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• Strong brand – eBay’s brand has risen significantly over the Paper

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Paper type: Essay , Subject: Accounting And Finance

• Strong brand – eBay’s brand has risen significantly over the years. In 2016, a survey of the top 500 brands, conducted by the marketing consultancy firm Tenet Partners, ranked eBay number 29. Participants of the survey expressed the company possesses many favorable virtues, such as overall reputation, perception of management, and investment potential. eBay’s brand is recognized not only within the United States, but all over the world. eBay has more than 175 million active members as of the end of 2017, showing that they dominate a large portion of the online store market share. (“eBay has more brand power than Amazon,” 2017)

• Largest internet marketplace – There are two essential aspects that define an online marketplace, having many sellers and buyers facilitating the platform and the buyer’s ability to purchase products without leaving the site. While eBay encompasses both features, they also possess other key elements of an online marketplace, including having buyers that are mostly consumers, as opposed to other businesses, as well as having a marketplace that sells physical products and not only services. As such, eBay’s marketplace has approximately two billion visits to its site each month. (“World’s Top Online Marketplaces 2019,” 2019)

• Feedback process – One of eBay’s most distinguishing features was their Feedback system, created in 1996. The system allows users to see how previous buyers have rated sellers and vice versa, providing a way to avoid potential scammers on the platform. After each transaction, the buyer and seller are invited to rate the experience that each has had and leave a comment. As fraudulent activity has grown at a rate equivalent to technological advancement, the feedback system eBay has established is significant to the security of their customers. (“Absolute Beginner’s Guide to the eBay Feedback System | Guides | Auction Nudge,” n.d.)

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• Technological tools – eBay’s application programing interfaces (APIs) demonstrate how eBay is utilizing technology to advance in the e-commerce industry. Their most recent APIs were designed to ensure data is consistent across all their buying and selling tools, including those created by buyers, sellers, and third-party developers. They strive to allow for a more seamless, connected experience for buyers and sellers as they move through application, device system, and beyond. eBay states that, “with these APIs, developers can rapidly create an integration and help accelerate buying from eBay anywhere, anytime. To me, that’s true disruption – and, it’s a leap forward for eBay developers.” (“eBay Developers Program,” n.d.)

• Localization – eBay’s localization efforts have increased to bring a wider audience of buyers to their numerous sellers. In 2014, eBay expressed they would be offering localized shopping experiences in both Spanish and Portuguese to reach customers in Latin America. In 2013, over one million new customers joined eBay from Latin America using an “English-language experience.” As shoppers are now able to shop in their local language, using their own currency, deals and promotions, the demand for items in those markets have increased substantially. (“Attention sellers: eBay offers localized shopping experience to Latin America,” 2017)

• Business model – Essentially, eBay only acts as the middleman between buyers and sellers trading in their marketplace, but as the pioneer for a business of its kind, eBay did not have much competition as it first began to grow into the empire it is now. This gave eBay a competitive advantage over competition such as Amazon.com, who was just getting their footing in the industry, when eBay was already an established brand. (Gopalkrishnan & Gupta, 2007)

• Strong finances – eBay’s debt has fallen significantly within the last year, from $10 billion to just over $9 billion, accounting for long-term debt. Current cash and short-term investment levels are steady at around $5 billion, but they have also generated cash from operations of $3 billion, making their total debt ratio around 29 percent. This reflects that eBay is producing enough operating cash to cover their debt. eBay also has a current ratio of 1.6, which is within a sensible range for the industry of online retail, showing that there is enough cushion without too much idle capital. Large companies often have lower cost of capital due to easily obtained financing, providing an advantage over smaller companies. By measuring how many times eBay’s earnings can cover interest payments, we can evaluate whether its level of debt is sustainable or not. Ideally, earnings before interest and tax (EBIT) should cover net interest by at least three times. For eBay, the ratio of 15.39 suggests that interest is amply covered. It is considered a responsible and reassuring practice to maintain high interest coverage, which makes eBay thought to be safe. (Simply Wall St, 2019)

• Acquisitions – eBay has acquired numerous businesses throughout the span of its existence allowing for faster growth and a decrease in competition. Some of the major businesses eBay has acquired include, PayPal, Skype, StubHub, and Rent.com. eBay continues to look for companies to acquire that will help facilitate their core mission of connecting buyers and sellers.

• PayPal – eBay uses PayPal, its own payment system, to proceed nearly all the payments going from eBay’s marketplace. From eBay’s perspective, such tight integration has the benefits of more fees collected, as PayPal takes transaction fees from the businesses, and tighter control over buyer’s shopping experience. From buyer’s perspective, PayPal provides easy to use online payment method and offers peace of mind if a transaction goes bad by having a refund policy built in. (Jurevicius, 2013)

• Economies of Scale – eBay has grown significantly from when they were first founded. Having put in substantial capital to get to where they are today and gain necessary skills and knowledge in a time where technology was ever changing, they now are able to serve over 100 million users without adding any overbearing costs.

The Weaknesses for eBay Inc. include:

• Fraud potential – One of the major weakness, not only for eBay but for the entire online retail industry, is the potential for fraudulent activity. As the Internet has given scammers a platform to misrepresent themselves and take advantage of unsuspecting consumers, there is always a concern that a fraud can take place. And fraud can present itself in numerous ways, including redistributing stolen goods.

• Technical difficulties – Being a man-made innovation, the Internet is not perfect and definitely has its limits. Systems have a chance of breaking down and disrupting trading activities and may cause loss of business, as the point of having retail online is so that it can be easily accessible. In the past eBay, as well as PayPal, have had issues with shutdowns and outages. This weakness may lessen over time as technology improves.

• Delivery wait-time – With any brick and mortar retail business, if you purchase a product, you can take that product home immediately and it will fill whatever need it was purchased for. However, with eBay and other online retail businesses, there is usually a shipping process that must take place before you can enjoy your new items. Depending on where you are and where the product is, these shipping times can range from a few days to weeks, even months if coming from overseas. More so, there is not often very many choices that you can make, as the buyer, on how the item is shipped. There are circumstances for which you can expedite shipping times, but an extra cost is often necessary, if available at all. This may become more of an issue as competitors like Amazon.com have established same-day delivery for specific products.

• Lack of hands-on experience – The ability to test out products before making a purchase, is taken away when buying items online. Especially with purchasing clothing items, not being able to try things on to ensure it fits properly is a real drawback to online shopping. Many items sold on eBay are used, and besides a few pictures and a description of the product provided by the seller, are the only elements to go by when contemplating the purchase of an item. This may lead to buyer’s remorse if the product does not live up exactly to what you saw in the pictures or what the seller described because they were puffing.

• Seller fees – There are three types of seller fees that eBay accesses, insertion fees, final value fees, and optional listing upgrade fees. Insertion fees are basic listing fees for creating the advertisement that they have a product for sale. Final value fees are based on the subtotal amount being charged to the customer per item. And finally, if a seller would like extra features on their listing, such as Gallery Plus which displays a small magnifying glass in the search results beneath your product image allowing shoppers to enlarge the item image without leaving the search page. These fees can be frustrating to sellers who use eBay’s platform regularly, as they can really add up and cut into the profits from the seller’s low-price products.

• Limited innovation – eBay has not made innovation the priority causing the company to have limited growth and limited ability to be competitive on a global level. As technology continues to increase and is applied to other online retail business platforms, eBay will begin to fall behind where functionality and convenience are concerned due to their lack of innovation. In e-commerce, innovation is the major growth driver, and while eBay’s centralized, functional organizational structure may be beneficial in some circumstances, it is disadvantageous to the business.

• Poor customer service – eBay’s platform allows anyone to sell their products through their website which overall is a great aspect, but it inevitably has its drawbacks. As individuals are not forced to have a code of ethics or abide by specific regulations that a normal retail business would, the quality of customer service is hit or miss. The seller may not respond promptly to questions, shipments may not be as fast, and sellers may not properly package items for shipping. This is where eBay’s feedback system can be put to good use to determine how customer service has been in the past with other buyers.

• Difficult customers – From a seller’s perspective, having to deal with customers may be a challenge, especially if the seller has no experience working with customers previously. Customers can be demanding and difficult to say the least and have the option of leaving negative feedback which may cause the seller’s rating to drop and hurt their reputation. In order to protect themselves, sellers should ensure products are listed accurately and explain in policies upfront. eBay also requires a return policy to be in place to prevent any misunderstandings. Ultimately, providing excellent customer service is how difficult customers can be avoided. (Frost, n.d.)

• Complicated programs – While many of eBay’s features are very user-friendly, there are some that take a closer look. Sellers can waste a lot of time worrying about their detailed seller ratings, when they should primarily just focus on selling. Having a feedback system is good for keeping sellers honest and ensuring everyone has a good experience, however if there is more focus going into having a perfect or near perfect rating, that focus is taken away from what is most important, which is selling products to consumers.

• Product restrictions – While you can sell almost any product on eBay, there are policies in place that restrict specific items from being sold through eBay’s marketplace. These items include adult material, animals, art, counterfeit items, drugs, firearms, and many others. Of course, depending on what the product is, there are good reasons for not selling particular objects through the platform, such as safety, and local legal restrictions.

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