Group #3

October 4th 2010

AGENDA

Introduction of eBay Environmental Analysis

General Industry Internal

Key challenges for the future Strategic Alternatives Recommendations

INTRODUCTION OF EBAY Founded in September 3rd, 1995 by Pierre Omidyar,

San Jose, California

Online person-to-person trading community/Auction

Initially named AuctionWeb(1997)

Echo Bay Technology Group (Eco Bay Mines)

First item sold was a broken laser pointer($14.83)

First President hired in 1996 Jeff Skoll

HISTORY OF EBAY

Revenue tops $10,000 in a month(1996) Gross Merchandise Volume: $7.2 Million Registered users 41,000

Meg Whitman joins as President & CEO(1998) Brings experience, half a million users, Revenue

$4.7 Million 10 Year Reign eBay Purchased(Skype, Half.com,

PayPal, Bill Me Later, 25% Stake in Craigslist

Operations localized in over 30 countries, 2007 Ebay sold over $60 Billion worth of Merchandise, over 15,000 Employees, Currently 90 Million Users Worldwide

EBAY HISTORY (REVENUE)

EBAY TRAFFIC AND REVENUE

EBAY REVENUE GROWTH

INTRODUCTION TO EBAY

Browsing and bidding is free Seller charges: Insertion Fee-ranges 30 cents to

$3.30 cents, depends on sellers opening bid on item

Final Value: Fee is charged at the end of a sellers auction, fee ranges from 1.25% to 5% of the sellers final sale price

Uncommon items sold on eBay 1999( Human Kidney), 500 Pounds of

Marijuana (1999) Rights to name baby (2005), the Internet,

Jetliner Ghost in a Jar, Vampire Killing Kit, Russian Test

Space Shuttle, The Meaning of Life($3.26)

GENERAL ENVIRONMENT

Key External Drivers Per Capita Disposable Income Percentage of Households with computers Median age of population # of broadband connections Consumer sentiment index

ECONOMIC ENVIRONMENT

Recession has caused consumption in all segments to drop.

Housing market collapse led to a drop in disposable income per capita (0.4%).

Demand for ecommerce companies is expected to rise much quicker than brick and mortar retailers.

In order to stay competitive with brick and mortars, must remain price competitive. This results in very low margins: 3.0 %

PER CAPITA DISPOSABLE INCOME

SOCIO CULTURAL TRENDS/DEMOGRAPHIC TRENDS

Shifts in lifestyle at home and globally As internet progresses and become accessible to

more people, ecommerce sites will gain more market penetration.

In US: Majority of each household has at least 1 computer.

Around the world, pcs and the internet are starting proliferate other parts of the world.

Median age for computer use around the world dropping.

Currently no financial infrastructure in developing nations.

PERCENTAGE OF US HOUSEHOLDS WITH PCS

2000 2002 2004 2006 2008 2010 2012 2014 201640

50

60

70

80

90

100

%

Data provided by Ibis World

CHINESE HOUSEHOLDS WITH PCS OR ACCESS TO PCS.

Data Provided by Gallup

TECHNOLOGICAL TRENDS

Better Broadband access. Faster Internet in the US. Increases the amount of online shoppers.

POLITICAL/LEGAL TRENDS

State Legislatures want to tax purchases inside their state.

You are required to pay use tax on online purchases inside your home state.

Have to abide by each states different regulation rules.

GENERAL ENVIRONMENT SUMMARY

Demographic

Economic

Political/legal

Sociocultural

Technological

Global

Porter’s Five Forces Model

THREAT OF NEW ENTRANTS

Because of low concentration, easy to enter market. Major players only amount to 40% of Market.

Entrance into the market requires a modest capital investment.

Reoccurring maintenance costs for databases and servers can be costly.

Hard to build trustworthy reputation.

Threat of New Entrants Is Low.

BUYING POWER OF SUPPLIERS

3 kinds of suppliers Casual Sellers Collectors Powerful Business Sellers

Not very many options for sellers other than ebay.

Bargaining Power of sellers is low.

BUYING POWER OF BUYERS

Buying Power Very High Ebay is an auction site Buyers set the price that they are willing to buy

at 3 Kinds of Buyers

Casual Collectors Professional Buyers

RIVALS

Biggest Industry Rival is Amazon Market leader @ 15 % market saturation

Ubid.com Bidz.com Buy.com

Threat from Rivals is Very High.

THREAT OF SUBSTITUTES

Search engine and price compare websites moving cutting into online auction business

Fixed based sales on auction sites.

Traditional brick and mortar retailers is the biggest threat of substitute.

Threat of Substitutes is high.

PORTER’S FIVE FORCES IN REVIEW

Threat of New Entrants Buying Power of Suppliers Buying Power of Buyers Rivals Threat of Substitutes

STRENGTHS

Brand power eBay is still a big name in e-business

Large customer base (90 million)

PayPal Quality control

Competes as both and auction site and instant purchase site More customers

WEAKNESS

Auctions vs. instant purchases There has been a shift in online buying

preferences The excitement of auction purchasing has

lessened Consumers have come to prefer fixed price

purchases Less of a hassle then auction buying

Need more advertising Last new eBay commercial?

WEAKNESS

Amazon buying experience is more reputable than eBay's

eBay needs to improve its buying experience in order to remain competitive with Amazon

They have copied Amazon to improve Better Buying Suggestions

eBay needs to innovate, not copy

WEAKNESS

In 2010, 54% of PowerSellers opinions of eBay have been negative Amazon ratings are 69% positive and improving

eBay needs to improve the buying/selling experience to improve its brand image

OPPORTUNITIES

China Huge market- 1.2 billion people Growing number of PCs

Add an optional bartering feature for sellers More accessible to some international cultures

THREATS

The Economy Consumer spending is low Many eBay items are not essential

Collectables, novelty items

eBays sales are suffering as a result

THREATS

Amazon eBay has made an effort to push buyers

towards “Buy it now,” rather than auction sales This put them in competition with Amazon

eBays market share is 5.3% Amazon has 15%

STRATEGIC ALTERNATIVESo Online Store vs. Online Mall

Move from the Online Mall to Online Store Business Model

o Fixed Pricing vs. Bidding Move from bidding to Fixed Pricing Hybrid

o Monitoring Controls Employ more monitoring personnel Build/Expand customer service

o Legal Issues Change locations to lower tax state Lobby for tax breaks Adjustments to shipping and price

STRATEGIC ALTERNATIVES

Innovation Bartering system

Cultural Changes Developing a business model for specific

countries Employ local personnel

o Distinguish and Strengthen Brand Equity Increase promotion and advertising http://www.youtube.com/watch?v=o7_u5p2PheE 24 hr shut down to make customer calls

“But I just want to buy these here and take them home with me”

RECOMMENDATIONS

Maintain top market in bidding sites, focus on rare/collector items Buyers and purchasers of collectors items prefer

bidding Fixed Price selling is where growth will occur

Invest more money/personnel into monitoring controls and customer service Cut down sales of illegal/counterfeit items Customer service/difficulties with site

RECOMMENDATIONS

Handling State Taxes: Threaten to move to other states Lobbying? Will effect all online retail Lowering shipping costs

Global Expansion: Different business model for specific countries Fixed-price vs. bid vs. barter Employ local personnel

Invest into price comparison websites Future of online shopping