eBay Inc. vs Amazon.com. Case Solution
eBay and Amazonboth operate in the e-commerce industry. This industry grows when the peopleare aware about the use of internetwhere the suppliers see the opportunity to sell the products via internet.The people are now more aware regarding this business model and they prefer to shop online rather than going to the retail store.
Furthermore, this business model brings advantages for the customers and suppliers, as the suppliers would not bear high inventory cost, rent expense of the retail outlets, warehouse cost. Moreover, the advantages for the consumer is that it would reduce the time as they now purchase the required products from any ware.
The e-commerce business can be operated via different business models, some are discussed below.
- Business to business
- Business to consumer
- Consumer to consumer
- Consumer to business
E-bay business model:-
eBay operates by using consumer to consumer model. eBay’s business model became successful as it gained major market share of the industry. The market share has grown from 58% (200) to 64% (2001). This percentage indicates that eBay is the market leader, because 64% seems to be a higher market share.
Later in that year, their competitors entered the e-commerce market with the new conceptto sell products at the fixed price. This business model captured 19% of the e-commerce business.
The revenue stream of eBay is from the commission of selling the products. Their business model requires low initial cost because there is no initial investment. They only provide the platform to the customers and sellers to buy and purchase their products.The second revenue stream of the company is derived from the subscription fees.
As far as cost is concerned, its costs include the normal maintenance of their website, payment process charges and the cost relating to customer services.
The company launched its website in 24 countries, which resulted in buyers and sellers trading internationally. In addition to this, everyone can subscribe to eBay’s website and sell their products. Currently, the products range from automobile to the toys.
In 2000, in order to respond to the fixed price products seller in the industry, they introduced a new strategy to offer the fixed price trading acquisitions, in which the customerscould buy the products at a fixed price.Furthermore, in order to further expand, they also offered retailers to sell goods via eBay’s website through which the company would charge monthly subscription fees and listing fees.
In order to improve the service quality, eBay decided to take feedbacks. The feedback form requires buyer and seller to rate the quality of services being provided to them. This as a result, enabled eBay to improve further and fulfill the buyers and sellers’ desires.
eBay is now focusing on improving the payment process. In 1999, the payments were through the check, which seemed to be time consuming for both the buyers and sellers, however recently it improved the payment process, as all payments are done online. Giventhe rapid growth of Amazon, eBay decided on the strategy for countering Amazon’s rapid rise in E-commerce.
After analyzing the case study and the market analysis, it seems that eBay lost the business to customer business segment but had successful track record in customer to customer business segment.
Amazon’s business model:-
Amazon was founded by Jeff Bezos with the aim to build a platform where the customers could buy what they want, which made it become the market leader of the industry.
Amazon follows the business to consumer and business to business model. Currently,Amazon is the largest online retail store and the market leader in the e-commerce industry.
Before the opening of the online retail stores,the company sold books via retail stores. After the increasing use of the internet, Amazon decided to change its business model from retail stores (physical books) to online e- book in order to reduce the rent expense and the warehouse expenses, resulting in increasing the profitability of the company.
After the successful business of the books, in 1998, they entered the music and video business.Its new business model created an opportunity for the company to gain major market share by offering the low prices, because the company could offer low prices due to the reduction in cost. In addition to this, Amazon gave tough time to its competitors, which resulted it in becoming the market leader of the industry.
Moreover, as business model became successful, Amazon developed good relationship with its suppliers to buy products at a discounted rate, which resulted in an increase inthe profitability of the company. Furthermore, the e-commerce model requiredless initial investment in inventory, but high cost relating to the technology as they established online software required high initial and onetime cost............................
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