EBay's Business Model and the Different Types of Auctions

Electronic Commerce Assignment 8
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Electronic Commerce Assignment 8
Part A
* The Ascending-bid Auction or the Open Auction
The auctioneer starts the bid at the lowest price they would accept for the item. This price is called the reserve price. When an interested party bids at the reserve price, the auctioneer raises the price by specified bid increments, thus inviting more bids. This process continues until nobody is willing to place a higher bid offer. At this point, the auction ends with the last bidder obtaining the item at their bid price. The winner pays their bid hence the name first-price auction. It is used to sell items like art, antiques, and other collectibles.
* The Descending-bid Auction
In this type of auction, the auctioneer starts at a higher price than they expect the item to sell before lowering it until someone bids, saying, “Mine!” The item is subsequently delivered to the bidder at their placed bid price. If more than one item is offered, the procedure will continue until all goods are sold. The quickness of this auction is one of its main advantages. The procedure takes just a few minutes because the bids are less than the auctioned objects. They are employed at flower markets in the Netherlands, thus the term “Dutch” auction.
* The First-price, Sealed-bid Auction
Each interested person submits their single bid-offer in an envelope they seal afterward. Next, all the envelopes are opened, and the person with the highest bid is declared, after which they obtain the item for their bid amount. This auction is mainly used for credit and foreign currency refinancing, among other mainly financial purposes.
* The Second-Price, Sealed-bid Auction
In this type of auction, interested parties submit their bid-offers in sealed envelopes. The object goes to the person with the highest bid, but he pays the price submitted by the person with the second-highest bid. The auction item goes to the highest unsuccessful bid in an auction with multiple auction items.
Part B
The company’s business strategy was primarily based on auctions at first. eBay began as an all-auction platform, which was groundbreaking at the time. The company depended on millions of small-scale vendors selling items they no longer wanted or needed. It also had two unique revenue models: the Advertising Revenue Revenue Model (which involves the collection of fees from investors) and the Transactional Revenue Model (which involves the acquisition of fees from transactions comprised of Low sales directives- High inventory cost). After that, the business model evolved into the present one, which focuses mainly on creating fixed pricing on items. It evolved towards a more professional selling environment, with small retailers buying things from other retailers and reselling them on the platform for a profit.
As the auction system’s excitement faded, in 2009, the corporation’s profits faltered, while Amazon’s fixed pricing model grew in popularity. Like Amazon’s, eBay’s present business model emphasizes professional sellers and huge web storefronts selling their products at set pricing. The corporation’s business model has now evolved to integrate e-commerce services. Acquisition services, including PayPal, Star Hub, and Gumtree, were added to the revenue collecting mix from which eBay receives a part of transaction fees. However, the first two revenue models are still used in this specific company model.
Using the present framework of online shopping, eBay’s old business model was unable to fast adapt to the evolving technological environment. eBay is a one-of-a-kind business concept that brings consumers and sellers together in an e-commerce platform. The business strategy eliminates the inefficiencies of conventional markets, which are dispersed and provide a limited selection of products. Due to the lack of intermediaries, such a business model saves on transaction costs for every sale. Furthermore, unlike Amazon and its rivals, eBay keeps ...