Porter Five Forces Model Analysis of eBay

eBay is an online shopping site that's best known for its auctions and consumer to consumer sales. It's also extremely popular for online merchants to use as a sales channel. eBay was one of the original online shopping experiences. As the years go by more and more people have taken up the convenience of online retail. With the growing popularity of shopping online, and eBay’s great success as an online retailer, there was inevitably going to be competition. While eBay is still a “brand name” that almost every household is familiar with, they now face competition from more formidable competitors, as well as the ability for search engines to drive traffic to smaller sites. We will take an in depth look into the analysis of a Porter Five Forces Model, and break down strengths, as well as potential problems for eBay moving forward.

First, As per my analysis the competitive pressure or industrial rivalry is the strongest force putting pressure on eBay. eBay has to continuously keep watching their competitors like Amazon and Bonanzle and some country specific e marketing shops.

In addition to traditional e-commerce websites, big box stores like Walmart and Best Buy have extended their online retail platforms. eBay must remain true to itself, while always looking for new segments that the consumer may want, and other competitors may provide.

Despite all the competition eBay has continued to increase revenue year over year. From 2006 to 2018 eBay annual revenue increased 80% from $5, 970 billion to $10, 746 billion. (macrotrends, 2019) 2006 to our current time has been arguably the biggest increase in e-commerce competition since eBay’s start in 1995. eBay still remains profitable year-over-year amongst the competition. The competitive pressures in this case mean that there is a big market for the e-commerce industry. The pressures have also forced eBay to continue innovating its trade platform.

If competition hasn’t halted eBay’s growth, then what can? The simple answer is themselves. eBay is an Auction based platform. There products are comprised of anything and everything that a seller wants to list on their website. This is what makes them successful amongst the other major e-commerce players. However, the nature of there website leaves them susceptible to their top two problems, product quality issues and inefficient shipping options.

eBay has standards in place, but doesn’t screen products before they are posted for sale. Many counterfeit items can be sold as real, and people can misrepresent the condition of their used items as well. eBay currently relies on customer feedback to spot bad sellers, and consumers are even encouraged by eBay to look at reviews and search for “red flags” before purchasing.

Product quality received by the consumer is highly correlated to the consumer’s due diligence in researching individual listings. eBay will need to develop a process to limit the amount of product quality issues they have. One of the biggest pillars of e-commerce is consumer trust. eBay could lose revenue if consumers become increasingly wary of the quality of an item they purchase from eBay.

I addition to product quality, eBay must come up with more efficient shipping options. eBay is known for independent sellers marketing one-off items with relatively inefficient shipping. Because of that, the auction site has experienced difficulty enticing major brands to sell new products on the site. On eBay’s website you will notice they have a few shipping options. If a person is local, they can come to your house to pick an item up. The other option is to use the shipping calculator. There you determine how much the cost will be, based mostly off the weight of the package and speed of delivery. The seller determines the shipping option to use. (eBay, 2019)

On top of that, when a buyer purchases the item online, the seller has multiple days to get the item in the mail depending on the handling time they put in the listing. Using a competitor like Amazon, a consumer can get free two day shipping with their Amazon Prime membership. eBay must implement a better strategy for shipping goods to consumers in a more efficient manner.

Looking forward, eBay will continue to be successful despite its problems and competition. This is because they already execute on some of the big keys to there success.

Remaining an auction based platform is critical for eBay. One of the reasons they succeed amongst competition, is that while they are an e-commerce company, they have no real direct threat. They are the industry leader in auction sells format. Amazon is the company many point to taking away market share from eBay, however those two companies are fundamentally different. “eBay boasts 155 million users, which is only 3, 000 times as many as the next largest all-purpose online marketplace, Bonanza. Even the latter’s low listing fees (3%) can’t compensate for eBay’s ability to offer 155 million potential buyers to every seller. ” (McFarlane, 2015) eBay must remain an auction based platform as it expands and tries to fix its aforementioned problems.

Perhaps eBay’s biggest success factor is there international brand. eBay has 25 dedicated internationals sites. “eBay’s second-largest market is the United Kingdom, where revenues topped $2. 6 billion last year. That’s followed by Germany at $2. 1 billion. ” (Mcfarlane 2015) 26% of eBay’s revenue comes from outside of the United States. eBay’s continued focus on supporting its international users will result in product diversification, as well as a global database of consumers for small businesses to sell to. (Kelly, 2018)

eBay is an online shopping site that's best known for its auctions and consumer to consumer sales. Passing years have brought about the normality of online shopping. There have been many competitors arise in the e-commerce industry. However, eBay remains an industry titan when it comes to online auctioning. The lack of direct rival has allowed them to continue to thrive despite some of its inconvenient problems. eBay’s focus on international customer servicing has allowed them to offer a wide range of unique and common items alike. The number of eyes that see products on eBay is a draw to sellers. eBay should remain a formidable business for as long as the internet continues to exist.