eBay (A) The Customer Marketplace

Topics: Revenue, EBay, Auction Pages: 46 (6024 words) Published: October 31, 2014
9-602-071
REV: SEPTEMBER 15, 2005

FRANCES X. FREI

eBay (A): The Customer Marketplace
It was 9 a.m. on a foggy San Francisco morning in February 2002. Fearghal O’Dea, chief creative officer for Orange Design, a small web design firm, juggled coffee, papers, and car keys on his way to work. But he had one thing left to do: check his eBay auctions. He had bids in for various interesting, if not necessarily practical, items, an old Russian military hat, for example. He had first turned to eBay in 1999 when he was looking to buy a car. His search for something old and “cool” had turned up a 1968 Buick Riviera. Today, as he logged onto the site to check his status in the various auctions, he debated whether to exercise the “Buy-It-Now” option the Russian hat seller had extended, which could avoid a bidding war at the cost of a higher fixed price. He saw that his was still the top bid, and decided not to Buy-It-Now. He would check back later in the afternoon. O’Dea enjoyed being part of the eBay community. He never sold anything, but enjoyed browsing through the millions of items for sale. For O’Dea searching through the weird and wonderful items on eBay was a tonic for boredom. Frequently amazed by what people offered for sale, he often forwarded random finds to friends. He had bought several useful products, including a digital camera, an old car manual, and games for his Sony PlayStation. Back east, across the Mississippi River, another frequent eBay visitor was taking a break from work and preparing her lunch. Barbara Smith was not interested in buying on eBay, but rather selling. In fact, she had made a successful small business selling collectibles on eBay. Tired of answering telephones, making travel reservations, and getting coffee, she had decided to leave her job as an assistant at a large manufacturing company in 1997 when her small eBay business started to take off. Almost five years later her livelihood now depended upon eBay. A long time eBay fan, she was uncomfortable with recent news that, despite incredible and unparalleled success, the company was raising fees and increasingly courting large corporate customers to the site. Smith viewed eBay as a community of buyers and sellers—not just exchanging merchandise but also making connections with each other around the world. It was a terrific marketplace, yet she worried about recent trends and wondered whether there were any comparable alternatives for her small collectibles business.

The Evolution of eBay
French-Iranian immigrant Pierre Omidyar launched eBay (short for electronic Bay Area) in 1995. Within a year the site had exploded, hosting 15,000 auctions daily and logging two million hits per ________________________________________________________________________________________________________________ Professor Frances X. Frei and Research Associate Hanna Rodriguez-Farrar prepared this case. Some information and identities have been disguised. This case was developed from published sources. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2001 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School.

602-071

eBay (A): The Customer Marketplace

week. The bread–and–butter of the business was the “collectibles” category, but members traded everything from toys to cars and beyond.1 (Exhibit 1 presents sales rate for selected items in 2001.) Offered for sale on eBay were...
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