Case Studies
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Case Studies
Wal-Mart and Mattel: Supply Chain Management Best Practices eBay Inc.: Managing Success in a Dynamic Online Marketplace
Submitted By: Abha Mahapatra (75003) BFIA 2 A SSCBS (DU)
Wal-Mart and Mattel: Supply Chain Management Best Practices
Being a supplier to Wal-Mart is a two-edged sword,” says Joseph R.Eckroth Jr., CIO at Mattel Inc. (www.mattel.com). “They’re a phenomenal channel but a tough customer. They demand excellence.” It’s a lesson that the El Segundo, California-based toy manufacturer and thousands of other suppliers learned as the world’s largest retailer, Wal-Mart Stores (www.walmart.com), built an inventory and supply chain management system that changed the face of the business. By investing early and heavily in cutting-edge technology to identify and track sales on the individual item level, the Bentonville Arkansas-based retail giant made its IT infrastructure a key competitive advantage that has been studied and copied by companies around the world. “We view Wal-Mart as the best supply chain operator of all time,” says Pete Abell, retail research director at high-tech consultancy AMR Research in Boston. Abell says he expects the company to remain in the vanguard. “Wal-Mart is evolving; they’re not standing still,” he says. The company is still pushing the limits of supply chain management, he says, searching for and supporting better technology that promises to make its IT infrastructure more efficient. Radio frequency identification (RFID) microchips, for example, may replace bar codes and security tags with a combination technology that costs less money.
Early on, Wal-Mart saw the value of sharing that data with suppliers, and it eventually moved that information online on its Retail Link website. Opening its sales and inventory databases to suppliers is what made Wal-Mart the powerhouse it is today, says Rena Granofsky, a senior partner at J.C.Williams Group, a Toronto-based retail consulting firm. While its competition guarded sales information, Wal-Mart approached its suppliers as if they-were partners, not adversaries, says Granofsky. By implementing a collaborative planning, forecasting, and replenishment (CPFR) program, Wal-Mart began a just-in-time inventory program that reduced carrying costs for both the retailer and its suppliers. “There’s a lot less excess inventory in the supply chain because of it,” says Granofsky. That efficiency is the key factor in maintaining Wal-Mart’s low-price leadership among retailers, says Abell. “Their margins can be far lower than other retailers’ because they have such an efficient supply chain,” he says. The company’s cost of goods is 5 to 10 percent less than that of most of its competitors, Abell estimates.
Wal-Mart’s success with supply chain management has inspired other retail companies, which are now playing catch-up, says Abell. “Others are now just starting. They’ve all had inventory systems, but sharing the data with their partners hasn’t been easy,” he says. Wal-Mart’s influence has extended beyond the retail sector. Mattel’s Eckroth says that he studied Wal-Mart’s supply chain best practices when he worked at a manufacturing division of General Electric Co. “They’re a benchmark company,” he says. One reason Wal-Mart is studied so closely is that it gets buy-in from its suppliers to an incredible degree. That’s because its programs and practices benefit not just the retailer but its partners as well, says Eckroth. CPFR, he says has “blurred the lines between supplier and customer. You’re both working to the same end: To sell as much product as possible without either of us having too much inventory. We’ve learned that if we listen to Wal-Mart, take their initiatives seriously, and align our strategies with making them successful, we both can succeed.”
Mattel has learned a lot from working with Wal-Mart and is bringing those lessons to bear in its relationship with other channels, says Eckroth. “Getting the supply chain optimized inside of Mattel is only 50 percent of the equation,” he says. “The other 50 percent is getting tightly linked with every one of our customers so that we’re reacting as quickly as they’re giving us data.” Tight links, Eckroth says, will enable Mattel to tackle the next big business problem: increasing manufacturing efficiency.
“My ability to get information about the sales pace of a toy and either ramping up or shutting down manufacturing depends on my having data,” he says. Having sales data on a daily or hourly basis is necessary to figure out on a micro level what is selling best where and tailor manufacturing accordingly. The greatest efficiencies will appear when the kind of trusting mutually beneficial relationship Mattel has with Wal-Mart is duplicated with the rest of the manufacturer’s retail outlets.
“Having that data on a global basis from every one of my customers allows me to optimize the sales of my products and the fill rates of my customers, ”Eckroth says. “The theme for the future is that at the end of the day, there can be symbiotic relationship between companies.”
SUMMARY
Supply chain management has been the cornerstone to Wal Mart’s success and remains their primary competitive advantage in the retail/department store industry. Their distribution system is generally regarded as the supply chain management that has long empathized visibility through the sharing of information with their suppliers. They have invested heavily in IT in case of identifying and tracking sales on individual items and the supply chain is still evolving. Introduction to RFID microchips was the cutting edge which may replace bar codes and security tags. Wal Mart also introduced “Just in time” inventory program which reduced carrying cost. The costs of goods are 5 to 10% less than competitors. Mattel learnt a lot from Wal Mart. It optimized the supply chain, but the main problem before them was increasing manufacturing efficiency. Mattel has duplicated the kind of trust with other manufacturers and retail outlets. The CIO of Mattel says that he looks forward to see companies having mutual beneficial relationship in future.
Question 1: 1. Do you agree that Wal-Mart is “the best supply chain operator of all time”? Why or why not? Answer: Wal Mart Is one of the best supply chain operators at the moment. It uses a supply chain system that is progressively giving competition to other retail stores along with pushing limits of supply chain management, searching for and supporting better technology that promises to make its IT infrastructure more efficient. Wal Mart uses its RFID microchips that replaces bar codes and security tags with a combinations of technology that costs less money. It shares it data with suppliers. By implementing CPRF, Wal Mart began a just-intime delivery program that reduced costs for both retailer and its supplier. But Wal Mart is still trying to improve the system. Moreover, the system is too expensive for low budget products, which could create trouble entering countries like India. RFID signals can’t be sent over long distance. But currently, it’s the best supply chain operator.
Question 2: What has Mattel learned from Wal-Mart? How well are they applying it to their own business? Explain your evaluation. Answer: Mattel has optimized the supply chain for Wal Mart by utilizing data gained from Wal Mart inventory databases. Like Wal Mart it has maintained an efficient supply chain so that there is less excess inventory. Mattel has applied the learning by utilizing the sales data on a daily basis or even on hourly basis to tailor the need of supply and demand. Pinpointing what products is selling and where so that Mattel can accommodate to the manufacturing needs. In doing so, both Wal Mart and Mattel are successful in the way they both are working. Question 3: What can other businesses learn from the experiences of Wal-Mart and Mattel that could improve their supply chain performance? Use an example to illustrate your answer. Answer: Wal Mart is the symbol of IT advantage. It introduced IT infrastructure in retail when nobody thought about implementing it and that too in retail. But it’s still trying to evolve its technology. It saves time and reduces costs too due to which it lowers its prices and it’s the leader in low price product offerings. Let’s take the example of a restaurant. When the inventory is being used for making dishes if RFID is used or barcode system is used, the record of absence of a particular product goes to supplier and without even informing the supplier manually or without taking labour or paper approach the inventory can be replenished.
eBay Inc.: Managing Success in a Dynamic Online Marketplace
It began as a trading site for nerds, the newly jobless, home-bound housewives, and bored retirees to sell sub prime goods: collectibles and attic trash. But eBay (www.ebay.com) quickly grew into a teeming marketplace of 30 million, with its own laws and norms, such as a feedback system in which buyers and sellers rate each other on each transaction. When that wasn’t quite enough, eBay formed its own police force to patrol the listings for fraud and kick out offenders. The company even had something akin to a bank: Its PayPal payment-processing unit allows buyers to make electronic payments to eBay sellers who can’t afford a merchant credit card account. “eBay is creating a second, virtual economy,” says W.Brian Arthur, an economist at think tank Santa Fe Institute. ‘It’s opening up a whole new medium of exchange.” eBay’s powerful vortex is drawing diverse products and players into its profitable economy, driving its sellers into the heart of traditional retailing, a $2 trillion market. Among eBay’s 12 million daily listings are products from giants such as Sears Roebuck, Home Depot, Walt Disney, and even IBM. More than a quarter of the offerings are listed at fixed prices. The result, says Bernard H.Tenenbaum, president of a retail buyout firm, is “They’re coming right from the mainstream of the retail business.” So what started out as a pure consumer auction market-place is now also becoming a big time business-to-consumer and even business-to-business bazaar that is earning record profits for eBay’s stockholders. And as the eBay economy expands, CEO Meg Whitman and her team may find that managing it could get a lot tougher, especially because eBay’s millions of passionate and clamorous users demand a voice in all major decisions. This process is clear in one of eBay’s most cherished institutions: the Voice of the Customer program. Every couple of months, the executives of eBay bring in as many as a dozen sellers and buyers, especially its high-selling “Power Sellers,” to ask them questions about how they work and what else eBay needs to do. And at least twice a week, it holds hour-long teleconferences to poll users on almost every new feature or policy, no matter how small. The result is that users feel like owners, and they take the initiative to expand the eBay economy – often beyond management’s wildest dreams. Stung by an aerospace downturn, for instance, machine-tool shop Reliable Tools Inc., tried listing a few items on
eBay in late 1998. Some were huge, hulking chunks of metal, such as a $7,000 2,300-pound milling machine. Yet they sold like ice cream in August. Since then, says Reliable’s auction manger, Richard Smith, the company’s eBay business has “turned into a monster.” Now the Irwin dale (California) shop’s $1 million in monthly eBay sales constitutes 75 percent of its overall business. Pioneers such as Reliable prompted eBay to set up an industrial products marketplace in January that’s on track to top $500 million in gross sales this year. Then there is eBay Motors. When eBay manager Simon Rothman first recognized a market for cars on eBay in early 1999, he quickly realized that such high-ticket items would require a different strategy than simply opening a new category. To jump-start its supply of cars and customers, eBay immediately bought a collector-car auction company, Kruse International for $150 million in stock, an later did a deal to include listings from online classifieds site, AutoTrader.com, Rothman also arranged insurance and warranty plans, an escrow service, and shipping and inspection services. This approach worked wonders. Sales of cars and car parts at a $5 billion-plus annual clip are eBay’s single largest market. That has catapulted eBay in from of no.1 U.S. auto dealer AutoNation in number of used cars sold. “eBay is by far one of my better sources for buyers,” says Bradley Bonifacius, Internet sales director at Dean Stallings Ford in Oak ridge, Tennessee. And for now, the big corporations, which still account for fewer than 5 percent of eBay’s gross sales, seem to be bringing in more customers than they steal. Motorola Inc., for example, helped kick off a new wholesale business for eBay last year, selling excess and returned cell phones in large lots. Thanks to the initiative of established companies such as Motorola, eBay’s wholesale business jumped nine fold, to $23 million, in the first quarter. As businesses on eBay grow larger, they spur the creation of even more businesses. A new army of merchants, for example, is making a business out of selling on eBay for other people. From almost none a couple of years ago, these so-called Trading Assistants now number nearly 23,000. This kind of organic growth makes it exceedingly tough to predict how far the eBay economy can go. Whitman professes not to know. “We don’t actually control this,” she admits. “We have a unique partner – millions of people.”
SUMMARY
eBay begun as a trading site for jobless, home-bound, bored people to sell their sub-prime goods. But soon it grew into a 3 million user site with its own laws and norms with a feedback system and its own regulations to delist fraud users. It became a virtual economy. The transactions were made by Paypal as a good alternative to credit cards. eBay offered retail products. It is $2 trillion market. Nowadays, eBay is not only for subprime products but giants like IBM and Walt Disney are also offering products which means it has become a business to customer market and in some cases a business to business market. eBay takes feedback of customers and organized the “voice of the customer” program and took the advice of the users every month for every single matter regarding the website and its policies. eBay sold many tools, cars, motorboats of huge prices and as a result the same year the gross sales grossed $500 mn. Then came the eBay motors site. Manager Simon Rotham bought a company Kruse international for motor dealings and also arranged insurance, warranty, escrow service, shipping and inspection. The strategy worked very well. People just expanded the site beyond imagination. In a few months a new group of people popped out called trading assistants who helped people sell/buy products. It has become tough to how far can an economy like eBay can go with the help of millions of people. Questions 1. Why has eBay become such a successful and diverse online marketplace? Visit the eBay website to help you answer, and check out their many trading categories, specially sites, international sites, and other features. Answer: eBay has got everything ranging from motor boats to bizarre stuffs like prank joke toys. If somebody wants anything he/she can get it from eBay as long it is legal. Visiting the site you will find that it has the most wide categories from fashion wear to electronics. It also provides feedback system, protects the customer from any kind of fraud transaction and guides you though the site if you are a new customer. It has different sites for different countries. It forms communities. Specialty sites eBay pulse, provides information about popular search items, tracks most watched items.
Moreover, it has discussion boards, groups, chat rooms, review and guides. It also provides WAPS, JAVA, Mobile shopping and SMS alerts etc.
Question 2 2. Why do you think eBay has become the largest online/off-line seller of used cars, and the largest online seller of certain other products, like computers and photographic equipment? Answer: The products like computers and photographic equipments are sometimes very much expensive if bought from showrooms. The same products are available on eBay new or second hand very cheap. Also there is free shipping and fixing for these products which frees the seller from additional burden and also the seller gets the right price because of the online bidding process. About cars, the second hand cars generally don’t provide any kind of insurance, warranty and inspection services. Due to these advantage eBay became the largest online/off-line seller of used cars and the largest online seller of certain other products like computers and photographic equipments.
Question 3: 3. Is eBay’s move from a pure consumer-to-consumer auction marketplace to inviting large and small businesses to sell to consumers and other businesses, sometimes at fixed prices, a good long-term strategy? Why or why not? Answers: According to the current trend, the trade of products has not been disturbed by turning the website into a business to customer or business to business market. Bidding process on the website has been eBay’s has been the chief focus. But if some businesses are introducing fixed price products it doesn’t give much competition to other traders in long term because the competition will only be survived by those who will offer attractive prices and if fixed price doesn’t attract customer it is only going to die in the long term. eBay itself is an economy and the market forces will efficiently regulate the forces.
Wal-Mart and Mattel: Supply Chain Management Best Practices eBay Inc.: Managing Success in a Dynamic Online Marketplace
Submitted By: Abha Mahapatra (75003) BFIA 2 A SSCBS (DU)
Wal-Mart and Mattel: Supply Chain Management Best Practices
Being a supplier to Wal-Mart is a two-edged sword,” says Joseph R.Eckroth Jr., CIO at Mattel Inc. (www.mattel.com). “They’re a phenomenal channel but a tough customer. They demand excellence.” It’s a lesson that the El Segundo, California-based toy manufacturer and thousands of other suppliers learned as the world’s largest retailer, Wal-Mart Stores (www.walmart.com), built an inventory and supply chain management system that changed the face of the business. By investing early and heavily in cutting-edge technology to identify and track sales on the individual item level, the Bentonville Arkansas-based retail giant made its IT infrastructure a key competitive advantage that has been studied and copied by companies around the world. “We view Wal-Mart as the best supply chain operator of all time,” says Pete Abell, retail research director at high-tech consultancy AMR Research in Boston. Abell says he expects the company to remain in the vanguard. “Wal-Mart is evolving; they’re not standing still,” he says. The company is still pushing the limits of supply chain management, he says, searching for and supporting better technology that promises to make its IT infrastructure more efficient. Radio frequency identification (RFID) microchips, for example, may replace bar codes and security tags with a combination technology that costs less money.
Early on, Wal-Mart saw the value of sharing that data with suppliers, and it eventually moved that information online on its Retail Link website. Opening its sales and inventory databases to suppliers is what made Wal-Mart the powerhouse it is today, says Rena Granofsky, a senior partner at J.C.Williams Group, a Toronto-based retail consulting firm. While its competition guarded sales information, Wal-Mart approached its suppliers as if they-were partners, not adversaries, says Granofsky. By implementing a collaborative planning, forecasting, and replenishment (CPFR) program, Wal-Mart began a just-in-time inventory program that reduced carrying costs for both the retailer and its suppliers. “There’s a lot less excess inventory in the supply chain because of it,” says Granofsky. That efficiency is the key factor in maintaining Wal-Mart’s low-price leadership among retailers, says Abell. “Their margins can be far lower than other retailers’ because they have such an efficient supply chain,” he says. The company’s cost of goods is 5 to 10 percent less than that of most of its competitors, Abell estimates.
Wal-Mart’s success with supply chain management has inspired other retail companies, which are now playing catch-up, says Abell. “Others are now just starting. They’ve all had inventory systems, but sharing the data with their partners hasn’t been easy,” he says. Wal-Mart’s influence has extended beyond the retail sector. Mattel’s Eckroth says that he studied Wal-Mart’s supply chain best practices when he worked at a manufacturing division of General Electric Co. “They’re a benchmark company,” he says. One reason Wal-Mart is studied so closely is that it gets buy-in from its suppliers to an incredible degree. That’s because its programs and practices benefit not just the retailer but its partners as well, says Eckroth. CPFR, he says has “blurred the lines between supplier and customer. You’re both working to the same end: To sell as much product as possible without either of us having too much inventory. We’ve learned that if we listen to Wal-Mart, take their initiatives seriously, and align our strategies with making them successful, we both can succeed.”
Mattel has learned a lot from working with Wal-Mart and is bringing those lessons to bear in its relationship with other channels, says Eckroth. “Getting the supply chain optimized inside of Mattel is only 50 percent of the equation,” he says. “The other 50 percent is getting tightly linked with every one of our customers so that we’re reacting as quickly as they’re giving us data.” Tight links, Eckroth says, will enable Mattel to tackle the next big business problem: increasing manufacturing efficiency.
“My ability to get information about the sales pace of a toy and either ramping up or shutting down manufacturing depends on my having data,” he says. Having sales data on a daily or hourly basis is necessary to figure out on a micro level what is selling best where and tailor manufacturing accordingly. The greatest efficiencies will appear when the kind of trusting mutually beneficial relationship Mattel has with Wal-Mart is duplicated with the rest of the manufacturer’s retail outlets.
“Having that data on a global basis from every one of my customers allows me to optimize the sales of my products and the fill rates of my customers, ”Eckroth says. “The theme for the future is that at the end of the day, there can be symbiotic relationship between companies.”
SUMMARY
Supply chain management has been the cornerstone to Wal Mart’s success and remains their primary competitive advantage in the retail/department store industry. Their distribution system is generally regarded as the supply chain management that has long empathized visibility through the sharing of information with their suppliers. They have invested heavily in IT in case of identifying and tracking sales on individual items and the supply chain is still evolving. Introduction to RFID microchips was the cutting edge which may replace bar codes and security tags. Wal Mart also introduced “Just in time” inventory program which reduced carrying cost. The costs of goods are 5 to 10% less than competitors. Mattel learnt a lot from Wal Mart. It optimized the supply chain, but the main problem before them was increasing manufacturing efficiency. Mattel has duplicated the kind of trust with other manufacturers and retail outlets. The CIO of Mattel says that he looks forward to see companies having mutual beneficial relationship in future.
Question 1: 1. Do you agree that Wal-Mart is “the best supply chain operator of all time”? Why or why not? Answer: Wal Mart Is one of the best supply chain operators at the moment. It uses a supply chain system that is progressively giving competition to other retail stores along with pushing limits of supply chain management, searching for and supporting better technology that promises to make its IT infrastructure more efficient. Wal Mart uses its RFID microchips that replaces bar codes and security tags with a combinations of technology that costs less money. It shares it data with suppliers. By implementing CPRF, Wal Mart began a just-intime delivery program that reduced costs for both retailer and its supplier. But Wal Mart is still trying to improve the system. Moreover, the system is too expensive for low budget products, which could create trouble entering countries like India. RFID signals can’t be sent over long distance. But currently, it’s the best supply chain operator.
Question 2: What has Mattel learned from Wal-Mart? How well are they applying it to their own business? Explain your evaluation. Answer: Mattel has optimized the supply chain for Wal Mart by utilizing data gained from Wal Mart inventory databases. Like Wal Mart it has maintained an efficient supply chain so that there is less excess inventory. Mattel has applied the learning by utilizing the sales data on a daily basis or even on hourly basis to tailor the need of supply and demand. Pinpointing what products is selling and where so that Mattel can accommodate to the manufacturing needs. In doing so, both Wal Mart and Mattel are successful in the way they both are working. Question 3: What can other businesses learn from the experiences of Wal-Mart and Mattel that could improve their supply chain performance? Use an example to illustrate your answer. Answer: Wal Mart is the symbol of IT advantage. It introduced IT infrastructure in retail when nobody thought about implementing it and that too in retail. But it’s still trying to evolve its technology. It saves time and reduces costs too due to which it lowers its prices and it’s the leader in low price product offerings. Let’s take the example of a restaurant. When the inventory is being used for making dishes if RFID is used or barcode system is used, the record of absence of a particular product goes to supplier and without even informing the supplier manually or without taking labour or paper approach the inventory can be replenished.
eBay Inc.: Managing Success in a Dynamic Online Marketplace
It began as a trading site for nerds, the newly jobless, home-bound housewives, and bored retirees to sell sub prime goods: collectibles and attic trash. But eBay (www.ebay.com) quickly grew into a teeming marketplace of 30 million, with its own laws and norms, such as a feedback system in which buyers and sellers rate each other on each transaction. When that wasn’t quite enough, eBay formed its own police force to patrol the listings for fraud and kick out offenders. The company even had something akin to a bank: Its PayPal payment-processing unit allows buyers to make electronic payments to eBay sellers who can’t afford a merchant credit card account. “eBay is creating a second, virtual economy,” says W.Brian Arthur, an economist at think tank Santa Fe Institute. ‘It’s opening up a whole new medium of exchange.” eBay’s powerful vortex is drawing diverse products and players into its profitable economy, driving its sellers into the heart of traditional retailing, a $2 trillion market. Among eBay’s 12 million daily listings are products from giants such as Sears Roebuck, Home Depot, Walt Disney, and even IBM. More than a quarter of the offerings are listed at fixed prices. The result, says Bernard H.Tenenbaum, president of a retail buyout firm, is “They’re coming right from the mainstream of the retail business.” So what started out as a pure consumer auction market-place is now also becoming a big time business-to-consumer and even business-to-business bazaar that is earning record profits for eBay’s stockholders. And as the eBay economy expands, CEO Meg Whitman and her team may find that managing it could get a lot tougher, especially because eBay’s millions of passionate and clamorous users demand a voice in all major decisions. This process is clear in one of eBay’s most cherished institutions: the Voice of the Customer program. Every couple of months, the executives of eBay bring in as many as a dozen sellers and buyers, especially its high-selling “Power Sellers,” to ask them questions about how they work and what else eBay needs to do. And at least twice a week, it holds hour-long teleconferences to poll users on almost every new feature or policy, no matter how small. The result is that users feel like owners, and they take the initiative to expand the eBay economy – often beyond management’s wildest dreams. Stung by an aerospace downturn, for instance, machine-tool shop Reliable Tools Inc., tried listing a few items on
eBay in late 1998. Some were huge, hulking chunks of metal, such as a $7,000 2,300-pound milling machine. Yet they sold like ice cream in August. Since then, says Reliable’s auction manger, Richard Smith, the company’s eBay business has “turned into a monster.” Now the Irwin dale (California) shop’s $1 million in monthly eBay sales constitutes 75 percent of its overall business. Pioneers such as Reliable prompted eBay to set up an industrial products marketplace in January that’s on track to top $500 million in gross sales this year. Then there is eBay Motors. When eBay manager Simon Rothman first recognized a market for cars on eBay in early 1999, he quickly realized that such high-ticket items would require a different strategy than simply opening a new category. To jump-start its supply of cars and customers, eBay immediately bought a collector-car auction company, Kruse International for $150 million in stock, an later did a deal to include listings from online classifieds site, AutoTrader.com, Rothman also arranged insurance and warranty plans, an escrow service, and shipping and inspection services. This approach worked wonders. Sales of cars and car parts at a $5 billion-plus annual clip are eBay’s single largest market. That has catapulted eBay in from of no.1 U.S. auto dealer AutoNation in number of used cars sold. “eBay is by far one of my better sources for buyers,” says Bradley Bonifacius, Internet sales director at Dean Stallings Ford in Oak ridge, Tennessee. And for now, the big corporations, which still account for fewer than 5 percent of eBay’s gross sales, seem to be bringing in more customers than they steal. Motorola Inc., for example, helped kick off a new wholesale business for eBay last year, selling excess and returned cell phones in large lots. Thanks to the initiative of established companies such as Motorola, eBay’s wholesale business jumped nine fold, to $23 million, in the first quarter. As businesses on eBay grow larger, they spur the creation of even more businesses. A new army of merchants, for example, is making a business out of selling on eBay for other people. From almost none a couple of years ago, these so-called Trading Assistants now number nearly 23,000. This kind of organic growth makes it exceedingly tough to predict how far the eBay economy can go. Whitman professes not to know. “We don’t actually control this,” she admits. “We have a unique partner – millions of people.”
SUMMARY
eBay begun as a trading site for jobless, home-bound, bored people to sell their sub-prime goods. But soon it grew into a 3 million user site with its own laws and norms with a feedback system and its own regulations to delist fraud users. It became a virtual economy. The transactions were made by Paypal as a good alternative to credit cards. eBay offered retail products. It is $2 trillion market. Nowadays, eBay is not only for subprime products but giants like IBM and Walt Disney are also offering products which means it has become a business to customer market and in some cases a business to business market. eBay takes feedback of customers and organized the “voice of the customer” program and took the advice of the users every month for every single matter regarding the website and its policies. eBay sold many tools, cars, motorboats of huge prices and as a result the same year the gross sales grossed $500 mn. Then came the eBay motors site. Manager Simon Rotham bought a company Kruse international for motor dealings and also arranged insurance, warranty, escrow service, shipping and inspection. The strategy worked very well. People just expanded the site beyond imagination. In a few months a new group of people popped out called trading assistants who helped people sell/buy products. It has become tough to how far can an economy like eBay can go with the help of millions of people. Questions 1. Why has eBay become such a successful and diverse online marketplace? Visit the eBay website to help you answer, and check out their many trading categories, specially sites, international sites, and other features. Answer: eBay has got everything ranging from motor boats to bizarre stuffs like prank joke toys. If somebody wants anything he/she can get it from eBay as long it is legal. Visiting the site you will find that it has the most wide categories from fashion wear to electronics. It also provides feedback system, protects the customer from any kind of fraud transaction and guides you though the site if you are a new customer. It has different sites for different countries. It forms communities. Specialty sites eBay pulse, provides information about popular search items, tracks most watched items.
Moreover, it has discussion boards, groups, chat rooms, review and guides. It also provides WAPS, JAVA, Mobile shopping and SMS alerts etc.
Question 2 2. Why do you think eBay has become the largest online/off-line seller of used cars, and the largest online seller of certain other products, like computers and photographic equipment? Answer: The products like computers and photographic equipments are sometimes very much expensive if bought from showrooms. The same products are available on eBay new or second hand very cheap. Also there is free shipping and fixing for these products which frees the seller from additional burden and also the seller gets the right price because of the online bidding process. About cars, the second hand cars generally don’t provide any kind of insurance, warranty and inspection services. Due to these advantage eBay became the largest online/off-line seller of used cars and the largest online seller of certain other products like computers and photographic equipments.
Question 3: 3. Is eBay’s move from a pure consumer-to-consumer auction marketplace to inviting large and small businesses to sell to consumers and other businesses, sometimes at fixed prices, a good long-term strategy? Why or why not? Answers: According to the current trend, the trade of products has not been disturbed by turning the website into a business to customer or business to business market. Bidding process on the website has been eBay’s has been the chief focus. But if some businesses are introducing fixed price products it doesn’t give much competition to other traders in long term because the competition will only be survived by those who will offer attractive prices and if fixed price doesn’t attract customer it is only going to die in the long term. eBay itself is an economy and the market forces will efficiently regulate the forces.
