What is eBay’s competitive strategy? Is it cohesive?
Since the foundation of the company in 1995, eBay offered marketplaces for goods and services, charging the customers with fees. The eBay’s strategy depends mainly on the ability to attract customers to the market and encourage them to buy or sell products. The company increased the profit by development in the global market. Nowadays, eBay has websites localized in many countries. A significant contribution to the company’s revenue was also made my international partnership and investments.
Initially, eBay applied auction sales that enabled customers to purchase goods on favorable terms. The company also adopted fixed-price sales to increase the company’s competitiveness. The acquisition of the new sites, development of platforms, and the establishment of new stores attracted more customers including both individual sellers and the big retail companies. Since eBay’s profit comes primarily from service and sale fees, the company’s evolvement was highly fruitful. Throughout the history of its existence, one of the main eBay’s focuses was the provision of customers with the convenient payment services. The company started with PayPal and then has added Billpoint and Bill Me Later services that allowed making transactions easily.
The eBay’s business strategy is coherent because it involved the evaluation of the current situation in the market. The implementation of various payment services has a good impact on the company’s development and income.
What is Amazon’s competitive strategy? Is it cohesive?
At first, Amazon implemented a retail model in its strategy. The competitiveness was supported by offering low prices. Initially, the products included books but more options appeared in few years and nowadays the company provides the broad range of goods.
The implementation of the customer-oriented policies played a crucial role in Amazon’s development. The company has spent big amounts for the customer services improvement that in the wake made Amazon prominent and brought more profit.
The important step taken to the company’s expansion was development into the e-commerce platform. With the change in the business format, Amazon became more concerned with the attraction of retailers and merchants to the web-site. Amazon charged the fees per sale and fees for the displaying of products on the website. The fees collected from the third-party sellers increased the income of the company.
Amazon’s way of development and its business strategies are different from eBay. Nevertheless, it is successful. It can be observed that the situation on the global market and the estimations were taken into consideration in the strategy. It allowed Amazon to increase profit significantly during the last decade.
Reasons for differences in the companies’ profitability
The differences between the companies’ incomes can be explained by the differences in their strategies and their starting points. EBay initially was an auction marketplace that later adopted the fixed-price sales. On the contrary, Amazon started as an online bookstore with the fixed low prices but then expanded into the platform. The Amazon’s fees for the third-party sellers are higher than eBay’s fees. The Amazon’s policy was primarily oriented to the professional merchants. It can be assumed that the convenient and beneficial terms of establishing business through Amazon attracted many retailers, and it allowed the company to become a leader by 2011.
Though the sites’ traffics were relatively equal throughout 1999-2010, eBay’s higher profit can be explained by the popularity among customers caused by the convenience of payment services, good terms of sales, a wider range of products and efficient customer services.
As it shifted to a platform business, how did Amazon encourage the third-party sellers? Was it successful?
Operating their business through Amazon platform merchants could make their products more prominent by paying extra fees. In 2000, Amazon allowed the businessmen to conduct business through the single-store pages. So the merchants’ products were separated from the Amazon’s products. Later, the Fulfillment by Amazon was adopted. This service allowed retailers to use the company’s network for distribution and shipping of their products. All these terms are highly beneficial for the merchants because they can manage the stores from its personal page. The terms provided by Amazon made the merchants’ communication with their customers more convenient. Moreover, the recognition of Amazon by public positively influences the products’ promotion.
It is possible to assume that Amazon encourages the third-party sellers by providing them with highly favorable terms of the platform services usage. Taking into consideration the fact that Amazon became a leader in e-commerce in 2010, it is right to conclude that these encouragements were successful. They attracted millions of customers and helped to gain great profit.
Are Amazon and eBay competing for the same market?
Both the companies are competitive in the e-commerce. Though, Amazon at first implemented the retailing business model and provided a narrow range of products, the company’s strategies have evolved, and the business has expanded worldwide. Along with printed issues, nowadays Amazon sells electronics, toys, beauty products, etc. It can be observed that eBay has the equally wide range of categories and products for sale. Customers visit eBay looking for used and cheap, or unique and collectible goods.
Despite the slight differences in the products categories, the overall similarity in the business and customer orientations and the even e-commerce environments make it clear that the companies are competing for the same market.
What would you recommend for eBay going forward, and why?
According to the recent data, eBay’s business is sustainable. The company needs to stick to its current strategies regarding the customer and payment services. Nevertheless, the further development of models will ensure the sustainable growth in future. Expansion and localization of marketplaces around the globe are supposed to be successful. Localization can provide a deeper understanding of customer needs in different regions because, and in its turn, it will increase traffic and revenue.