eBay

eBay

By:Dan McLindonKyle McDanielJeremy SmileyTom AndersonRay Moorman

Key Question for eBay

How can eBay continue to grow as an online retailer?

Secondary Questions• What is eBay’s history? • What is happening in eBay’s external environment?• How is eBay performing today and what does the future look

like?• Who are eBay’s competitors and how is their performance in

comparison?• Does eBay still adhere to the strategies and values on which it

was founded?• Should John Donahoe be the CEO of eBay?• What is eBay’s current market position?• How can eBay position itself for future success?

eBay Company Overview

Founded 1995 by Pierre Omidyar as an online auction site to bring buyers and sellers together.

Vision “Create a place where people could do business just like the old days – when everyone got to know each other personally, and we all felt we were dealing on a one-to-one basis with individuals we could trust.”

Strategic Business Units 1. Marketplaces – online auction and direct retail sites2. Payments – PayPal3. Communications - Skype

Organization Size 15,000 employees, revenues of $5.9 billion in 2008

eBay Key Acquisitions

Company Year Anticipated Result

Actual Result

PayPal 2002 Allow eBay users to make credit card payments.

Success within eBay marketplace as well as adoption by other online retailers (57 million registered active accounts ins 2008).

Rent.com 1st quarter 2005 Natural extension of online real estate mkt.

N/A

Shopping.com 2nd quarter 2005 Bolster traditional online retailer presence.

50 million visitors per month, world’s 3rd largest internet shopping site.

Skype 2006 Create synergies with Marketplace SBU, enabling buyers and sellers to communicate better.

2007 had to take a $900 million write-down on value, synergies not realized. CEO indicates potential sale.

StubHub 2007 Synergies with existing ticket business.

Successful expansion into adjacent mkt.

Conclusion: eBay’s strategy of growth by acquisition in core and adjacent markets has been hit or miss. Major success was PayPal, which was more of a horizontal integration than an adjacent market.

PEST Analysis for eBayCategory Issue Threats/Opportunities

Ranking (1-5)

Political

Economic 2008 Economic downturn

Threat – lower retail spending.Opportunity – new sellers looking to

supplement income, buyers looking for better deals.

3

4

Social

Growth in popularity of social networking sites

Opportunity – possibility to align with sites for advertising and to gain new

users.

4

Development of mobile society, beginning of the “Connected Era”

Opportunity – enables buyers and sellers to constantly monitor status of

ongoing auctions.

5

Technological

Search capabilitiesOpportunity - developments in search make it easier for users to find items they are looking for.

3

Global expansion of Internet Opportunity – 1.4 billion Internet users, ½ will buy something online. 5

Industry Overview (Supply)Porter’s five forces:

Rivalry among existing competitors

High

Threat of substitute products

High

Bargaining powerof buyersHigh

Threat of new entrants

High

Bargaining power of suppliersMedium

Porter’s Five ForcesFactor Analysis Impact

Threat of substitute products

Consumers can choose to go to brick and mortar stores or trade without the use of a

website.

Bargaining power of suppliers

Can go to a number of competitors to sell their goods. Low switching costs to use .

eBay must work with Sellers to keep them as

active suppliers to buyers on the site.

Bargaining power of buyers

Online consumers can find what they are looking for on a number of sites, unless good

is very rare.

eBay needs to find a way to entice buyers to site and keep them coming back,

like variety and free shipping.

Competitive rivalry

Amazon coming on strong with well established brand and customer service

focus. Traditional retailers also moving online with varying degrees of success. Little to no

switching costs.

eBay will have to find a way to differentiate itself, either by variety, cost, or ease of

website use. Will likely need all three.

Threat of new entrants Many retailers moving online. Minimal costs to setup a website and configure a payment

engine.

eBay well positioned in market with large number of users. Key will be to

keep existing and attract new.

Registered & Active eBay Users

0

50

100

150

200

250

300

# of

Use

rs in

Mill

ions Registered Users

Active Users

Linear (RegisteredUsers)Linear (Active Users)

• Reg users continues to grow but Active users has flattened out

Core Business: Online Auctions

0

500

1000

1500

2000

2500

2000

2001

2002

2003

2004

2005

2006

2007

2008

*

Online Auctions

• # of online Auctions declining during same time frame as users are increasing

eBay’s Business Model – 3 Operating Segments

% of eBay's Net Revenues

68%

25%

7%

MarketplacesPaymentsCommunications

Net Revenues By Segment

0

1000000

2000000

3000000

4000000

5000000

6000000

2005 2006 2007

MarketplacesPaymentsCommunications

Forrester Research: 2012 Prediction of Internet Sales

• B2B predicted to be 10x larger than retail sales 91%

9%

RetailB2B E-commerce

Worldwide Internet Users in 2008

32%

47%

21%

Asia, 550mEurope, 380mNorth America, 250m

• 220m of NA was from US.

eBay’s CompetitionInitial Competition:

Classifieds, Garage Sales, Flea

Markets, Collectible Shows, Local Auctions

Current Competition: • Classifieds, Garage Sales,

Flea Markets, Collectible Shows, Local Auctions

• Retailers with e-commerce presence

• Brick and mortar discount retailers

• Specialty retailersCompetition increases via new entrants

and eBay enhancing

product mix.

Direct Competition:

Overstock.com, Amazon.com, uBid.com

Comparison with CompetitioneBay Amazon Overstock uBid

Core Business Auctions New goods Discounted new goods

B2C Auctions

Auctions? Yes No Yes Yes

New Goods? Yes Yes Yes Yes

Used Goods? Yes Yes Yes Yes

Differentiation? Sense of community

Product Reviews

Discounted Merch

Discounted Merch B2C

Core Role Facilitator e-tailer e-tailer Facilitator

All started in a unique niche, but have grown similar via product expansion.

Success Factors for E-commerce site

Brand

Good Web Site

Stickiness Traffic

Reputation

Secure and Trustworthy

Product Mix

Diversity

Traffic

Diverse Sales Method

Fair to Buyer/Seller

Factors are the same regardless of online auction or retailer. Brand and product mix are the two key success factors.

Success Factors: eBay vs. Competition

StrongBrand

Large Product Mix

WeakBrand

Small Product Mix

Class.Ads

FleaMkt

BigBox

Specialty

http://www.google.com/imgres?imgurl=http://www.textually.org/textually/archives/2009/11/15/amazonlogo.jpg&imgrefurl=http://www.textually.org/textually/archives/2009/11/024932.htm&h=164&w=559&sz=32&tbnid=vLRx_S06DRnsaM:&tbnh=39&tbnw=133&prev=/images?q=amazon+logo&hl=en&usg=__CtbYb08TtqF19YlIrDcA0WlhYFU=&ei=Dj2wS6-cForCNtvIxJkF&sa=X&oi=image_result&resnum=3&ct=image&ved=0CAoQ9QEwAg

http://images.google.com/imgres?imgurl=http://files.couponmountain.com/images/default/merchants/498/b_logo.gif&imgrefurl=http://www.couponmountain.com/Ubid-coupons-deals.html&usg=__5VcKzHyjcbY21OZvsTwYNkIGF9w=&h=50&w=200&sz=2&hl=en&start=4&um=1&itbs=1&tbnid=KbGCkk6M2ho-tM:&tbnh=26&tbnw=104&prev=/images?q=uBid+logo&um=1&hl=en&sa=N&tbs=isch:1

http://images.google.com/imgres?imgurl=http://meetinnovators.com/wp-content/uploads/overstock_logo.jpg&imgrefurl=http://meetinnovators.com/2008/06/05/patrick-byrne-from-overstockcom/&usg=__yXUnoGpxP8DLmBNdCqdbqB-uTtY=&h=104&w=280&sz=6&hl=en&start=4&um=1&itbs=1&tbnid=g2v58uknYnjwxM:&tbnh=42&tbnw=114&prev=/images?q=Overstock+logo&um=1&hl=en&tbs=isch:1

Should eBay Be Worried About The Competition??

1. From 2001-2007• eBay customer service rankings stagnant around a ranking

of 81• Amazon ranking improves from 84 to 88• Seller ratings now on Amazon• Amazon offering used merchandise

2. Amazon net income experiences 250% increase from 2006 to 2007• Consistent investment new offerings and partnerships• Free and low cost shipping deals• 19 fulfillment centers worldwide

3. Overstock.com • Launches auction site to compete with eBay• Launches automobile marketplace, then real estate

. The competition is on the move!

Internal Analysis – Core Values

Core Values

An honest, open

environment can bring out

the best in people

Everyone has

something to

contribute

People are basically

good

Recognize and respect everyone as

a unique individual

Treat others the way that you want to be treated

Conclusion: eBay’s recent

changes to their fee structure and feedback forum go against the

company’s core values.




was founded?• Does the eBay brand create a sense of trust, security, and

community?• Should John Donahoe be the CEO of eBay?• What is eBay’s current market position?• How can eBay position itself for future success?

Management Timeline

1996: Founder Pierre Omidyar and Jeff Skoll run operation

alone

1997: Meg Whitman hired

as CEO

1997-2008: Omidyar recruits top talent to

serve on eBay’s board including Scott Cook and Fred D. Anderson

2008: John

Donahoe becomes

CEO

Whitman vs. Donahoe

Meg WhitmanTook eBay from 30 employees with $86 million revenue to 15,000 employees with $5.9 billion revenue.

Experience includes general manager at Hasbro, brand manager at P&G, CEO of FTD, president of Stride Rite, and SVP of marketing at Walt Disney.

BA Economics from Princeton, MBA from Harvard.

Approval rating of 75% at time of retirement

John Donahoe

• % of eBay’s revenue generated from Marketplace fell from 72% to 56% during that time

Started at eBay in 2005 as president of Marketplaces SBU

Experience includes consulting firm Bain & Co.

• StubHub, eBay express, online advertising

Focus in Marketplaces SBU has been growth through acquisition of other retail sites, getting away from simple auction.

Approval rating at 22%

SWOT Analysis for eBayStrengths

• Well established brand.•Large number of user accounts.•PayPal acquisition to support ebay.com.•Ability to collect huge amounts of data on buyers and sellers.

Weaknesses• New CEO John Donahoe.•Company culture becoming stale, employees not fully engaged.• Skype acquisition.• Fee structure has alienated some sellers.•Limitations on feedback hurt ability to create sense of trust and community.•Moving away from online auction, into direct retail.•No attempt to address issues and costs in shipping.

Opportunities• Find a new revenue stream with online advertising with Skype.• Growth in total online retail means more potential users of PayPal.•Other competitors, Overstock.com and uBid.com are struggling, possible acquisition targets.•Personalize eBay websites for various countries.

Threats• Sellers moving to other auction sites, taking the variety of items they supplied to the competition.•Possible shift in online shoppers preferences from auction-based to traditional online retailing.•Scammers and security issues may drive customers to the competition.

Recommendations1. Fire John Donahoe, leverage strong board of directors to

find a replacement that can lead eBay into the future.

2. Focus on restoring the eBay brand name. Make eBay.com a 100% auction site. Use Shopping.com and other possible acquisition targets to compete in traditional online retail space.

3. Revamp fee structure to be friendly to both small and large sellers. Tier the structure based on monthly or annual trade volumes.

Recommendations

4. Look into acquiring either or both Overstock.com and uBid.com

5. Introduce “Merchant Rewards” program• Allow merchants to earn rewards points per

transaction.• Rewards can include shipping credits/codes, free

boxes, packing supplies.

Any Questions?

eBay

Documents

Transcript of eBay