The Ebay Business Model - Use it to Your Advantage - By Mike Ralph

The online auction process offers a business model whereby participants bid for products and / or services over the internet. The biggest and most widely known of these auction sites is Ebay.

Ebay is by far the largest online auction site and like the majority of the online auction sites it does not actually sell goods that it owns. It just facilitates the process of listing and displaying the products, provides the ability to bid on them and also provides a basis so that the products can be paid for. Put simply it has generated a virtual marketplace in which members can buy and sell without leaving the comfort of their own home.

There are a number of strengths and advantages that using this business model to buy and sell products can provide and I strongly suggest that ALL online sellers consider getting a presence in the marketplace to take advantage of them. These strengths typically are:

The sheer size of the marketplace.

Ebay offers a huge marketplace that is not bound by the traditional limitations of physical location, there are literally millions and millions of buyers and sellers which combine to produce a huge scope of products and service for sale which gets the attention of far more potential customers than an average business can expect for the same money.

A self perpetuating marketplace.

Ebay by its own nature is a self perpetuating marketplace, a large number of bidders encourage more sellers into the marketplace which in turn encourages more sellers and so on. The member projections for the Ebay marketplace in the next two years are absolutely huge. As can be expected the larger the marketplace becomes the more valuable the business model becomes for all concerned.

Geographical location means nothing.

Usually a business is confined to selling to a particular area, if they are lucky enough and willing to invest enough, a particular country. Not with Ebay, a simple check of a box allows the seller to sell to a buyer on the other side of the world for the same cost as it would cost to sell to someone down the road.

No time constraints

Ebay auctions are not governed by any time constraints they are available 24/7 for the duration of the auction listing. This not only provides convenience for the buyer but also greatly increase the potential number of buyers for that item which in turn will increase the profit realised from the sale.

It creates buyers euphoria.

Ebay bidding becomes also akin to gambling whereby members, wanting the particular product, develop an ‘anticipation of winning’ state of mind and many get involved in the game so much that it pushes the final bids higher than could be expected from normal retail methods. This also ensures that the members return to the marketplace to feed their addiction thus also maintaining the size of the marketplace and potential buyers.

The whole process is capital light.

For what Ebay can offer the costs involved in operating in the marketplace are low, what other business medium can offer the exposure and customer base for a few pounds investment….although lots and lots of people complain that the costs of operating within the Ebay marketplace are high, I would argue that this is because they are selling the wrong product.

Put simply:

If you are aiming to get online and sell a product then to ignore Ebay is to be out of touch with reality and will damage your business....

Mike - Webmaster and eBay Power Seller at Online Auction Trader

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