09-­‐Dec   2012  

eBay  and  Amazon.com  

What  Strategy  should  eBay  follow  

upon  Amazon.com’s  rapid  rise  in  
e-­‐commerce?  
 
                                                                                                   

M o d u l e   –   S t r a t e g i c   M a n a g e m e n t  
P r o f e s s o r   –   F r a n c o i s   T h e r i n  
  

“A  good  strategy  is  one  that  can  be  successfully  implemented.  

Sometimes,   successfully   implementing   a   flawed   strategy   may  
be   better   than   devising   an   elegant   strategy   that   is   not   or  
cannot  be  implemented.  If  the  implemented  strategy  is  out  of  
step   with   the   needs   of   the   business,   it   is   unlikely   to   be   of  
benefit   as   it   may   not   exploit   the   specific   window   of  
opportunity  it  was  planned  for”    

Macmillan  &  Tampoe  

  2  
  
 
Table  of  Contents  
 
 

Executive  Summary..............................................................................................4.  
 

Main  Report.........................................................................................................5.  
 
 
Exhibits….............................................................................................................12.  
 
 
Bibliography........................................................................................................14.  
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
  3  
  
Executive  Summary  

A  well-­‐elaborated  virtual  store  may  indeed  make  the  all  difference  for  a  company.  E-­‐
commerce  provides  the  possibility  for  virtually  anyone  to  see  any  product  available  
at   any   place   in   the   world,   turning   commodities   to   be   known   in   several   locations,  
creating   new   possibilities   for   the   public   and,   thus,   generating   more   revenue   and  
profitability.  

Well,  two  of  the  main  key  players  in  the  e-­‐commerce  revolution  have  been  eBay,  Inc  
and   Amazon.com.   In   the   pursuit   of   beneficiating   from   all   features   linked   with   e-­‐
commerce,  these  players  have  been  on  a  close  “battle”  to  gain  the  upper  hand  in  the  
market  place.  

This   “tête-­‐à-­‐tête”   between   the   two   companies   has   been   having   its   ups   and   downs  
along  the  years.  One  year,  one  seems  to  gain  the  upper  position  and,  right  after  that,  
the  other  one  re-­‐acts  to  re-­‐gain  the  leading  position.  

By   2010,   Amazon   seemed   to   have   gained   the   momentum   and   established   itself   as  
the   market   leader.   “The   company’s   share   price   had   grown   at   a   compound   annual  
growth  rate  (CAGR)  of  37%  since  2001—more  than  six  times  eBay’s  6%  growth  over  
the   same   period.   Over   the   past   five   years   in   particular,   its   revenue,   operating  
income,   and   net   income   had,   on   average,   grown   at   robust   rates   of   32%,   27%,   and  
26%,   respectively.   On   the   other   hand,   eBay   had   grown   these   indicators   at   rates   of  
15%,   14%,   and   21%.   Notably,   its   core   Marketplaces   business   grew   its   revenue   at   a  
CAGR  of  10%  per  year  from  2005  to  2010”  (eBay,  Inc.  and  Amazon.com,  p.  1).  

The   concerning   question   for   eBay,   as   it   entered   2011,   was   to   determine   which  
strategy  it  should  pursue  to  once  again  regain  the  upper  hand  over  Amazon.  Should  
it  maintain  its  platform  business  model?  Or  should  transform  and  expand  its  model  
into  new  areas?  

The  aim  of  this  paper,  then,  is  to  try  and  elaborate/conclude  on  what  should  be  the  
best   (most   appropriate)   business   strategy   decision   for   eBay   to   implement.   Allied  
with  that,  there  are  also  other  key  questions  that  should  be  addressed  in  order  to  try  
and  have  a  much  comprehensive  view  over  both  eBay’s  and  Amazon’s  realities.  The  
key  set  of  questions  that  I  will  try  to  answer  along  this  paper  will,  then,  be:  

! What  are  the  key  drivers  of  profitability  in  eBay’s  business  model?  
! What   are   the   key   drivers   of   profitability   in   Amazon’s   retail   business   model?  
And  how  does  it  retail  business  model  interact  with  that  of  eBay?  
! As   it   shifted   to   a   retail   and   platform   business   model,   how   successful   was  
Amazon   in   overcoming   barriers   to   entry   in   the   third-­‐party   seller   market?  
What  business  choices  were  critical  in  altering  the  competitive  dynamic?  
! What  conclusion  may  one  draw?  What  should  one  recommend  for  eBay  going  
forward,  and  why?    

On   the   following   pages,   then,   I   will   try   to   grasp   all   of   these   questions   and   foresee  
what   strategy   or   strategies   (based,   and   solely,   on   the   information   provided   in   the  
given   case   study   article)   I   reckon   to   be   the   best   and   most   appropriate   for   eBay   to  
implement.  

  4  
  
Main  Report  

What  are  the  key  drivers  of  profitability  in  eBay’s  business  model?  

The  profitability  of  eBay’s  business  model  is  based  on  three  main/key  drivers,  each  
of  them  having  specific  and  particular  features:  

A. The  Auctions  Marketplace  

1) As   stated   by   eBay,   Inc.   and   Amazon.com   case   study,   “eBay’s   primary   offering  
were   online   marketplaces   for   the   sale   of   goods   and   services,   supplemented  
by   other   e-­‐commerce   platforms   and   on-­‐line   payment   solutions”   (eBay,   Inc.  
and   Amazon.com,   p.   2).   The   profitability   of   eBay   is   primary   based   on   three  
key   business   segments   –   Marketplaces,   Payments,   and   Communications   –  
“with   the   core   Marketplaces   and   PayPal   fees   earned   on   eBay   sites  
constituting   the   majority   of   company’s   overall   revenue”   (eBay,   Inc.   and  
Amazon.com,  p.  2).  “The  company  primarily  generated  revenue  from  sellers  
through   fees   for   listing   items   and   commission   fees   payable   on   completed  
transactions”1  (eBay,  Inc.  and  Amazon.com,  p.  2).    
2) Another  fundamental  driver  for  eBay’s  profitability  rates  was  the  company’s  
ability   to   rapidly   enter   into   other   markets   outside   the   United   States   (U.S.).  
“As  of  2011,  the  company  had  localized  websites  in  24  countries,  as  well  as,  
partnerships   and   investments   in   an   additional   15   markets.   eBay’s   global  
scalability  also  enabled  greater  cross-­‐border  trade  throughout  the  company’s  
platform,   as   sellers   in   international   markets   such   as   China   were   able   to  
efficiently  source  products  and  offer  them  on  eBay’s  most  active  websites  in  
the   U.S.,   the   United   Kingdom,   and   Germany”   (eBay,   Inc.   and   Amazon.com,   p.  
2).  
3) A  third  key  feature  of  eBay’s  Auctions  Marketplace  business  model  was  (and  
is)  its  singularity  of  offering  unique  and  used  products  to  its  customers  (know  
as   collectibles   category).   eBay   expanded   “into   more   than   50,000   product  
categories   ranging   from   automobiles,   to   toys,   to   sporting   goods”   eBay,   Inc.  
and  Amazon.com,  p.  2).  These  features  and  numbers  represent  and  show  by  
themselves  how  huge  was  the  potential  of  eBay  to  raise  its  profitability  rates.  

B. The  Expansion  into  Fixed-­‐Price  Sales  

1) In  2000,  following  the  acquisition  of  the  retail  site  Half.com  and  the  addition  
of   a   “Buy-­‐It-­‐Now”   feature   in   its   traditional   business,   eBay   implemented   a  
fixed-­‐price   policy/strategy,   which   was   more   associated   with   commodity  
products.   This   category   of   products   had   the   key   feature   of   having   low   prices.  
This,   obviously,   had   the   tremendous   effect   of   attracting   potential  
buyers/customers,  and  thus,  raising  eBay’s  revenue  and  profitability.  

 
                                                                                                               
1
 Please  see  Exhibit  1  for  a  basic  fee  schedule  of  selling  on  eBay  in  1999.  
  5  
  
2) Later,   in   2001,   eBay   “launched   eBay   Stores,   which   allowed   sellers   –   including  
large  retailers  such  as  The  Home  Depot  –  to  offer  goods  through  fixed-­‐price  
storefronts   on   the   company’s   platform.   At   the   time,   pricing   for   sellers  
included  both  a  monthly  subscription  fee  of  $9.95  and  listing  fee  of  $.05  per  
item,   with   final   value   fees   ranging   from   1.25%   to   5%”   (eBay,   Inc.   and  
Amazon.com,   p.   3).   What   did   this   meant?   Well,   again,   by   not   only   offering  
goods   at   fixed   prices,   but   also   charging   fees   from   its   sellers,   it   expanded  
eBay’s  leveraging  capability  to  increase  its  profitability.  

C. The  Decision  to  Improve  the  Buyer  and  Seller  Experience  

1) eBay’s  owner  –  Pierre  Omidyar  –    strategic  decision  to  launch  the  Feedback  
Forum2   (FF)   rating   system   had   the   significant   result   of   capturing/attracting  
buyers  in  a  particular  way.  It  provided  the  experience  to  potential  buyers  of  
interacting  in  a  much  efficient  and,  principally,  trustworthy  way  with  eBay’s  
service.  The  FF  gave  eBay  a  much  reliable  service,  where  people  could  trust  in  
a   much   clear   way   in   sellers’   profile   and   consequent   transactions   they   were  
about   to   make.   Customers   became   more   assured   about   eBay’s   service   and  
the   products   it   offered.   What   does   this   means   in   terms   of   driving   the  
company’s  profitability?  Well,  by  more  efficiently  assuring  its  buyers  on  the  
quality   of   its   service   and   goods   offered,   eBay’s   capability   of   attracting   buyers  
and   gain   their   loyalty   became   greater,   and   thus,   the   probability   of   rising   its  
profitability  rates  also  became  greater.  
2) Complementary   to   the   launch   of   the   FF,   eBay   also   boosted   its   rapid  
profitability  by  focusing  and  providing  much  efficient  and  effective  payment  
methods   for   buyers   and   sellers.   By   acquiring   three   key   person-­‐to-­‐person  
credit  card  payments  over  the  Internet  –  Billpoint,  PayPal  and  Bill  Me  Later  –  
eBay  determinately  leveraged  its  profitability  rates.  With  a  person-­‐to-­‐person  
credit   card   payment   system,   the   efficiency,   speed   and   effectiveness   of  
payment   transactions   became   greater,   which,   obviously,   meant   more   rapid  
income,  revenue  and,  ultimately,  profitability.  
3) Still  in  the  context  of  trying  to  offer  a  much  safer  and  more  efficient  buying  
and   selling   process   to   its   users,   eBay   “offered   several   other   services   for  
buyers   and   sellers,   ranging   from   its   Best   Match   search   algorithm   that  
incorporated  seller  ratings  and  shipping  fees  into  its  sorting  of  listings,  to  pre-­‐  
and   post-­‐   trade   tools   that   made   the   buying   and   selling   process   safer   and  
more  efficient”3  (eBay,  Inc.  and  Amazon.com,  p.  3).  

 
                                                                                                               
2
  The   Feedback   Forum   “was   a   rating   system   that   allowed   buyers   and   sellers   to   grade   each   transaction   as  
“positive,”   “negative,”   or   “neutral”   and   offer   a   brief   comment   on   the   experience.   The   ratings   became   a  
permanent   aspect   of   a   member’s   profile.   Through   2001,   eBay's   rate   of   fraud   remained   below   0.01%,   and   the  
company   insured   auctions   via   a   fraud   protection   program   that   reimbursed   buyers   up   to   a   certain   amount   for  
items  either  not  received  or  not  as  described”  (eBay,  Inc.  and  Amazon.com,  p.  3).  
 Please  see  Exhibit  2  for  a  much-­‐detailed  overview  of  eBay’s  key  services  for  buyers  and  sellers.  
3

  6  
  
What   are   the   key   drivers   of   profitability   in   Amazon’s   retail   business   model?  
And  how  does  it  retail  business  model  interact  with  that  of  eBay?  

In   terms   of   the   profitability   of   Amazon’s   business   model,   and   just   as   it   happens   with  
eBay’s  case,  it  is  based  on  three  main/key  drivers,  each  of  them  having  specific  and  
particular  features:  

A. The  Retail  Model  

1) As   per   its   early   years   (founded   in   1994   by   Jeff   Bezos),   Amazon’s   key   driver   of  
profitability  was  the  retail  business  –  aimed  at  consumers  and  sellers.  Along  
the  years,  this  model  expanded  its  offer  from  offering  just  books  to  providing  
music  and  video  goods.  Then,  “within  two  years,  the  company  had  launched  
toys,  electronics,  and  tools  (among  other  categories)  and  expanded  into  the  
U.K.,   Germany,   and   Japan.   The   company’s   stated   goal   was   to   be   Earth's   most  
customer-­‐centric   company   for   three   primary   customer   sets:   consumers,  
sellers,   and   developers,   the   latter   of   which   Amazon   serves   though   its   Web  
Services   offering   –   though   the   retail   business   aimed   at   consumers   and   sellers  
made  up  nearly  all  of  Amazon’s  revenue”  (eBay,  Inc.  and  Amazon.com,  p.  4).  
2) By  1997,  Amazon  strategically  decided  to  implement  a  low  price  policy  across  
the   company’s   entire   product   range.   This   strategy   turned   out   to   be   a  
competitive  one  in  the  “battle”  against  the  more  traditional  retail  behemoths  
such  as  Wal-­‐Mart.  Thus,  the  profitability  growth  tended  to  be  positive.  
3) The  launch  of  new  product  lines  and  features,  from  1998  to  2000,  turned  out  
to  be  another  key  driver  for  Amazon’s  continuous  profitability  growth.  
4) Complementary  to  the  new  products  and  features  presented  between  1998  
and   2000,   Amazon   saw   other   two   key   vectors   in   the   continuous   pursue   of  
greater   profits   –   the   supply   chain   and   distribution   network.   These   vectors,  
understandably,  reveal  themselves  to  be  determining  ones  if  a  company  like  
Amazon  wants  to  more  efficiently  and  effectively  please  its  aimed  buyers  and  
sellers.   The   more   efficient   and   effective   the   supply   chain   and   distribution  
network   are,   the   more   likelihood   the   goods   are   sold   and   distributed   in   a  
quicker   manner.   The   buyers   and   sellers   become   more   satisfied,   as   well   as,  
the   company   who   provides   the   service   (Amazon)   sees   its   revenue   and  
profitability  figures  increase.  
5) A   fifth   driver   of   profitability   within   Amazon’s   retail   model   was   the   strategic  
decision   to   heavily   invest   in   Technology   and   Content,   “which   included   its  
technology  infrastructure  and  expansion  of  product  categories  and  fulfilment  
costs.   These   investments   helped   Amazon   achieve   an   impressive   cash   flow  
cycle   of   27   days   between   the   time   it   received   payment   and   had   to   pay  
suppliers”  (eBay,  Inc.  and  Amazon.com,  p.  4).  
 
 
 
 
 
 
 
 

  7  
  
B. The  Decision  to  Enhance  Customer  Convenience  

1) “Since   the   company’s   launch,   Amazon   allowed   users   to   post   and   read  
product   reviews,   averaging   scores   on   a   five-­‐star   scale”   (eBay,   Inc.   and  
Amazon.com,   p.   4).   Pretty   much   like   eBay’s   strategy,   Amazon   saw   the  
enhancing   of   the   buyers   and   sellers   experience   as   a   determining   way   to  
attract   more   users/clients   and   have   their   loyalty,   and   thus,   turning   its  
profitability  performance  in  a  steady  growth.  As  stated  by  the  eBay,  Inc.  and  
Amazon.com   case   study,   “one   analyst   estimated   that   promoting   the   most  
helpful   reviews   increased   sales   in   those   categories   by   20%...   Similarly,  
Amazon   maintained   a   recommendation   engine   for   its   customers,   which   it  
claimed   was   responsible   for   generating   35%   of   product   sales”   (eBay,   Inc.   and  
Amazon.com,  p.  4).  
2) Other   key   features   of   enhancement   of   customer   satisfaction   and  
convenience  comprised:  
" The  introduction,  by  2002,  of  a  free  shipping  policy  on  orders  of  $99  
or  more.  
" The  Launch,  by  2005,  of  Prime  –  a  program  which  gave  members  free,  
unlimited   two-­‐day   shipping   for   an   annual   fee   of   $79.   “One   analyst  
estimated   that,   as   of   2009,   there   were   over   2   million   members   of  
Prime,   growing   at   nearly   25%   per   year.   Each   million-­‐member   increase  
added  nearly  3%  to  Amazon’s  revenues  as  members  spent  130%  more  
than  non-­‐Prime  customers”  (eBay,  Inc.  and  Amazon.com,  p.  5).  

C. The  Decision  to  Expand  into  a  Platform  

1) A   key   driver   milestone   was   the   strategic   decision   for   Amazon   to   expand   its  
business   model   into   a   platform   for   e-­‐commerce   and,   consequently,   to  
introduce  another  key  feature  –  the  auctions  business.  The  expansion  into  a  
platform   made   possible   to   establish   a   new   kind   of   interaction   with   Amazon’s  
clients.   This   new   interaction   between   the   already   existing   retail   business  
model   and   the   auctions’   one   had   a   very   clear   objective:   one   of   the   visions  
allied   with   the   implementation   of   this   strategy   was   to   “use   existing  
customers   to   provide   a   ready   audience   for   sellers”   (eBay,   Inc.   and  
Amazon.com,   p.   5).   From   2000   to   2001,   “Amazon   Auctions   grew   99%   to   over  
5  million  unique  visitors”  (eBay,  Inc.  and  Amazon.com,  p.  5).  The  profitability  
rates  were,  then,  rising  with  tremendous  figures.  
2) The   launch   of   zShops,   in   1999   (another   tool   that   made   possible   the  
interaction   between   the   two   models)   –   “an   online   supermall   that   offered  
small-­‐  and  medium-­‐sized  merchants  the  ability  to  operate  storefronts  within  
Amazon’s   site   for   a   monthly   fee   and   per-­‐sale   commissions”   (eBay,   Inc.   and  
Amazon.com,   p.   5).   In   addition   to   this,   and   as   way   to   increase   Amazon’s  
income,  the  company  provided  the  possibility  for  merchants  to  “pay  extra  to  
have   their   names   and   logos   featured   more   prominently”   (eBay,   Inc.   and  
Amazon.com,  p.  5).  
 
 
 
 
 

  8  
  
3) The  adoption  of  a  single-­‐store  strategy,  in  2000  (a  third  “upgrading”  strategy  
in   the   new   interaction   between   the   two   models),   “in   which   third-­‐party  
merchants  would  be  allowed  to  sell  their  products  alongside  Amazon’s  own  
goods   in   the   primary   “product-­‐detail”   pages”   (eBay,   Inc.   and   Amazon.com,   p.  
5).  
4) The   launch,   in   2006,   of   a   service   called   Fulfilment   by   Amazon   (the   fourth  
“upgrading”   tool   in   the   new   interaction   between   the   two   models)   –   “which  
allowed  third-­‐party  sellers  to  use  Amazon’s  vast  distribution  and  warehousing  
network   to   ship   and   store   their   products”   (eBay,   Inc.   and   Amazon.com,   p.   5).  
The  company  saw  such  service  as  a  way  of  making  even  more  money.    
5) Finally,   by   2011,   and   in   the   pursuit   of   leveraging   even   more   its   profitability  
performance   and   offering   a   new   service   that   provided   another   way   of  
interacting   retail   and   platform,   Amazon   “offered   a   full   suite   of   services   to  
attract   merchants   to   its   platform:   its   Web   Store   service   helped   merchants  
build  and  operate  a  direct-­‐to-­‐customer  business  across  multiple  channels,  its  
Checkout   service   offered   merchants   a   complete   payments   solution,   and  
companies   could   advertise   on   Amazon   product   pages”4   (eBay,   Inc.   and  
Amazon.com,  p.  5).  

As   it   shifted   to   a   retail   and   platform   business   model,   how   successful   was  

Amazon   in   overcoming   barriers   to   entry   in   the   third-­‐party   seller   market?  
What  business  choices  were  critical  in  altering  the  competitive  dynamic?  

The   strategic   decision   to   expand   into   a   platform   business   model   proved   to   be   a  

profitable  one.  As  pointed  earlier,  “from  2000  to  2001,  Amazon  Auctions  grew  99%  
to  over  5  million  unique  visitors”  (eBay,  Inc.  and  Amazon.com,  p.  5).  

However,  the  platform  business  model  came  to  be  a  very  challenging  one  in  terms  of  
overcoming  barriers  to  try  and  enter  in  the  third-­‐party  seller  market.  By  1999,  and  
despite   the   success   of   the   launch   of   Auctions,   zShops   and   other   services-­‐related  
offerings,  the  respective  portions  of  the  total  revenue  were  very  low,  totalling  “only  
$13  million,  or  less  than  1%  of  revenue”  (eBay,  Inc.  and  Amazon.com,  p.  5).  Numbers  
don’t   lie.   1%   of   the   total   revenue   means   that   the   strategy   to   sell   such   offerings  
weren’t   competitive   enough.   Thus,   facing   such   figures,   Bezos   realized   that  
something  else  should  be  done  in  order  to  alter  and  boost  the  profitability  rates  of  
the  third-­‐party  seller  market.  A  series  of  business  choices/strategies  came  into  play  
in  boosting  third-­‐party  satisfaction  and,  thus,  altering  the  competitive  dynamic:  

 
                                                                                                               
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  In   this   respect,   the   fees   charged   by   Amazon   showed   attractive   numbers  –   both   for   the   company   and   the   seller.  
“If,  for  example,  a  third-­‐party  individual  seller  sold  an  item  in  the  consumer  electronics  category  for  $100  that  
weighed  1  pound,  he  or  she  would  pay  a  $0.99  closing  fee,  an  8%  referral  fee  ($8.00),  and  a  variable  fee  of  $0.45  
plus  $0.05  per  pound  ($0.50),  yielding  $9.49  in  fees.  This  would  be  offset  by  a  shipping  credit  of  $4.49  plus  $0.50  
per  pound  ($4.99),  so  in  the  end  the  seller  would  earn  $95.50  while  Amazon  would  earn  $4.50.  The  seller  could  
also  opt   to   have  the  item  fulfilled  by   Amazon  using  FBA.   In   this  case,  the  seller   would   receive  no  shipping   credit,  
and  he  or  she  would  pay  $2.40  in  fees,  leaving  the  seller  $88.11  while  Amazon  earned  $11.89”  (eBay,  Inc.  and  
Amazon.com,  p.  5).  
 
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# By  2000,  “Bezos  and  other  senior  managers  decided  to  adopt  a  “single-­‐store”  
strategy   in   which   third-­‐party   merchants   would   be   allowed   to   sell   their  
products   alongside   Amazon’s   own   goods   in   the   primary   “product-­‐detail”  
pages”  (eBay,  Inc.  and  Amazon.com,  p.  5).  Parallel  to  that,  Bezos  “reorganized  
the   company   to   support   this   strategy   by   making   general   managers   for  
category  stores  responsible  for  income  statements  reflecting  the  operations  
of  both  Amazon  and  third-­‐party  sellers”  (eBay,  Inc.  and  Amazon.com,  p.  5).  
# By   2006,   Amazon   launched   another   decisive   business   strategy:   “a   service  
known   as   Fulfilment   by   Amazon   (FBA),   which   allowed   third-­‐party   sellers   to  
use   Amazon’s   vast   distribution   and   warehousing   network   to   ship   and   store  
their  products”  (eBay,  Inc.  and  Amazon.com,  p.  5).    
# A  third  key  milestone  strategy  was  Amazon’s  offering  (by  2011)  of  “a  full  suite  
of  services  to  attract  merchants  to  its  platform:  its  Web  Store  service  helped  
merchants   build   and   operate   a   direct-­‐to-­‐customer   business   across   multiple  
channels,   its   Checkout   service   offered   merchants   a   complete   payments  
solution,   and   companies   could   advertise   on   Amazon   product   pages”   (eBay,  
Inc.  and  Amazon.com,  p.  5).  
 
What  conclusion  may  one  draw?  What  should  one  recommend  for  eBay  going  
forward,  and  why?    

In  my  account,  eBay  should  try  and  follow  a  strategy  that  encompasses  a  mixture  of  
strategies  –  maintaining  its  platform  business  model  (having  both  an  auctions  and  a  
fixed  price  policy)  and  expanding  its  business  model  into  areas  such  as  services  for  its  
sellers,  even  including  fulfilment  and  marketing  (pretty  much  like  Amazon  had  done  
so)  –,  which  should  be  implemented  into  two  distinct  phases.  And  those  are:  

–  First  Phase  –    

Facing  its  more  recent  “sluggish  growth”,  eBay  should  firstly  and  definitely  make  all  
efforts  to  maintain  its  current  users,  as  they  represent  a  sustained  large  ecosystem  –  
“with   a   base   of   95   million   active   users   and   4.5   billion   listings”   (eBay,   Inc.   and  
Amazon.com,  p.  6).  There  should  be  a  strategic  policy  of  improving  and  fine-­‐tuning  
the   foundation   of   its   core   auctions   and   fixed-­‐price   business.   The   company   could,   for  
example  “endeavour  to  attract  more  buyers  to  the  site  by  elevating  trust  standards  
with   an   improved   feedback   system   and   enhancing   the   user   experience   with  
optimized   search   and   navigation”.   And,   in   addition,   it   could   “expand   product  
selection  and  attract  more  buyers  to  the  site”  (eBay,  Inc.  and  Amazon.com,  p.  6).  

–  Second  Phase  –    

In   my   view,   the   company   should   not   only   focus   on   the   improvement   of   its   core  
auctions  and  fixed-­‐price  business  nor  just  on  the  lowering  of  listings  and  final-­‐value  
fees.    

eBay,  and  only  after  having  implemented  the  first  phase  strategy  described  before,  
should   also   look   with   strategic   eyes   (in   the   sense   of   not   neglecting)   to   the   possibility  
of  implementing  new  services  for  its  sellers  (like  the  ones  successfully  launched  by  
Amazon)  –  including  the  Fulfilment  and  the  Interactive  Marketing.    

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eBay  should  not  neglect  the  tremendous  positive  effect  that  these  policies  could  also  
have   on   its   growth.   Taking   the   same   measures   undertaken   by   its   main   competitor  
(specially,   such   effective   ones)   could,   indeed,   help   eBay   to   regain   the   momentum  
and  the  upper  hand  in  its  battle  with  Amazon.  

Complementary  to  the  two  strategic  phases  described,  eBay  should  also  meditate  on  
what   I   would   call   a   third   strategic   option,   which,   in   my   account   should   only   be  
considered   at   a   later   stage   (not   for   immediate   consideration   and   option):   the  
possible   shift   from   its   platform   model   into   an   owned-­‐inventory   business   model  
similar   to   Amazon.   And   why   do   I   defend   that   it   shouldn’t   have   an   immediate  
feasibility?   Well,   because,   I   reckon   that   it’s   wiser   to   make   a   step   at   a   time   then  
jeopardising   an   entire   strategy.   A   sustainable   strategy   is   one   where   profits   must  
follow  closely  behind.  eBay  should  firstly  focus  on  what  it  already  has  –  its  current  
users.  Only  then,  it  should  think  about  other  more  challenging  ventures  and  business  
strategies.  

As  in  Hugh  Macmillan’s  and  Mahen  Tampoe’s  words,  “one  aim  of  strategy  is  to  win  
and  this  means  beating  the  enemy  or  the  competition  in  a  game  which  may  be  won  
or  lost”  (Macmillan  and  Tampoe,  2010:  23).  Indeed,  eBay’s  focus  is  to  find  a  strategy  
that  may  allow  it  to  beat  its  main  competitor  –  Amazon.  It  should  also  be  conscious  
that  such  “battle”  may  be  “won  or  lost”.  And,  in  order  to  raise  its  gaining  odds,  eBay  
should  also  implement  a  right  and  appropriate  strategy  –  one  that  follows  a  step  at  a  
time,  where  each  step  is  well  measured  and  sustained.  

 
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Exhibits  

Exhibit  1  

Fee  Schedule  for  eBay,  1999  

 
(Source:  eBay,  Inc.  and  Amazon.com,  found  at:  
https://campus.college.ch/download/assignment/2379)  

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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Exhibit  2  

eBay’s  Key  Services  for  Buyers  and  Sellers  

 
(Source:  eBay,  Inc.  and  Amazon.com,  found  at:  
https://campus.college.ch/download/assignment/2379)  

 
 
 
 
 
 
 
 
 
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Bibliography  
 
 
Books  
 
- Macmillan,  H.  &  Tampoe,  M.,  2010.  Strategic  Management.  Oxford  University  
Press.  P.  23,  188.  
 
Internet  Resources  
 
- eBay,  Inc.  and  Amazon.com  (Webpage)  
Available  from:  https://campus.college.ch/download/assignment/2379    
(accessed  Monday,  01.  December  2012).  
 

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