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eBay: The Innovation of Advanced Business Sector

Free essayThe California-based eBay Inc. was founded on September 4, 1995, by French-born Iranian-American computer programmer Pierre Omidyar. At the age of 28, Omidyar wrote the first PC code for an online stage to enable a direct open auction. Through computer coding, Omidyar created and dispatched an online administration known as Auction Web, for which he was successfully sued by Thomas Woolston for patent infringement of online closeout programming Woolston had demonstrated in the late 1990s (Cohen, 2003). Auction Web services were hosted on a website that was initially created to provide information about the Ebola virus (Cohen & Hardy, 2013) Auction Web was later renamed eBay. After its launch, the first item sold on eBay was a broken laser pointer (Cohen, 2003). The ability to sell a broken laser pointer was such a breakthrough for Omidyar that this encouraged him to enlist other items on eBay website that had a positive response from the clients who were new to the online shopping experience.

In 1996 Omidyar signed an agreement to offer airline tickets on the website and in the same year, the site marked 250,000 auctions mostly being of the barter trade variety (Carr, 2013). In the month of January 1997, eBay facilitated 2 million sales. By June of the same year, eBay had grown so rapidly that it was hosting about 800,000 auctions a day. (Carr, 2013) At the end of 2014, eBay had an approximately 36,500 employees globally with 1,900 employees as temporary workers.

eBay Market Environment

eBay is a website platform that allows individuals and businesses to sell items at a fixed price or through open bidding after a free sign up on As of December 31, 2014, eBay had a platform with a capacity of 162 million active users. These users are registered members who are either buyers or sellers of various products from fashion, home, and garden, electronics, collectibles, and motors. eBay constitutes localized websites including and; eBay works closely with other e-shopping websites platforms including, StubHub and

The study of the eBay market environment will formulate and highlight the contributions and challenges of eBay in the world of e-commerce. Transactions on eBay can be carried out through direct checkout or PayPal. Since its emergence, eBay has contributed greatly to e-commerce. E-commerce is the online trading of products and services which includes online shopping, electronic information and many other forms of transactions hence this has led to conveniences since today’s customers are getting more comfortable with online transactions due to innovation in technology. The use of global shipping program has enabled eBay to penetrate almost every corner of the world, with delivery of their listed products to various customers completed within 14 days.

eBay provides customer satisfaction through the services they offer which include the following:

Price Savings

Customers purchasing on eBay have a variety of advantages in terms of prices. eBay through its pricing system enables users to shop and sell through an auction-style or fixed price listings.

eBay’s settled value arrangement permits purchasers and vendors to execute at a price set by the merchant. An auction-style format enables a shopper to choose a base price offered on any open bids. eBay additionally posts classified websites in more than 1,500 online communities globally which are created to help consumers in the free posting of their items and administrations that advance regional exchange. These classifieds websites include BilBasen,, eBay Kleinanzeigen, eBay Annunci, Gumtree, Kijiji, iBazar alaMaula, 2dehands.Be,, LoQUo, and

eBay’s delivery format enables consumers all over the globe to purchase items of preferred choices and ship to them to the specific destination through transportation alternatives offered by the vendor and helpful to the purchaser on eBay Market stage. Consumers can pick their online purchased items from the retailers’ physical stores.

Enhanced Shoppers’ Decision

Customers are privileged to have a variety of commodities listed on eBay which they can purchase from sellers locally, nationally and worldwide. These products can be brand new or used depending on consumers taste and preference. As at December 31, 2014, eBay had listings of over 800 million items for sale, making eBay one of the world’s largest online marketplaces with approximated an international gross merchandise volume of 61%.

Easy Search and Transaction Cost

eBay has an advanced search engine that enables consumers searching for products on its platform to find items and correlate prices with little effort hence this is more convenient compared to the traditional brick-and-mortar stores that requires a lot of research, which can be tiresome, expensive and time-consuming.

Promotion of Different Types of Trade

eBay is a worldwide market platform that allows anybody 18 or older to carry out transactions on eBay. eBay has more than 150 million clients all over the world. Through this, eBay promotes international trade through the exchanging of items and organizations between countries. Aside from buying and selling on a global scale, eBay also supports local business.

Facilitation of New Markets Development

eBay promotes the development of new markets such as second-hand products and collectibles items, hence through eBay sellers are provided a new platform to sell their products without a struggle. For example, 178,000 people in the United Kingdom acquire their primary or extra income through executing eBay.

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Competitive Strengths of eBay on Online Market Platform

Increase in the Number of Customers

eBay’s acceptance of PayPal as a means of carrying out payments by its users has led to rapid growth in its user’s base since PayPal is widely accepted globally. The increase in online shoppers presents enormous growth opportunities for PayPal as it is one of the few payment systems that meets the standards for convenient shopping and payment processing on the go.

Restrictions on Some Items

eBay regulations and policies include restrictions in the listings of some items on the eBay site. These forbidden items include drug paraphernalia, alcohol, firearms and ammunition; illegal, confidential or stolen documents; live animals, copyrighted or trademarked items, and gambling-based items including lottery and sweepstakes tickets.

System Reliability and Data Security

eBay market platform has enhanced its reliability and data security through various measures implemented by the eBay security team. The security protocol put in place has led to a minimization of eBay system breaches like in the incident that occurred in May 2014.

Platform Integration to Third-Party Mobile Applications

The ability of eBay to integrate its platform to conform to mobile devices is a breakthrough. eBay’s integration to the mobile platform is important due to the increase in the use of smartphone around the globe. The eBay app is available in three primary operating system supporting mobile devices that include Android, Windows, and iOS. eBay’s latest version can be downloaded from iOS App Store for free for users owning an iPhone. eBay users on the Android platform can also download the latest version of eBay app on the Google Play Store for free. Windows smartphone users can also access eBay on Windows’ Microsoft Store for free.

Flexibility of eBay’s Business System

eBay’s ability to act as a link between sellers and buyers in eBay’s market platform makes eBay one step ahead of its competitors. eBay has no real competition in the online auction market but with only a few direct competitors eBay’s business framework has an upper hand over its immediate rivals like Amazon, Wal-Mart, Alibaba, Flipkart, Best Buy, Newegg, and Overstock.

eBay’s Economy of Scale

An economy of scale is the expense advantage that emerges with expanded yield of production at a minimum operational cost to a firm. In the initial stages, eBay heavily invested in information technology and management of eBay users’ relationship but through eBay’s economy of scale, it has gained more than 150 million active users making eBay the world’s largest online marketplace. Various types of eBay listings like multiple-item listing formats, choice containing exceptions and optional listing enhancements have made its users’ work easier in the allocation of selected items to purchase.


Localization is the adjustment of an item or administration to address the issues of a particular dialect, culture or wanted population. eBay started localization in 1999 with its first foreign site in Japan. The enhancement of eBay services all over the world has promoted localization since eBay localization enables the utilization of a local commercial center with ease due to the use of local languages and the ability to adjust to local item offerings.

Accepted Payment Modes

eBay has three principal modes of payments that include payment upon item pickup, through PayPal and Merchant credit card. US-based PayPal offers worldwide online payments system. PayPal is considered as one of the safest modes of online payment. PayPal system ability to automatically encrypts its clients confidential information in transit from the customer’s computer to PayPal’s server by the use of Secure Sockets Layer protocol (SSL) containing an encryption key length of 128-bits which is the most advanced available at the commercial-level. PayPal has been the preferred online transaction channel due to its ability to attract and retain users through enhanced customer service through the easy accessibility of PayPal’s website on both PCs and Mobile platform. PayPal’s system reliability is attributed to its security protocol in protecting its users.

Any user’s information passed to PayPal site is stored on a server that is fully protected both physically and electronically by use of an electronic firewall that is not directly connected to the Internet; hence PayPal users’ private information can only be accessed from an authorized PC. The other factors that make PayPal more secure include state-of-the-art technology to eradicate online payments fraud, and PayPal privacy policy which binds PayPal to protect its user’s privacy.

Payment through Merchant credit is also another secure way to experience online payments. All a seller on eBay needs to do is register for a credit merchant account and provide their gateway account information for payment purposes. After the transaction has taken place, the seller will get a notification via email about a successful operation.

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Another form of accepted mode of payment is Escrow Services which primarily deals with motor vehicle sales on eBay. Escrow Services has a different approach to transactions. First, for a buyer and a seller to transact using Escrow Services they must both agree to use The customer submits a direct payment to Escrow rather than to the vendor. Escrow acts as the intermediary for transactions between the purchaser, and the seller hence Escrow is tasked with tracking the shipment of the vehicle and delivery to the customer for inspection of the vehicle. Once the vehicle is inspected, the buyer notifies Escrow on issues of acceptance or rejection. After a notification of acceptance by the client to Escrow or on expiry of inspection without communication from the purchaser, the seller is paid by Escrow through a written check. In a case of rejection of a vehicle delivered to him/her, Escrow is notified by the buyer after the return of the vehicle to the seller. The buyer is required to pay Escrow the transaction fees and return shipping fees.

Brand Reputation

eBay is one of the most dominant online shopping platforms with annual net revenues of more than $17 billion which is achieved through the loyalty of an estimated 150 million active users around the world. In 2015, Forbes ranked eBay 50th on its list of the world’s most valuable. This ranking is a clear indication that eBay has a strong reputation around the globe. eBay’s capacity to list more than 800 million items makes it a reliable brand and grasping of online networking stages like Facebook with more than 7.9million likes and a Twitter handle with more than 500,000 followers for internal communications purposes. Through these platforms, eBay has enhanced its brand reputation to greater heights.

Weaknesses of eBay Online Market

eBay’s sellers are required to pay several types of fees to enable them to transact on eBay. These fees can sometimes be prohibitively high depending on what a seller has to offer. The increased fees to the sellers have been the major challenge faced by individuals or groups during business through eBay.

Listings of Illegal or Counterfeit Items on eBay

Failure to eradicate all illegal or counterfeit products listed on eBay is a challenge in the detection of these products. eBay has acknowledged this loop but little has been done to protect the buyers from this acts.

Security Threats

Online security threats pose another challenge to eBay. Just like any other website prone to cyber-attacks, eBay is also potentially vulnerable although the company’s security team has taken measures to protect their users from having personal data stolen, although even the best measurements are not guaranteed to provide full protection to eBay users.

Strict or Inflexible Local Labor Laws and Regulations

Every country has rules governing international trade within its jurisdiction. Some of the laws and regulations make it difficult for eBay users to transact with convenience.

Import and Export Regulations

These are the rules governing the transfer of any item in and out of a country. Every country has its own rules on importation and exportation that may affect the eBay user negatively. Some regulations impose high taxes on imported goods than exported goods hence discouraging eBay users from making international transactions.

Natural Disasters and Political Influence

Natural disasters and disease outbreaks can influence international trade due to restrictions to access specific areas that are affected. Disease outbreaks have led to limitations in e-commerce. An example is the 2014 Ebola outbreak in West Africa which brought about a temporary ban on inbound flights. This had a negative impact on users in those countries who could not access items purchased on eBay at the right time.


Competition is another challenge facing eBay. Its chief competitor is Amazon, which Forbes ranked 13th on its list of world’s most valuable brands in 2015. Other competitors include search engines distributors, liquidators, catalog and mail-order companies, import and export companies, auctioneers, classifieds, directories, and shopping channels. eBay has sought to take on the competition through the acquisition of other brands with the aim of brand expansion. For example, in 2011 eBay purchased GSI Commerce which was spun off into Omnichannel Operations, Solutions Commerce Technologies and Commerce Marketing. GSI Commerce was later renamed Enterprise.

Trade rates have influenced exchange in the middle of purchasers and merchants on a global stage. Different countries have differences in currency rates which significantly affects trade between African and European countries.

Government Policies

Government policies have an impact on eBay due to the subjection to laws and policies affecting online payment and e-commerce directly. A good example is the subjection of PayPal to intensive regulation and additional government laws.

Regulations and Litigation Issues

In every given company, there are regulations and litigation issues. Litigation issues are the actual procedures challenged where claims are recorded with the court. Some of these litigation issues are in the initial stages hence plaintiffs may seek compensation or seek damages instead. In cases of clear indications of any loss faulting the company, eBay will be in a position to compensate and credit the decline in their financial statements.

Litigation Issues

In January 2008, eBay Korea had sent notices to its more than 20 million clients regarding an information security breach. This led to a class action lawsuit against eBay Korea by more than 149,000 users, which resulted in the initiation of the hearings in the Seoul Central District Court in August 2009. The courts initiated a point of reference in South Korea for monetary compensation despite the depth of breach to the plaintiffs. The court ruled in favor of eBay Korea in January 2010, determining that the company had adhered to policies shielding eBay from the attacks. This decision was later appealed in 2010 by approximately 34,000 plaintiffs to the Seoul High Court, but the High Court upheld the decision in September 2012.

Patent Litigation

eBay has been accused of patent infringement due to the company’s listings through the third party policy. An example of a patent litigation is a case involving XPRT Ventures, LLC vs. eBay in which XPRT Ventures, LLC made a claim that eBay unfairly implemented the idea and method of payment in eBay’s PayPal and electronic payment systems.

Regulatory Proceedings

Regulations and policies set by the U.S government require that PayPal notify the Foreign Assets Control Office(OFAC) on issues of denied or unverified payments. Although minor offenses like the transactions of a small dollar amount exist, that is a possible violation of OFAC sanctions regulations. Due to these rules eBay has negotiated with OFAC regarding violation possibilities arising from PayPal’s practices that resulted in eBay acquisition of accrued reserves that are adequate cover any breach of violation.

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In May 2014, eBay publicly announced a breach of their networks that led to user data theft that resulted in requiring all eBay clients to reset the passwords of their accounts. eBay later approached some regulatory bodies that included those with the highest power over data security issues.

Domestic and Foreign Macro Issues

eBay faces some challenges locally and globally. Global challenges include:

  • Fluctuation and differences in foreign currency among the user countries globally has been a challenge.
  • Changes in currency values vary within a different country with U.S dollar as the standard comparison.
  • The appreciation of the dollar currency has led to the decline in international trade since transactions between countries with weak currency power, and high money power is deemed not realistic.
  • eBay’s policy change has had to a negative impact on sellers. There has been a continuous review of eBay’s policies regarding transactions carried out on its market platform that has resulted in complaints and dissatisfaction among sellers. Change in eBay’s sellers policy has led to a massive migration of traders to other online seller sites such as Amazon.
  • Transactions through the use of PayPal is a significant challenge facing eBay that has led to countless lawsuits regarding payments using eBay with the latest lawsuit claims of the monopoly of PayPal as the means of purchase on eBay.

Competition Laws

U.S government agencies are in constant surveillance of eBay operations to ensure that the company is in compliance with fair competition laws. Private rights of actions in some jurisdictions are provided to competitors or buyers to enable them to make claims of anti-competitive conduct.

Interruptions or System Failure

Technology interactions may lead to a slow response times on the eBay website as well as mobile applications and general services offered by the company. System failures have resulted in huge losses since eBay is a 24/7 operating online shopping platform hence any system glitch has the potential to result in losses to the company.

Global Trade Policies

Online market platforms are not maximizing their full capacity because of limiting global trade policies which strives to analyze trade effects of on the environment.

Financial Statements

United States(Millions) Other Countries(Millions) Totals
Owned facilities 3.3 _ 3.3
Leased facilities 5.1 3.3 8.4
Total facilities 8.4 3.3 11.5

The statistics shown above is retrieved from showing the annual net revenue between 2004 and 2014.

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According to the statistics, online auction and selling on eBay amounted to $14.07 billion in 2012 and reached $16.05 billion in 2013. The above figure excludes money incurred in the operation of eBay’s corporate headquarters in San Jose, California. Those expenditure are as follows:

  • Marketplaces $3.3 Billion
  • Payments made $2.9 Billion
  • Enterprise $5.3 Billion
  • Total $11.5 Billion

eBay has ownership of various properties and leases in the U.S. and in 32 other countries around the globe. These resources are used to facilitate administrative and executive implementations, data and fulfillment centers, customer service and product development offices. Detailed information on eBay’s 2014 Annual Report was reported as follows:

  • eBay’s annual net revenue $17.9bn
  • eBay’s annual commercial center net income in the U.S $8.5m
  • eBay’s total dynamic purchaser $8.8bn
  • eBay’s quarterly gross stock volume $159m
  • eBay’s gross merchandise volume in ‘Home & Garden’ product category $19.6bn
  • Altered value exchanging as rate of eBay’s aggregate gross stock volume $11.8bn

eBay’s offers public stock on Nasdaq under the symbol EBAY. The below table shows the Nasdaq Global Select business sector report on the opening and closing stock prices and the high and lows for the accompanying period.


In 2014, Marketplaces Net Revenues were $175 million (12% increase) in comparison to 2013. The increase is a testament to a continued investment flow and increment in volumes of due to eBay’s data centers, loyal customers, and smooth operations. The business expense of net salaries at a rate of Marketplaces net incomes is raised by 0.9% in 2014 as opposed to 2013.

In 2013, There was an increase of $247 (19%) as a cost of marketplace net revenues in comparison to 2012. The business expense of net incomes at a rate of Marketplaces net incomes is raised by 1.1% in 2013 as opposed to the previous year. The increment in marketplace income is contributed by infrastructures, eBay’s operations, and customer loyalty to the business

Financial Analysis Summary

Payments expense of net incomes expanded $437 million (16%), in 2014 compared to 2013. Installment cost of net wages at a rate of payments net salaries decreased by 1.0% in 2014 in comparison to 2013 due to flexible transaction expense rates.

In 2013, installments expense of net incomes expanded $466 million (21%) in the examination to 2012 because of the essential effect of development on expenses identified with client loyalty to the business. Installments expense of net incomes at a rate of payments net incomes expanded by 0.8% in 2013 as opposed to 2012 due to flexible transaction expense rates.


Venture expense of net incomes expanded to $89 million (11%) in 2014 compared to 2013 which is ascribed to development in gross merchandise sales. The undertaking expense of net incomes at a rate of enterprise net income is increased by 3.1% rate amid 2014 contrasted with 2013 because of a lower take rate.

Endeavor expense of net incomes expanded by $126 million (18%) in 2013 compared to 2012 which is attributed to growth in gross merchandise deals and amortization cost started by the rising commerce technologies. Endeavor expense of net incomes at a rate of undertaking net salaries expanded by 8.3% in 2013 contrasted with 2013 due primarily to a lower take rate. The Nasdaq Global Select market report on the high and low closing sale prices per share of eBay’s stocks for the following periods.

Year Ended 2014 High ($) Low ($)
First Quarter

Second Quarter

Third Quarter

Fourth Quarter









Completed Year December 31, 2013 High ($) Low($)
First Quarter

Second Quarter

Third Quarter

Fourth Quarter









The below table shows Stock buyback amid the three months finished December 31, 2014 as follows:

Period Ended No. of Shares Purchased in Total Average Paid Price per Share Total No. of Publicly Announced Shares Purchased Maximum ($) Value of Shares for Purchase (1)
Octo. 31, 2014 14,197,983 $50.76 14,197,983 $1,444,769,107
Nov. 30, 2014 7,958,899 $53.76 7,958,899 $1,016,907,137
Dec. 31, 2014 594,056 $54.48 594,056 $984,542,829
22,750,938 22,750,938

Management and Labor Relations

eBay is a Multi-national e-commerce platform that has over 32,700 employees. Due to a large number of workers, there is a need to structure eBay Management System for efficient operations of the company. eBay current’s Management positions is listed as follows:

  • Pierre Omidyar-Founder and Chairman of the Board,
  • Devin Wenig-President & CEO
  • Steve Fisher-Senior VP, Chief Technology Officer
  • Marie Oh Huber- Senior Vice President
  • Wendy Jones- VP, Global Operations
  • Hal Lawton- Senior Vice President, eBay North America
  • Jay Lee- Senior Vice President, eBay Asia Pacific
  • Kris Miller- Vice President, Chief Strategy Officer
  • RJ Pittman- Chief Product Officer
  • Scott Schenkel- Senior Vice President, Chief Financial Officer
  • Dan Tarman- Senior Vice President, Head Communications Officer.
  • Paul Todd- Senior Vice President, eBay Europe
  • Kristin Yetto- Chief People Officer

Labor Relations

Labor Relations is the study of how any given company associates with its employees in regards to the daily operations of a particular firm. Some of the ways in which eBay is relating with its employees are as follows:

Stock Purchase Arrangement for Employees

eBay has an eligible stock purchase plan for all its employees that enables them to buy these stock over the greatest span of 2 years at a lower expense of 85% compared to equitable worth on the first day of the proper offering period or the most recent day of the six-month buy period. Workers are allowed to purchase shares not exceeding a value of 10% of their satisfactory remuneration amid an offering period. In all three years 2012, 2013 and 2014, employees bought roughly 4 million shares under this arrangement. These are shares purchased at average prices of $26.10 per share in 2012, $35.51 in 2013 and $42.06 in 2014. Approximately 27 million shares of regular stock were accounted for to be held for future utilities.

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Planning for Employee Savings

eBay has an investment funds arrangement as demonstrated under Section 401(k) of the Internal Revenue Code which permits its employees to contribute up to half of their qualified earnings but not more than statutory purposes of constrainment. In 2012, 2013 and 2014, eBay contributed one dollar for each dollar an employee contributed, with a top level augmentation of 4% of every worker’s qualified pay, subject to the greatest manager commitment of $10,400, $10,200 and $10,000 per representative for every period, individually. eBay representatives working outside the locale of the U.S are secured by different funding arranges. eBay aggregate costs for these funding arrangements were $71 million in 2012, $84 million in 2013 and $89 million in 2014

Conceded Stock Units

During eBay’s annual meeting of stockholders held in 2011, conceded stock units were provided to each non-worker chief except eBay’s author. Additionally, before January 1, 2015, new chiefs who are not workers of the organization or its auxiliaries or partners received a one-time grant of surrendered stock units equivalent to the consequence of separating $150,000 by the honest estimation of our consistent stock on the date of the gift. Each conceded stock unit includes an unsecured and unfunded right to receive one share of eBay common stock. Each conceded stock unit recompense allowed to another non-representative official upon race to the board vests 25% one year from the date of stipend, and at a rate of 2.08% every month after that. In the ending of the executive administrations whenever, all rights to the unvested conceded stock units will likewise end. eBay conceded stock units distributed on or after August 1, 2013, are payable uniquely in stock. There were near 351,065 conceded stock units outstanding as of December 31, 2014, which included eBay limited stock unit movement as depicted beneath.

Embracing Diversity

A major transformation to embrace diversity has been initiated through the creation of various activities that promote distinctiveness by giving eBay a more reliable working environment for its employees. eBay’ push to the formation of Women Initiative Network that promotes the development of professional skills in women has led to significant success in the company.

Greener Commerce

eBay is committed to making a positive environmental impact within the business through the continued utilization of cleaner vitality, increased efficiency and by using our global marketplace to extend the durability of products.

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