The global online retail sector had total revenues of $631.7 billion in 2012, representing a compound annual growth rate (CAGR) of 18.6 percent between 2008 and 2012. (MarketLine 2013) The industry has been heavily fragmented, with a number of large companies, such as Amazon, and smaller, specialised firms. This is intensified by the lack of consumer switching cost and the ease of using search facilities and price comparison website which further boost the competition among firms significantly. However, low fixed costs and dynamic market revenue growth in the recent years has moderated rivalry to some extent
Basically, eBay had defined two different types of competitors, namely direct and indirect competitors:
4.1 Direct competitors
Direct competitors are rivals who stand in a direct competition with eBay’s core business activity and the product line, particularly in three operating segments of online marketplace, online payment and Internet marketing and advertising.
The major segment of online marketplaces accounts for 52 percent of the company’s total revenue. eBay’s Marketplaces segment generates net transaction revenues primarily from listing and final value fees paid by sellers. Generally, eBay’s marketplace sector sees competition from Amazon, Google, Yahoo, e-commerce sites of large retailers such as Walmart and Target, and also other online market sites such as Bonanza and Webstore. It can be seen that Yahoo and Amazon have been the main competitors of eBay for years and they have been fighting eBay for a piece of the market in online auction.
Currently, Amazon is most important competitor of eBay. Even though Amazon is much bigger than eBay and they have a different niche than eBay by appealing to business-to-consumer transaction. However, the customer base and products of these two companies are similar, therefore, they may pose a threat to eBay’s absolute dominance and have the potential to steal market share from the largest online marketplace. Both business models have benefits and drawbacks. For example, Amazon has an advantage with the customer support, the usability, the lower prices, and the several payment methods, while eBay has no inventory cost, wider range of product, provides a solid distribution channel for individuals and small businesses. Indeed, eBay is behind Amazon when it comes to market share in e-commerce and revenue growth rate but it win over the largest online stores.
In 2003, eBay revenues increased 14 percent to $16.05 billion and net income increased 9 percent to $2.86 billion. The company’s revenues from its payment segment increased 19 percent to $6.63 billion and marketplace segment increased 12 percent to $8.28 billion. Revenues from the U.S. increased 14 percent to $7.71 billion and international segment increased 13 percent to $4.22 billion. eBay sells at 26 times its earnings, which is about 5 times more than the Nasdaq. In contrast, Amazon revenues increased 22 percent to $74.45 billion and net income totaled $274 million versus a loss of $39 million in 2013. North America revenues increased 28 percent to $44.52 billion and international segment increased 14 percent to $29 billion for 2013. Online sales increased 28 percent to $44.52 billion in 2013. Amazon sells at 628 times its earnings of $0.60 per share.
The major segment of online marketplaces accounts for 52percent of the company’s total revenue. eBay ‘s payments segment earns net transaction revenues primarily from processing transactions for customers. Revenues resulting from a payment processing transaction are recognized once the transaction is completed. The payment sector has outperformed other segments for years. In the financial year of 2013, eBay total revenues increased 14 percent to $16.05 billion, the company’s revenues from its payment segment increased 19 percent to $6.63 billion while marketplace segment only increased 12 percent to $8.28 billion. Basically, even though until now PayPal is still dominating online payment business, there is increased competition from other online payment companies such as Moneybookers and Google Checkout , many credit card companies such as Mastercard, Visa, American Express and other financial institution such as Western Union and Wirecard.
4.2 Indirect competitors
Indirect competitors are potential rivals who do not stand in eBay’s core business activity and the product line. One of biggest competitor of eBay is the drop off industry, however many drop off companies also use eBay services. More manufacturers are selling directly to consumers; examples include Apple, Nike, and—via Vitacost.com—several consumer-product manufacturers. Tech players are also fighting for consumer retail dollars: Google offers more than one billion products for sale on Google Shopping and Froogle, a new service from Google, may be very dangerous to eBay for many reasons. Google already has a huge network of search-users and advertisers. If vendors can set up their own online stores and be offered for free on Froogle, they have less of a reason to pay eBay for its high access. Last but not least, some social networks such as Facebook also pose a threat to demand for a centralized intermediary between sellers and buyers by enabling low-cost peer-to-peer shopping opportunities. Given its security and reputation, eBay certainly still has a lot going for it but may soon find its network challenged by social network vendors.
(to be continued)
e-Marketing Excellence 