eBay business model started out from the living room of Pierre Omidyar in 1995. Ever since its inception, eBay has grown into one of the pioneers of the marketplace business model. Over the years, they have provided a platform for business-to-consumer and customer-to-customer selling. eBay had humble beginnings as an online auction for collectibles. However, eBay has come a long way since then. eBay is now one of the leading online marketplace that offers classifieds and online ticket sales.
The ecommerce platform saw significant growth in early years, thanks to the first-mover advantage. They had no competition in the early days and this helped them to evolve easily without needing to rush things. Moreover, unlike other companies, eBay has continually reinvented themselves to capture the greater share of the market. The constant hustle to be better has helped them to stay on top.
The business model is largely based on providing service to consumers. The driving force is to provide quality service to the buyers and sellers both.
eBay is one of the most notable success stories of the dot-com bubble. Pierre Omidyar created eBay as a hobby. However, his website caught traction and saw significant growth. At the time of inception, the website was known as Auction Web.
The website allowed people to auction different collectibles. The amount of traffic grew considerably in the next few years and Pierre was forced to upgrade his internet connection. The website was renamed to eBay in 1997 and the rest is history!
How Does eBay Business Model Make Money?
eBay and Amazon rode the dot-com wave and established their position in the world market. While both of these companies have a lot of similarities, they are different in operation. Amazon has a marketplace business model that is more centered on fulfilling the orders of customers. eBay follows suit, but elements such as auctions, ticket vending etc. sets it apart from its competition.
The eBay revenue model has been revitalized over the years to maximize profits and value of the company. Their 24 years of existence in the market has been possible because of correct financial decisions taken in the past.
The American multinational e-commerce tycoon takes pride in being the pioneers of online trading. They revolutionized the consumer-to-consumer trading by digitizing flea markets, garage sales etc. Moreover, it ended the need to physically meet to complete the deal.
The idea of eBay is a digital marketplace that allows consumers to buy and sell things. Trading can be of many sorts. eBay introduced a platform that allowed auction and fixed-price sales. The option to have a digital auction made things convenient for everyone. In an auction, people bid for an item to buy it. The person with the highest bid gets to buy the item.
Similarly, in a fixed price sale, the seller decides the price of their item. Consumers can buy the product by paying the fixed price.
Moreover, eBay has introduced a host of programs such as eBay Top Rated Seller program, SafeHarbor Program, Verified Rights Owner program, feedback forum etc. so that customers feel safe and can trust the right sellers when buying goods.
eBay Business Model and the ‘Buy It Now’
The ‘Buy It Now’ option is the simplest way of buying something from eBay. You pay the upfront price and you get your item. This option is used by most marketplace business models on the internet. However, eBay has two more options in addition of this one:
- Auction listings have a ‘Buy It Now’ option as well. The customer can either bid for it or just buy it directly off the seller. However, the ‘Buy It Now’ price of the product is at least 30% higher than the starting price of the auction.
- There are reserved price auctions too. These auctions have a reserved price set for the product. When this price is met, customers can buy the product using the ‘Buy It Now’ option. The item costs the same as the reserved price in this case.
Fees Charged to the Seller in eBay Business Model
Sellers are expected to pay for listings on eBay. The cost of the listing varies depending on the category in which you want to list the item. Nevertheless, every seller has about fifty free listings each month before they need to start paying to put up a classified on eBay.
You will be charged 5 cents if you wish to put up an extra listing in books, movies, DVDs, music or video games section. However, the cost of an extra listing increases to 30 cents if you wish to add it in any other section that was not mentioned in the preceding sentence.
Final Value Fee
Sellers pay a commission to eBay for every sale they make on the platform. The commission is charged in the name of ‘final value fee’ and can go from 3.5% to 10%. However, the commission rate depends on the category in which the product was placed.
It can be hard to get noticed in a swarm of many listings. To get noticed easily, you can upgrade your classified to advanced listing. This is similar to sponsored listings that we have seen in various other business models.
Sellers pay a fee to get this upgrade. This feature is available to auction and fixed-price sales both.
eBay Business Model: Close5
The original idea of eBay was to facilitate local trading. However, they diverged and turned into a full-blown digital marketplace when their project picked traction. Close5 took up the idea from eBay and started using eBay’s old business model.
Moreover, the business model of Close5 is similar to LetGo business model and Craigslist business model. Both companies make money though sponsored posts. Similarly, Close5 does the same to generate revenue.
eBay made various acquisitions through the years. StubHub was one of the acquisitions. They were acquired in 2007. It is an online platform that facilitates ticket selling and buying of different events and sports. It is the world’s largest marketplace for tickets.
Sellers pay no upfront fee for listing their tickets. However, they are charged 15% of the cost of the tickets if they get sold through the platform. Furthermore, the commission rate can fall down to 10%, depending on the number of tickets that are sold. Buyers pay 10% of the fees to StubHub.