| Case study 1 eBay thrives in the global marketplace
Context
It’s hard to believe that one of the most well-known
dot.coms has now been established more than 20 years.
Pie
e Omidyar, a 28-year-old French-born software
engineer living in California, coded the site while work-
ing for another company, eventually launching the site
for business in September 1995 with the more direct
name ‘Auction Web’. Legend reports that the site
attracted no visitors in its first 24 hours. The site
ecame eBay in 1997. At the end of 2017 eBay had 168
million 12-month active buyers, an increase from 90
million active in 2010. Nearly two-thirds of transactions
are now international. This shows how established
pureplays have continued to grow with global adoption
of the web.
This summary and others in the text are based on the
SEC filing of the business. The Security and Exchange
Commission (SEC) required by company law in the US
gives deep, relatively hype-free insights on the main
online platforms based in the US and is recommended
for students studying these types of business to show
the success and risk factors.
Mission
eBay describes its purpose as to ‘pioneer new communi-
ties around the world built on commerce, sustained by
trust, and inspired by opportunity’. eBay's 2016 report
describes the company’s view on cu
ent marketing
approaches of exploiting Big Data and Artificial
Intelligence:
To deliver the most relevant shopping experience,
we continue our efforts to better understand, organ-
ise and leverage eBay's inventory. With our struc-
tured data initiative, we are able to begin organising
our vast inventory around products rather than list-
ings and aggregate insights into supply and demand.
We continue to
oaden the coverage of structured
data, which enables us to create and start rolling out
new consumer experiences that are modern, simple
and differentiated. One of our goals is to deliver a
more personalised shopping experience by deter-
mining what products to show our consumers and
highlight the incredible price and selection advan-
tages that eBay often provides across categories.
eBay is best known for its retail marketplaces, with a
core mission to ‘create the world’s online marketplace’.
In its most recent annual report, it describes its vision as
to be present where people spend the majority of thei
time online, becoming part of the ‘fa
ic’ of their day-to-
day online experience. Another marketplace owned by
eBay is StubHub, one of the largest ticket marketplaces,
with a footprint of 48 countries. PayPal is also part of
eBay. The Paypal business was acquired in 2003 but was
epurchased at a later date and now trades separately.
This case focuses on the best known eBay business, the
eBay Marketplace.
Revenue model
The vast majority of eBay's revenue is for the listing and
commission on completed sales. For PayPal purchases
an additional commission fee is charged. The margin on
each transaction is phenomenal since once the infra-
structure is built, incremental costs on each transaction
are tiny — all eBay is doing is transmitting bits and bytes
Chapter 1 Introducing digital marketing 39
etween buyers and sellers. To grow revenue, eBay has
acquired and developed other sites such as comparison
site Shopping.com and StubHub (event tickets). eBay has
also created vertical formats, such as Classifieds, Daily
Deals, Fashion, Motors (vehicles, parts and accessories)
and Electronics.
eBay also expanded into providing infrastructure fo
other retailers in 2011 with its purchase of GSI, a provide
of e-commerce and interactive marketing services
encompassing websites and fulfilment centres to enter-
prise clients that include some of the world’s leading
ands and retailers covering merchandise categories
including apparel, sporting goods, toys and baby, health
and beauty and home.
Advertising and other non-transaction net revenues
epresent a relatively small proportion of total net reve-
nues and the strategy is that this should remain the
case.
Proposition
The eBay Marketplace is well known for its core service,
which enables sellers to list items for sale on an auction
or fixed-price basis, giving buyers the opportunity to bid
for and purchase items of interest.
Software tools are provided, particularly for frequent
traders, including Tu
o Lister, Seller's Assistant, Selling
Manager and Selling Manager Pro, which help automate
the selling process, the Shipping Calculator, Reporting
tools, etc. Today over 60 per cent of listings are facili-
tated by software, showing the value of automating post-
ing for frequent trading. An example of a new Shoppe
feature that is part of its OVP is the eBay ShopBot on
Facebook Messenger. This uses Artificial Intelligence to
provide a personalised shopping assistant that helps
people find the best deals from eBay’s one billion
listings.
Fraud is a significant risk factor for eBay. To respond,
eBay has developed ‘Trust and Safety Programs’, which
are particularly important to reassure customers since
online services are prone to fraud. For example, the
eBay feedback forum can help establish credentials of
sellers and buyers. Every registered user has a feed-
ack profile that may contain compliments, criticisms
and/or other comments by users who have conducted
usiness with that user. The Feedback Forum requires
feedback to be related to specific transactions, and Top
Seller status was introduced in 2010 to increase trust in
the service. There is also a Safe Ha
our data protec-
tion method and a standard purchase protection
system.
eBay has increased use of mobile commerce since
2009 as consumer habits have changed. Mobile
accounted for 20 per cent of purchases in 2014 and by
40 Part 1 Digital marketing fundamentals
the end of 2017 eBay related that more than 50 per cent
of sales involved at least one mobile touch point.
According to the SEC filing, eBay summarises the
core messages to define its proposition as follows:
For buyers
® trust;
* value;
* selection;
* convenience.
For sellers
© access to
oad markets;
« cost-effective marketing and distribution;
* access to large buyer base;
* good conversion rates.
In 2007, eBay introduced Neighbourhoods (http:
neighbourhoods.ebay.com), where groups can discuss
ands and products they have high involvement with.
This social commerce experiment has now ended.
In January 2008, eBay announced significant changes
to its Marketplaces business in three major areas: fee
structure, seller incentives and standards, and feedback.
These changes have been controversial with some sell-
ers, but are aimed at improving the quality of experience.
Detailed Seller Ratings (DSRs) enable sellers to be
eviewed in four areas: (1) item as described; (2) com-
munication; (3) delivery time; and (4) postage and pack-
aging charges. This is part of a move to help increase
conversion rate by increasing positive shopping experi-
ences, for example by including more accurate descrip-
tions with better pictures and avoiding excessive
shipping charges. Powersellers with positive DSRs will
e featured more favourably in the search results pages
and will gain additional discounts.
Competition
Although there are now few direct competitors of online
auction services in many countries, there are many indi-
ect competitors. The SEC filings describe competing
channels as including online and offline retailers, dis-
tributors, liquidators, import and export companies, auc-
tioneers, catalogue and mail-order companies,
classifieds, directories, search engines, products of
search engines, virtually all online and offline commerce
participants and online and offline shopping channels
and networks. Amazon is one of the biggest competitors
since it also has marketplace sellers integrated into its
products listings. eBay's latest SEC filing notes: ‘Con-
sumers and merchants who might use our sites to sell
goods also have many alternatives, including general
ecommerce sites, such as Amazon and Alibaba, and
more specialised sites, such as Etsy.’
Competitive factors today are listed as:
« ability to attract, retain and engage buyers and
sellers;
* volume of transactions and price and selection of
goods;
trust in the seller and the transaction;
customer service;
and recognition;
community cohesion, interaction and size;
website, mobile platform and application ease-of-use
and accessibility;
system reliability and security;
« reliability of delivery and payment, including custome
preference for fast delivery and free shipping and
eturns;
* level of service fees
«quality of search tools.
Objectives and strategy
The overall eBay aims are to increase the gross merchan-
dise volume and net revenues from the eBay Market-
place. More detailed objectives are defined to achieve
these aims, with strategies focusing on:
1 Acquisition: increasing the number of newly regis-
tered users on the eBay Marketplace.
2 Activation: increasing the number of registered users
who become active bidders, buyers or sellers on the
‘eBay Marketplace.
3 Activity: increasing the volume and value of transac-
tions that are conducted by each active user on the
eBay Marketplace.
The focus on each of these three areas will vary
according to strategic priorities in particular local
markets.
eBay Marketplace growth is also driven by defining
approaches to improve performance in these areas.
First, category growth is achieved by increasing the
number and size of categories within the marketplace,
for example: Antiques, Art, Books and Business & Indus-
trial. Second, formats for interaction: the traditional for-
mat is auction listings, but it has been refined now to
include the ‘Buy-It-Now’ fixed-price format. This fixed-
price listing now accounts for well over half of all
transactions.
eBay’s growth strategy
In its SEC filings, success factors eBay believes are
important to enable it to compete in its market include:
ability to attract buyers and sellers;
* volume of transactions and price and selection of
goods;
® customer service;
«
and recognition.
According to its 2010 SEC filing:
Our growth strategy is focussed on reinvesting in ou
customers by improving the buyer experience and
seller economics by enhancing our products and ser-
vices, improving trust and safety and customer sup-
port, extending our product offerings into new
formats, categories and geographies, and imple-
menting innovative pricing and buyer retention
strategies.
Search marketing is a key technique for eBay to meet its.
aim to become part of the ‘fa
ic’ of their customers’
day-to-day online experience. If you search for ‘low-cost
hair curlers’ or similar you will see eBay features both in
the sponsored results (Google Shopping ads with
images) and within the organic results.
It also notes that in the context of its competitors,
other factors it believes are important are:
© community cohesion, interaction and size;
© system reliabili
« reliability of delivery and payment;
.
.
.
‘website convenience and accessibility;
level of service fees;
quality of search tools.
This implies that eBay believes it has optimised these
factors, but its competitors still have opportunities fo
improving performance in these areas, which will make
the market more competitive.
Chapter 1 Introducing digital marketing 41
Updating
and positioning using tradit-
ional media
In an interview with eBay UK marketing director Gareth
Jones in, Marketing Week (2016), he explained that: ‘We
don’t want to be defined by that online car boot sale repu-
tation anymore. We need to get people to consider eBay
in a completely different way. The UK is the petri dish fo
testing a new approach to rebuilding the
and globally. It
is all about a shift away from the marketplace and over to
eing the ultimate shop.’
He is candid that a past focus on prioritising digital
channels has had a ‘small impact’ on changing eBay's
perception. Despite stating we're in an age of digital-
ased marketing, he believes TV is the best channel fo
and building. This is based on regional tests in the
Summer that proved TV is the best place to get people
to reappraise eBay as a
and:
TV is still on fire and a wonderful medium to get neu-
ons into people’s
ands in order to rewire their per-
ceptions. If you ask someone where they are shopping
on Black Friday then TV is the best place to put eBay
at the front of their consideration set.
Source: BBG XXXXXXXXXXeBay's 10-year rise to world fame. Robert Plumme
story from BEG News, 2 September, http:
news.
c.co.uk/go/p
-/1
hifbusiness/ XXXXXXXXXXstm (accessed May 2018); SEC XXXXXXXXXXUnited States
‘Securities and Exchange Commission submission Form 10-K; eBay submis
sion for the fiscal year ended 31 December 2007.
Question
Discuss how eBay has had to evolve its online
and
proposition and communicate it to achieve contin-
ued growth.