e-Bay industry analysis
E-Bay:external market analysis
E-Bayis one of the world’s leading e-commerce firms. The San Jose basedfirm runs a website (ebay.com) that facilitates consumer-to-consumerand business-to-consumer sales transactions. The firm has establishedother subsidiaries to serve other markets such as Australia(e-Bay.au) and the UK (e-Bay.uk). The website is uses an auctionformat that allows buyers to make bids. However, e-Bay as a firm doesnot produce any goods but obtains revenue by facilitating thesetransactions online. The firm thus operates in the online retailingindustry under online auction sector.
Asa whole, online retailing industry is made up of firms such as e-Bayand others that do not particularly produce tangible goods and thosethat sell/produce tangible goods and services. For those that producemake goods, they look forward to by-pass retailers. In most cases,they stock their brands only. For other retailers, they targetspecific niche markets through a unique product category such asfashion or electronics only. Other firms seek to offer timed deals.Direct competitors to e-Bay include Craig’s list, Google, Alibaba,Yahoo and Amazon. The range of products and services that can beoffered online is also growing and also being shaped by rapidtechnological changes. For instance, accessibility of high speedinternet connectivity and internet enabled devices heavily determinereach and use. As a result, the industry reported 140 million usersand over 131,000 ecommerce firms in 2013 (Ibis world 2014).
Thenumber of online retail firms is high. This gives buyers ample choiceto choose from and even compare prices, service, shipping, andusability very easily. Furthermore, consumers have the option tochoose from other substitutes in form of brick and mortar stores.Customers’ demand for superior service, shipping options, andpayment options give them higher bargaining power. Their switchingcost is also very low. This is a disadvantage to e-Bay and otherplayers who have to meet these needs on demand.
Thereare millions of registered suppliers on e-Bay and other e-tail sites.Anyone who registers on the site and has a genuine product to sellbecomes a supplier of his own product and traffic instantly. Thiscompetition has a positive impact on e-Bay. Additionally registeringat the site is free. This also means that there is little cost ofinputs hence a plus for e-Bay. There is little cost of switchingsuppliers meaning that e-Bay can target anyone who can supply sitetraffic and online purchases. The site is also free to all usersthereby implying the number of suppliers is high and thus lowconcentration which is beneficial to e-Bay. In summary, there is verylow supplier bargaining power which puts e-Bay in a strongcompetitive position.
Theindustry has low barriers of entry making it relatively easy for newsmall scale players to join. This exposes the firm to intensecompetition from local and foreign players. However, new entrants inthe market are deterred by poor brand recognition in the market andsecurity in online transactions (Fang et al 2014). Financial strengthof firms such as e-Bay’s reported 4.37 billion revenue and Amazon’s20.58 billion in 4thquarter 2014 (static.com 2014). Additionally, the strict regulationsgovernment the online payments methods and also cyber securityconcerns lock out many potential players. To address security issues,majority of established players in the industry have launched theirown payments methods such as Paypal from e-Bay (Neely, P. (2014).
E-Baysells a wide range of products as supplied by the millions ofsuppliers. This way the firm cushions itself against other substituteproducts stocked by competitors. The major substitute can be brickand mortar stores because they offer instant access to items afterpurchase unlike online purchase where buyers have to wait forshipping. On the level of substitute brands, there are severalsimilar brands in the market competing for same clients.
E-Bayfaces competition not only from ecommerce competitors but also fromtraditional brick and mortar retailers. Buyers can access the sameproduct that e-Bay offers from distributors, search engines,manufacturers, directories and other ecommerce sites. This means thatthe competitive rivalry is very intense. Competition is largely basedon price which limits these firms from premium pricing. For e-Bayactive users as of the 3rdquarter of 2014 there were 152.3 million while Amazon recorded 237same period (static.com 2014). Payment options and security concernslimit new entrants but at the same time offer competitive edge toestablished players. The entrant of new players with newerproprietary payment methods such as Apple is likely to intensifycompetition the industry in the near future.
Onlineretailing industry is rapidly moving to mobile based e-tailing. Firmsare adding mobile phone applications alongside websites in enablinge-commerce. These mobile applications are based on windows, Apple’sIOS and Google’s Android. The ease in accessibility of theseinternet enabled devices and ease in development of websites andtheir associate mobile applications has ushered in a host of newusers and other players (Einav et al 2014). Additionally, the virtualnature of the industry enables firms in the industry to venture intonew markets without heavy investment. For some, registration and achange in the domain name such as .com and .uk for e-Bay solves theirexpansion strategy. However, this has also ushered in greater foreigncompetition and in this case from Alibaba. Besides conventional brickand mortar retailers such as Wal-Mart and Target have also joined thee-tail market. Similarly, manufacturers such as Sony, Apple and Dellnow allow shoppers to make online purchases directly from theirwebsites.
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