Can eBay Continue Growing?

Q1. What is eBay’s business model and business strategy? How successful has it been?
Ans: The business model of eBay is a web-based automated auction service, founded in 1995 by Pierre Omidyar and Jeff Skoll. eBay earns its revenue mainly from fees and commissions, associated with its trading services; basically through transmitting of information. The company itself holds no inventory and is not responsible for shipping.

The company’s growth strategy focuses on expansion and continuing innovations, to enhance the variety of products on its sites. It assists buyers and sellers trade high-end goods and chattel; fine arts, automobiles, jewelry to clothing, consumer electronics and house wares.

The company has been successful and profitable attracting more than 200 million users by 2006. eBay now employs more than 8,000 full-time workers and has operations in 32 countries, including services in Mexico and eight South American countries. In 2005, the eBay users listed 1.8 billion items for auction; resulting in $40 billion worth of goods. In 2006, it was expected to be surpassed by 2 billion.


Q2. What are the problems that eBay is currently facing?
Ans: eBay is currently facing several problems:
a) With the increased seller fees, the growth rate in the United States and Germany had been slowed, though the losses were covered by the rapid growth in France and Italy.
b) eBay had trouble penetrating the real estate, travel, new car sales and expensive collectibles market.
c) Increasing competition in the auction site obstructs eBay from monitoring its compliance with diverse laws and regulations as it expands internationally.
d) eBay failed in ensuring a secured trade environment with fraud protection.
e) The company’s customer service department struggles with the task of satisfying online buyers and sellers.