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07Nov

Essay on eBay

Posted by admin as Example papers

Example Essay on eBay

Over the past decade and a half computers and technology have changed our lives dramatically. In the 80’s computer changed the way companies did business and today in the beginning of the 21st century it has only gained momentum in the ways it has changed business. When the internet came along we slowly noticed more changes it has made to our lives. Almost all of America either has the internet or can access it easily. For many of us it has changed the way we communicate, do work, listen to music, or even shop.

By now if a company that is offering a product for consumers to buy does not yet have a web site that at least offers information about their products, they have lost track of reality somewhere in the early 90’s. As a matter of fact, internet consumption has become such a reality that it now has its own category in today’s commerce, called “e-commerce”. E-commerce is electronic commerce that is simply the spending of money electronically via the internet. There are many players in the game of e-commerce, some large and some small. More players are entering the game every day and some are growing and some shrinking, but nonetheless, e-commerce itself is growing so fast it is hard to track it. One player in the game of e-commerce came along back in 1995, its name is eBay.

EBay started as a home business in Pierre Omidyar’s apartment and has since grown to be one of the major .com companies, which means eBay plays a large part in e-commerce.

Omidyar was born in Paris, France in 1968. As a young boy he moved with his parents to reside in Washington, D.C (Bunnell 27). When he reached high school the revolutionary computer, the Apple II, was released. The Apple II caught on pretty fast for being the first personal computer, almost like a UFO to most Americans at the time. Many kids Omidyar’s age were buying them and spending a great deal of their time messing around and trying to develop simple programs. Omidyar took his passion for computer and used it to computer catalog his school’s library, while being paid an incredible $6 an hour (Bunnell 29). In 1991, while Omidyar was working for the company he co-founded called Ink Development Corporation, e-commerce was a new idea (Bunnell 28) and now seems as revolutionary as sliced bread. Later Ink was bought out by Microsoft (couldn’t you have guessed?) and renamed eShop (Bunnell 17). Omidyar then went to work for a mobile communications platform company called General Magic; it is there where the idea for online auctions came up (Bunnell 18).

Omidyar decided to create eBay to help his girlfriend expand her collection of Pez dispensers (Adler 3), but little did he know he would be expanding a lot more than that. After his internet provider told him he had too much traffic for them to hold his web site Omidyar had to buy a server to put in his apartment. Soon after he expanded his girlfriend’s Pez dispenser collection he realized he was going to have to expand that server, or better yet his apartment to make room for that large of a server. That time probably came around 1996, when he was forced to register his web site as a corporation. It was around this time when Omidyar was forced to change from no listing fee to 25 cents per listing (Bunnell 43). Omidyar thought he might lose his customers but later said, “People seemed happy to pay for the service, except I was so busy keeping the site going, I couldn’t even get to the mail and open the checks that were piling up. That’s when I realized my little hobby-experiment had taken on a life of its own” (Bunnell qtd. 43).

Essentially what Omidyar was doing when he created eBay was trying to tap the market of flea markets, garage sales, resale shops, public auctions, and classifieds. That may sound trivial, but in America it is a $100 Billion a year market (Bunnell 62). And to take it a step further, that $100 billion a year is only stuff that is actually sold. How many people just pile junk up in their basement, attic, garage, or even rental storage just because they don’t want to lose something that they paid for but no longer need? I bet you are thinking, “I am one of those people.” Well congratulations you are among millions. EBay gives all of these people a way to get rid of that stuff and still hold some of their dignity because it is like selling a used car; you got use out of it and now you get a portion of that money back when you are finished with it. Now that $100 Billion a year market has probably expanded about that much more. Now you can see why some people may call spring cleaning “eBay cleaning”.

Back in 95’ and 96’ when eBay was just getting itself together the odds of actually being able to tap this market probably seemed very miniscule, but eBay has surprised us all, especially those who made millions off of the stock. Once the company began to grow more and more and show its potential as a major e-business, Omidyar and the partners he developed along the way decided that they needed to hire a CEO that knew more about the buisness than they did. When it came down to it they gave full control of day to day operations to Meg Whitman, who was CEO of Hasbro preschool division at the time. The offer to Whitman was $145,000 a year salary with up to $100,000 in bonuses, which in big buisness wasn’t a huge offer. But the big perk for Whitman was that she had the option of buying 7.2 million shares of the company for only $0.022 per share(Bunnell 114), to put it in lay terms, if things went well she could be a billionaire. Under Whitman’s leadership eBay has evolved even further into mainstream consumer buisness. No longer is eBay just the place to find beanie-babies and antique furniture and other garage sale items, it has reached main stream retailing. Whitman has helped to make eBay more of a main stream retail store in many ways but one way is by the new “Buy It Now” option, which allows the buyers to now buy the item at a fixed price and not have to wait until the end of the auction to call it their own. In 2001 fixed price sales accounted for twenty percent of sales, and Whitman hopes to push that up to thirty-three percent (Adler 3).

EBay has moved so far into main stream that other large corporations worth even more than eBay such as Motorola, Sears, IBM, and even Dell sell their items through their own eBay “store” directly on eBay (Adler 2). Even larger corporations than these are using eBay to sell their overstock items rather than sell off to liquidators. eBay says that Motorola sells approximately $1 million worth of old phones per month and makes about 45% more on eBay than they would if they sold to a liquidator (Grow 1). In fact, eBay says that big name companies make about 5% of its sales (Grow 2). Whitman has pushed eBay so far into main stream consumerism that actual revenue from selling of goods on eBay was over $430 million up 92% from 1999, only two years earlier (Cohen 3). That is almost a fifty percent increase in revenue per year. And even furthermore, eBay had over 22.5 million registered users in May of this year, up 125% from the previous quarter at an annualized rate (Cohen 1).

What does that mean? It means people are starting to use eBay as a way to shop. Not as a way to find that hard to find collectible, but to shop. In fact, eBay is predicted to do over $6 billion in sales of merchandise in this year alone. I’m sorry but there isn’t $6 billion worth of collectible trading happening on one website in one year. Sure, that is about 5% of what Wal-Mart sells in a year, but I but Wal-Mart can not say that they raised that high, that fast. If Wal-Mart grew that fast, today there would be only one place where you could buy something and that would be Wall-Mart. EBay will probably not continue to grow as fast as it did in its first years, but why would it stop growing? If you think about it, eBay is like an online Wal-Mart, and give it the amount of time that Wal-Mart has had to grow and well, maybe there won’t be a Wall-Mart anymore.

Maybe one of the things that makes eBay’s success so unique is the way it is run. Today most American’s probably don’t even know what the honor system is because everyone has lost touch with it, but eBay is based on it. Omidyar built the business to act like a community of members and not customers, after all Omidyar isn’t selling anything. Members police themselves by awarding each other feedback of praise or complaint and that gives that user a rating. This way, someone knows that the person they are buying from is honest and the seller knows that the person they are selling to will not be a deadbeat. This system works incredibly well, in fact the percentage of fraud on eBay is less than 0.01% (Adler 3). You could argue that is still a lot for millions and millions of auctions but even when there is fraud, most of the time you can foresee it if you just know a little bit about eBay. For many this system of shopping has changed the way they shop and even think for that matter. It is true that it probably hasn’t affected most people, but I bet Wal-Mart didn’t affect many people after five years either. It is obvious that eBay has come a long way and made shopping easier and less expensive for many and with it moving into the mainstream, could soon effect the way everyone shops.

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