eBay’s Strategy in China
Defining the Business Model
1) Customer Value Proposition (CVP)
eBay’s customer value proposition consists on three main ideas. The main one, their target market, is all Chinese customer with the willingness to buy and trade through an online platform. eBay tried to fulfill this necessity by opening an online trading “auction house” for Chinese customers. The company provided a service where an item would be listed in their webpage with the ability to bid on it. The owner would place the item or service online while buyers who were interested on acquiring the product would bid on it till the highest bidder got the product. Then, the owner would be informed through eBay and the trade would take place online. In addition to setting the online platform, eBay also provided personal customer support through various channels (including email, online text chat and phone) and value-added tools directed by third parties. These value-added tools included Personal Shopper (email notifications), Turbo Lister, eBay Blackthorne, ProStores, Selling Manager, Picture Services and many others.
2) Profit Formula
eBay’s revenue model worked differently than a simple auction house. The company would charge the seller an Insertion Fee at the moment they listed the product. The Insertion Fee could vary from US$0.30 to US$3.30 depending on the opening bid of the product. The select could also “opt for additional features, such as highlight or bold font, to promote their items for which an Optional Features Fee was added”1. Once the service or item was sold to the highest bidder, eBay would charge a percentage on the final sales price that varied from 1.25% to 5%. eBay’s cost structure is similar to any online website store. The main areas where the money goes are: sales and marketing, product development and general and administrative costs. The costs aren’t so high compared to a physical store like an auction house because eBay “operate[s]...
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