First Mover Advantage
After launching of Onsale in 1995, eBay was formed later that year with an initial name of Auction Web. The advantage it had was because it was the first auction website that brought all buyers and sellers on a single platform. With time eBay expanded its diversity of products and included almost all items in the list without giving other firms an opportunity of second-mover advantage.
With time eBay offered a diversity in its services and introduced a variety of services for users according to their demands. Introducing services like “GoLocal”, “eBay Stores” and “Buy-It-Now” helped orienting the websites according to user needs. This further added to their advantage. The service “GoLocal” was introduced for items which are very heavy to carry
The web had a kind of its own “network effect” which helped a number of buyers and sellers to come at one place and trade. Soon eBay served as a “market maker” which brought numerous buyers and sellers at one forum and facilitated buyers to fetch more sellers and in turn provide sellers with more number of buyers. It became a ‘win-win’ scenario for both.
Another reason is user’s timely feedback. The feedback helped it gain the trust that users had on eBay. The rating system helped buyers to actually see the previous rating of the seller. Depending on that a user may decide to take the product or not. The seller’s feedback and ratings were based on experienced-transaction-relation. It helped buyers to make a conclusion of making the payment or not to a particular seller.
Being one of its kind of website, the business model of eBay was advantageous since its launch as it did not involve any storage of goods. It was just a platform between prospective buyers and sellers. Hence the cost of operation and the risk was least possible which in turn led to increase in profit.
This service was introduced especially for gaining buyers trust to eBay. The buyers to pay only when the shipment is done. This led to further increase in trust.
All those people associated with eBay i.e. all buyers and sellers helped increase its user base. The user has to stay with eBay for a long period of time for the transaction to get processed. This helped company’s strategy for keeping customers attached for a desired length of time and helped it to grow.
Distribution Channel and replacement Effect:
EBay used the same distribution channel to serve the same set of customers without use of disintermediation.
Customer-driven value creation
The base idea of eBay is more focused towards customer. And requires a lot of customer centric approach.
Ans 2) The failures of Yahoo! Auctions and Amazon Auctions:
Yahoo! Auctions started in 1998 for USA and Canada to compete against eBay and got shut down on June 16, 2007. In March eBay had more than 60 million visitors compared to Yahoo! who had less than 330000 visitors. With so less visitors Yahoo was even unable to match its threshold. The site got down due to failure in network effect because it was unable to get new users out of the existing ones.
While all this going around, Yahoo thought of striking some deals with eBay before making its operations shut down. The tactical game led to the deal of Yahoo accepting payments through PayPal and eBay showing ads of Yahoo. According to Hitwise, the Market share by eBay at that time was 94 percent and Yahoo just had 0.19 percent of the market share.
“If you’re juggling too many balls, it’s better to make the conscious decision to remove some of them, than let them fall to the floor and look incompetent.