All about Blue Ocean Strategy
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eBay's Blue Ocean Strategy Strategic Sequence
Chris Wiggins, Student (University), United States, Member
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.
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BOS eBay Strategic Sequence - Adoption
Caroline Pittman, Student (University), United States, Member
eBay also eliminated risk by partnering with PayPal to handle their transactions. This was necessary as purchasing on the internet was not considered all that safe when eBay first began operating.
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Local Markets not Served Well
E. von Ammon, Business Consultant, Switzerland, Member
But eBay does not serve local and regional markets well. A Swiss competitor named Ricardo is the trusted platform to people in a small country who love to know where the buyer is located. They have learned not to trust a yahoo-based seller. There are more of these. And prices asked for merchandise are surprisingly lower ... fees as well.
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BOS EBay and Local Markets
Eva Niklaus, Business Consultant, Member
@ E. von Ammon: it´s exactly what I try to tell to my Swedish colleagues. As a Swiss do I experience differences between countries which have an active local culture like in CH and such which have lost this tradition like Sweden.
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EBay BOS and PayPal Acquisition
Chris Wiggins, Student (University), United States, Member
Caroline: I agree, enabling PayPal was an extremely beneficial move on eBay's part.
This allowed all their users to pay with credit cards which added convenience, but also added another layer of risk mitigation and buyer protection.
Most importantly, it enabled every single seller to accept credit cards, which not only expedited the distance-sales process, but also reduced the risk of buyer non-payment.
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Blue Oceans versus Golden Ponds
david walters, Professor, Australia, Member
Surely the eBay has been an example of looking for a compromise between competitive advantage and acceptable levels or risk. They as did Amazon and many of the large 'pharmas' are now doing linking up with biotechs are optimising competitive advantage, risk and returns - a sensible strategy when the return to lt growth evades North America and Europe.
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EBay and Regional Markets
Chris Wiggins, Student (University), United States, Member
@ E. von Ammon: thank you for your feedback. I agree, eBay does not do much to foster regional trade. It is one of the "eliminated factors" when discussing the four actions framework.
ANother question is if local merchants could achieve certain benefits by selling on eBay, simply due to the increased visibility and exposure a global market brings?
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Trade Barriers and Behaviour
E. von Ammon, Business Consultant, Switzerland, Member
@ Chris Wiggins: you are right - more visibility is fine. But eBay still depicts a world of customs and trade barriers which you can't really easily comprehend in the US.
US sellers hesitate to sell to overseas. Parcel in Europe - because of bureaucracy - mostly ships only to countries within the official Euro community leaving out direct neighbours etc..
Another topic: especially in Switzerland we have much higher prices because of skimming off of additional buying power - everybody here is supposed to be rich. Whenever Swiss buyers compare prices they find a huge number of competitors with much lower prices than found on eBay. For example, eBay itself does not allow for minimum prices, probably hoping sellers keep prices as high as possible.
So in my opinion eBay does not really support swarm intelligence and an open market but somehow acts as an old fashioned newspaper or outdoor ad agency selling space to advertise and increase fees as long as members do not leave.
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EBay and the Reality
Eva Niklaus, Business Consultant, Member
@ E. von Ammon: I agree with you! I am living in Sweden for some years but I'm originally Swiss. All you tell is exactly how I see it myself. But I understand that American people have some difficulties to understand our market both in Switzerland and Europe. Therefore you will not find interesting debates on this topic when you're talking to American traders.
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Andrew Nelson
