eBay: King of Online Auctions

Like many college students, Laura likes jewelry and she has found a new way to shop for it from her dorm room—online auctions, especially eBay.com. In checking eBay’s listings recently, she found the following: “8” 14 kt gold plated bracelet—gold plated with 20mils of 14kt gold. That’s very thick as most chains have only 2-3 mils of gold plating. Chains are not easy to find with this much gold, but they are sold in higher end stores for $49.95 or more. The chain is a 6 mm flat link style and is heavy--not a cheap lite weight.” That sounded good, so she looked at the starting price--$9.95—and how many people had bid on the bracelet--0. There were over 5 days left on the auction. “Hm-m-m,” she thought. “It’s certainly cheap enough and the description sounds good. Let’s see the picture.” When she scrolled to the picture, she thought the bracelet looked very much like one that a girl on her hall owned and which she he had often admired.

Even though, it seemed like a good deal, Laura was concerned that no one had bid on it. “Maybe not many people have looked at it” she argued with herself. “It’s not been on auction very long.” When she checked the counter, however, she found that 37 people had viewed this auction. “I wonder if there’s something else wrong,” she mused. “Maybe it’s the seller.” When she checked the seller’s feedback, she found that the seller had received 11 positive comments in the last 7 days, 26 in the last month and 110 in the last 6 months. There were, however, 3 neutral comments in the last 6 months and 1 negative. “Well, this seller seems to be doing better as there are no negative or neutral comments in the last month,” thought Laura. “Because it’s only $9.95, I might as well bid and see what happens. If the price gets too high, I can always drop out.”

Five days later, there are 5 hours until the auction ends and Laura is back on eBay, looking at the bracelet. There have been 3 bids (other than Laura’s) and the price is now $19.59. Laura can’t decide if she should bid again. While the bracelet is still well below the store price of $49.95 (suggested by the seller), Laura wonders why so few people have bid on the bracelet. Is there something wrong with it that she can’t see? Or will she get a really good deal if she gets it for less than $30?
Welcome to the world of “dynamic pricing” brought to you by eBay, the premier online auction company. Started by Pierre Omidyar to help his girlfriend sell her Pez dispenser collection, eBay has mushroomed to over 2 million items on sale daily and expected sales of $3 billion in 1999. That’s up from $746 million in 1998 illustrating the explosive growth available on the internet. eBay has 3.8 million registered users and its members are intensely loyal. They spend an average of 130 minutes a month on the site—double that of any other Web site.

In spite of the impressive numbers, there are problems with shopping on eBay. Few sellers take credit cards and some won’t take personal checks; so purchasers have to send money orders which they have to purchase at the bank or post office. There’s a time delay to allow checks and money orders to clear before the goods are mailed. The turnaround from purchase to receipt of goods is frequently several weeks. There have also been reported cases of fraud. While the company does not guarantee the goods listed, it has, however, worked with the state of New York to settle reported fraud cases. Finally, eBay’s brand recognition is only 32% when compared to the 52% of Amazon.com, but one should remember that 32% is 63 million U.S. adults. On the whole, considering the intense loyalty, customers seem to be happy buying from eBay.

What do consumers shop online? The major answer is convenience—no more trips to stores and malls in all kinds of weather, no more parking problems or dealing with indifferent or non-existent clerks, no more stock outs and no more searching from store to store. One can shop online in the comfort of home at all hours (no more 9 to 5 or 9 to 9). And price comparing is easier by surfing from site to site. If you don’t want to comparison shop by keyboard, you can have a robot shop for you. Personal shoppers of various types have been introduced by a number of web vendors. eBay has a personal shopper where you can describe the item you want, and eBay will search current and future listings and notify you when the item is listed. Then, it’s up to you to bid on it.

Another reason is the thrill of getting a bargain. Bidding or “dynamic pricing” in e*maketing lingo meaning that price constantly changes. You have more control over what you pay. Don’t like the price? Don’t bid; there’ll probably be a similar or substitute item listed in a few days or weeks and maybe you can get it cheaper. Everyone loves a bargain, right?
Finally, the greater assortment of goods available on the internet means that shoppers have a better chance of finding what they want online than in the limited assortments of retailers near them (again no stock outs). If eBay has 2 million items for sale at one time and auctions last a week, that’s 104 million items in a year organized into 1627 categories of goods. For collectors looking to fill in a collection or find a rare or unusual item, eBay is a wonderful resource because of the large number of sellers recognizing that it has problems, eBay has worked to improve the experience that purchasers and sellers have at their site, but they have a long way to go to reach the seamless buying that shoppers experience on Amazon.com where 1-click will purchase goods, give credit information and where to send the goods. 1-click would seem to be as easy as it could get to purchase; whereas the eBay shopper must keep up with the auctioned item’s price for possibly as long as a week and might lose the item because of bidders who sneak in their bids at literally the last minute.

eBay has signed a deal with Mail Boxes, Etc. and iShip which will integrate the auctions with Web-based packaging, shipping and tracking information and give users the option to take advantage of secure, convenient package delivery at over 3,000 Mail Boxes, Etc. sites. For the purchaser waiting for goods, this would not only speed up delivery but also be reassuring that the package is not lost somewhere along the line.

And eBay is constantly expanding the variety of goods its sells and its format. It recently bought Kruse International which will enable it sell antique autos to buyers. It is also gearing up a high-powered marketing campaign to improve its brand awareness and reach more consumers. Because it finds that 20% of its sellers account for 80% of its business and that some of those sellers have quit their jobs to sell online, eBay is considering opening storefronts at its web site with—gasp—fixed pricing! Any seller who so desires could have a virtual store filled with online goods at a set price, making it easier for shoppers to purchase like they do in a store. But wouldn’t that take some of the fun and sense of accomplishment from getting a bargain out of online shopping?

Questions for Discussion

What level of decision making is Laura’s experience on eBay?
Is purchasing on eBay economic, passive, cognitive or emotional?
How are need recognition, pre purchase search and evaluation of alternatives affected when shopping is online?

Answer rating: 100% (QA)

1 Lauras experience on eBay is at the cognitive level She i... View the full answer