Research Report 1: eBay.com

eBay Inc. is an American Internet company that manages eBay.com, the world's largest online auction site. The online auction web site was founded in San Jose, California on September 3, 1995 by computer programmer Pierre Omidyar. eBay does not actually sell goods that it owns itself. It merely facilitates the process of listing and displaying goods, bidding on items, and paying for them. It acts as a marketplace for individuals and businesses who use the site to auction off goods and services. In addition to its original U.S. website, eBay has established localized websites in several other countries.

Purpose:

Allow people and businesses to buy and sell goods and services through the website

Features:

eBay opened its new eBay Express site, which is designed to work like a standard Internet shopping site to consumers with United States addresses (eBay Express). Selected eBay items are mirrored on eBay Express where buyers shop using a shopping cart to purchase from multiple sellers. The UK version was launched to eBay members in mid October 2006 (eBay Express UK), and differs from the US version by only offering brand new items from pre-vetted business sellers. The German version was also opened in 2006 (eBay Express Germany).Later, eBay added an eBay Community Wiki and eBay Blogs to its Community Content which also includes the Discussion Boards, Groups, Answer Center, Chat Rooms and Reviews & Guides. Ebay has a robust mobile offering, including SMS alerts, a WAP site, and J2ME clients, available in certain markets.

Key Characteristics:

eBay.com uses a C2C business model. It acts as an online marketplace. eBay offers three types of auctions which are Auction-style listings, Fixed Price format and Dutch Auctions. Auction-style listings allow the seller to offer one or more items for sale for a specified number of days. The seller can establish a reserve price. Fixed Price format allows the seller to offer one or more items for sale at a Buy It Now price. Buyers who agree to pay that price win the auction immediately without submitting a bid. Dutch Auctions allow the seller to offer two or more identical items in the same auction. Bidders can bid for any number from one item up to the total number offered. eBay uses a paypal system. PayPal is an e-commerce business allowing payments and money transfers to be made through the Internet. It serves as an electronic alternative to traditional paper methods such as cheques and money ordes. PayPal performs payment processing for online vendors, auction sites, and other corporate users, for which it charges a fee. PayPal is owned by eBay Inc.

Design:

The background colour of the website is white.The texts are either black or blue or grey. The website also uses light colour like yellow. It matches well with the background colour. It creates a soothing effect on the users.

Strengths:

1. No time constraints. Bids can be placed at any time. Items are listed for a number of days (usually between 1 and 10, at the discretion of the seller), giving purchasers time to search, decide, and bid. This convenience increases the number of bidders.
2. No geographical constraints. Sellers and bidders can participate from anywhere that has internet access. This makes them more accessible and reduces the cost of "attending" an auction. This increases the number of listed items (ie.: number of sellers) and the number of bids for each item (ie.: number of bidders). The items do not need to be shipped to a central location, reducing costs, and reducing the seller's minimum acceptable price.
3. Intensity of social interactions. The social interactions involved in the bidding process are very similar to gambling. The bidders wait in anticipation hoping they will "win" (eBay calls the successful bidder the "winner"). Much like gambling addiction, some bidders may bid primarily to "play the game" rather than to obtain products or services. This creates a highly loyal customer segment for eBay.
4. Large number of bidders. Because of the potential for a relatively low price, the broad scope of products and services available, the ease of access, and the social benefits of the auction process, there are a large numbers of bidders.
5. Large number of sellers. Because of the large number of bidders, the potential for a relatively high price, reduced selling costs, and ease of access, there are a large number of sellers.
6. Network economies. The large number of bidders will encourage more sellers, which, in turn, will encourage more bidders, which will encourage more sellers, etc., in a virtuous circle. The more the circle operates, the larger the system becomes, and the more valuable the business model becomes for all participants.
7. Captures consumers' surplus. Auctions are a form of first degree price discrimination. As such, they attempt to convert part of the consumers' surplus (defined as the area above the market price line but below the firm's demand curve) into producers' surplus. On-line auctions are efficient enough forms of price discrimination that they are able to do this.

Weaknesses:

eBay acknowledges weaknesses in its feedback system on its own policy pages, noting several of the points which include:

1. Small and large transactions carry the same weight in the feedback summary. It is therefore easy for a dishonest user to initially build up a deceptive positive rating by buying or selling a number of very low value items, such as e-books, recipes, etc., then subsequently switching to fraud.
2. A user may be reluctant to leave honest feedback out of fear of negative retaliatory feedback (including "negative" in retaliation for "neutral").
3. Users and generators of feedback may have different ideas about what it means. eBay offers virtually no guidelines.
4. Feedback and responses to feedback are allotted only 80 characters each. This can prevent users from being able to fully list valid complaints.
5. Although eBay protects sellers from getting a negative feedback from a deadbeat buyer when the deadbeat buyer/bidder did not respond to Unpaid Item dispute, they do not offer the same protection for a buyer who gets a deadbeat seller.

Many complaints have been made about eBay's system of dealing with fraud. The complaints are generally that eBay sometimes fails to respond when a claim is made. And since eBay makes its money on commissions from listings and sales it may not be in eBay's interest to take action against large sellers.

Frauds that can be committed by sellers include:

• Receiving payment and not shipping merchandise
• Shipping items other than those described
• Giving a deliberately misleading description
• Knowingly and deliberately shipping faulty merchandise
• Counterfeit or bootleg merchandise
• Knowingly selling stolen goods
• Inflating total bid amounts by bidding on their own auction with "shill" account(s), either the seller under an alternate account or another person in collusion with the seller. Shill bidding is prohibited by eBay and, in at least one high-profile case involving Kenneth Walton (and his accomplices Kenneth Fetterman and Scott Beach) has been prosecuted by the federal government as criminal fraud

Frauds committed by buyers include:

• PayPal fraud: Filing false shipping damage claim with the shipping company and with PayPal.
• Credit card fraud, in the form of both stolen credit cards and fraudulent chargebacks.
• Receiving merchandise and claiming otherwise
• Returning items other than received
• The buyer sends a forged payment-service e-mail which states that the buyer has made a payment to the seller's account. An unsuspecting seller may ship the item before realizing the e-mail was forged