Electronic markets and auctions – Group 84
Link video: https://www.youtube.com/watch?v=ZcPFT7M_5lQ
Everybody knows eBay and Amazon. However, what most people don’t realize is that these online marketplaces are affecting and transforming the entire retail sector. Namely, e-commerce technologies (i.e. online marketplaces) reduce consumer search costs, making it easier to compare different producers’ products and prices. On the supply side, e-commerce enables new distribution technologies that can reduce supply chain costs and improve service. Also, e-commerce is characterized by the electronic brokerage effect: by electronically connecting many different buyers and suppliers through a central database the need for both parties to contact a large number of alternative parties individually is deleted. This increases the number and quality of alternatives that can be considered and decreases the cost of the entire product selection process. However, compared to offline markets, online markets have more information asymmetry.
The electronic commerce movement continues to grow as more consumers embrace the convenience of shopping from the comfort of their homes through online platforms. Both eBay and Amazon stand out as major players in this marketplace. Amazon is the world’s largest online retailer. It became the most dominant player in the world due to their ability to offer the lowest prices, their strategically dotted delivery network, their progressive deals with postal services and their completely robot-operated warehouses. However, Amazon does not have free shipping costs and their immense amount of product categories might confuse consumers. Another successful e-commerce company is eBay. Ebay is the world’s largest marketplace due to its auction-based business model, global reach and economies of scale. However, eBay charges high fees and lacks a future growth strategy. Whereas Amazon is more focused on selling new goods for fixed prices, eBay’s products are mainly second-hand and sold by means of an auction. Also, Amazon is more buyer-oriented whereas eBay is more seller-oriented.
The amount of people connected to the internet has been steadily growing since the internet was created. We believe that this growth will continue, providing an advantage for the e-commerce industry. However, due to high fees and no clear strategy for the future, continuing success is not necessarily guaranteed for companies like Amazon and eBay. Their business models are relatively easy to duplicate and once established retail companies with physical stores have settled both online and offline, pure e-commerce companies might be in danger. After all, many customers still feel the need to see and touch (especially complex) products in real-life before purchasing them online to reduce product uncertainty. On top of that, it is less expensive and time-consuming to expand your business to online retailing than the other way around providing an advantage for currently offline but successful companies. These threats should be an incentive for Amazon and eBay to critically examine their business models and strategies in order to stay competitive in the future.
