Evolution Of Ebay's Business Model

IT & e-business strategy Group 3 18.11.2014 Evolution of eBay business model and eventual competitors

1 eBay business models

1.1 Industry target eBay’s purpose at its creation was to create a virtual marketplace to facilitate the sale of goods and services between individual users. They established an online person-to-person auctions’ marketplace, where item sellers list their products and find potential buyers who are willing to bid for these items.

1.2 Value propositions, product and service offerings eBay’s business model is based on the principle that there will always be people that are interested to buy and sell goods. Its goal is to facilitate the contact between interested counterparties and provide them with a secure platform where

All the products that Amazon propose is actually integrated with Amazon Online store. This huge integration and huge internet service also requires good IT skills and R&D due to increasing number of products and different market segmentations.

Amazon's lines of businesses can be defined as: 1) online retail, 2) internet services, and 3) the Kindle ecosystem.

The main revenue source of Amazon is the online Marketplace. The products are sold either directly by Amazon or by a third party through Amazon’s website. For the first service, Amazon is subject to inventory, transportation and distribution costs. For the second service, Amazon does not carry any inventory and charges the reseller a commission fee.

2.2 Ricardo.ch: eBay main competitor in Switzerland

The flagship product of Ricardo-Gruppe (part of Naspers) is Ricardo.ch. This online portal helps buyers and sellers to get in touch to trade between themselves. Auctioning and fixed prices are the ways of trading. It is interesting to note that, in Switzerland, Ricardo.ch overpass eBay.com. For instance, Alexa.com gives a clear insight: eBay.com is the 41st more visited website in Switzerland while Ricardo.ch is the 9th. The following study focuses only on the Swiss

However, since eBay is oprating in a global context, its resources are on a larger scale. Amazon on the other hand operates in a very different way compared to eBay. It acts mainly as a retailer. Thus it has developped huge competencies in inventory and supply chain management based on information technology. Moreover, it leverages this enourmous IT capabilities by providing cloud computing services to its customers.

3.4 Revenue and cost models eBay’s costs are very low, compared to other online businesses, e.g. Amazon. Their main costs concern software and server development and maintenance, customer service, accuracy of billing and security issues. As we mentioned before, they are not involved in the physical completion of the sales procedure. As a consequence, they do not carry inventories nor are subject to transportation and distribution costs. However, its revenue is based on a fee depending on the amount and the final price of the sales. Thus they do not have a fixed margin on the products like Amazon. eBay and Ricardo.ch have a very similar revenue and cost model, in a lower scale for Ricardo.ch since it operates only in the Swiss market. Since they are not in a big competition, they both have very low marketing