eBay's Blue Ocean Strategy Strategic Sequence
eBay operates in a Blue Ocean today due to their ability to capitalize on their
first mover advantage and immense popularity. The BOS sequencing for eBay is:
- Buyer utility: eBay innovated a convenient way for sellers to list, and buyers to bid on and purchase, items online. The utility is clear for both buyers and sellers: buyers get the chance to purchase items at extremely attractive prices due to the buyer-driven market, and sellers are offered the exposure of a global marketplace in which to sell their items—all done with the excitement of an auction-style sale.
- Pricing: since eBay was only a sales broker of sorts, pricing was free for buyers and only a percentage of total sale price for sellers—and in its most basic format, sellers were only charged if the item sold. The online auction model was untested, and would be fairly easy to imitate by a competitor, so strategic pricing was set very low since volume was the key as they would be dependent upon network externalities to be successful.
- Cost: since all transactions occurred online, and all with third-party goods offered for sale, overhead was low. eBay was able to apply price-minus costing to arrive at a profitable yet hard to match price cost structure.
- Adoption: eBay’s clearest adoption hurdle was consumer trust. Today there are numerous tools which were introduced at various points in the history of the business that help create trust in eBay’s market, such as detailed seller feedback and dispute resolution processes. However, at the time of company founding, the online auction concept was so new that eBay had to take a leap of faith for the sake of their own market. eBay addresses this on their values page of their website where they state, “Pierre Omidyar founded eBay on a simple idea: people are basically good.” eBay started small, and as trust was built quickly gained momentum--aided no doubt by their low pricing structure and overall value innovation.
