: 1) Maintaining existing business model – EBay has shown records of sustaining their large ecosystem of users time and again. The company should opt to improve and fine-tune the foundation of its core auctions and fixed price business rather than undertake a risky, and a potential costly transformation. In addition, eBay could incentivize seller activity by lowering listings on final values fees, which could expand product selection and attract more buyers to their site. 2) Expand its business model – Ebay could also expand its core marketplace platform. For example, to attract buyers, thecompany could shift its focus away from the PC onto mobile devices with an emphasis on local inventory. Other measure that can be done: In essence, eBay is looking to partner with physical retailers to generate more sales online or by driving more foot traffic to their stores. That‘s in steep contrast to Amazon, which has increasingly focused on driving more and more spending online. It also has focused on the digital distribution of content, such as books, music and video, and is placing a huge bet on hardware, like the upcoming Kindle Fire, hoping to rival Apple‘s iPad.
  10. 10. 8|P a g e Ebay will be launching its new technology platform aimed at developers, names X.commerce. The nonconsumer-focused platform will enable developers to use the tools to build applications for retailers who are looking to have a larger presence on social networks, online and on mobile phones. The X.commerce division will draw from many of eBay‘s existing technologies, including PayPal, but will also tie together several other acquisitions, including Milo, which has created an online database of offline inventory in physical stores; Red Laser, which is a barcode scanning technology; and Magento, which assists in the creation of online storefronts. 9|P a g e