Ebay Five Forces Analysis

Five Forces Analysis of Ebay

E-bay is one of the most recognized brand names in the field of e-retail. While compared to Amazon, it has seen less growth, the brand has still maintained an impressive presence in the e-retail business. In the recent years, E-bay seems to have geared up to challenge Amazon. It has prepared a road-map for future years to find quicker growth. Amid tough competition and changing market dynamics, the road to a profitable future can be tough for E-bay. To challenge Amazon would not be easy and still E-bay has demonstrated some key strengths, that could help it improve its current position. Here is a five forces analysis that shows how these forces impact E-bay’s position in the industry and its ability to compete with others. Porter’s five forces model is an analytical tool that analyses a brand’s or industry’s position relative to five important forces that influence its attractiveness and competitiveness. These forces are a part of every market and industry and this analysis helps brands develop their competitive strengths and make their position stronger.

Bargaining power of buyers: High

Customers hold enough influence in the online market. It is mainly because of the emergence of so many players each of which is trying to cater to their needs and wants in its best way. There are both online and offline players that E-bay has to compete with for market share. Buyers can shop from multiple sources and they want the best prices and deals plus fastest delivery options. Overall, the balanced is tilted in the favor of the customers and so they wield much power. Some of the risks get mitigated by the large range of products and services available at e-bay and still the bargaining power of the customers is huge.

Bargaining power of suppliers: Low

There are millions of sellers selling their products through e-bay. For every product there are so many suppliers which provides Ebay with too many options. This limits the bargaining power of the suppliers and keeps E-bay in control. However, the same sellers list their products on other sites too and still, it is the seller sites that are mostly in control. If we think of shipping carriers as suppliers, then they hold some clout because of their limited number. Similarly, the referring sites and Google too hold some clout because they direct searched ad customers towards Google. However, e-bay has become a brand and is a dominant player in the e-retail industry which reduces the clout of its suppliers. So, overall the bargaining power of the suppliers is very limited.

Threat of new entrants: Moderate

Technology has reduced the barriers to entry in the e-retail segment. Any player with sufficient capital to invest in technology can erect its own ecommerce. The entry of small and big players like Alibaba, flipkart, snapdeal etc at national and international levels has proved this. Moreover, Paypal which is a wholly owned subsidiary of E-bay is currently the dominant player i9n online payments. However, established and big players like Google, Apple and Amazon can hack into its market share with their financial and technological might if they decide so. So, overall the threat of new entrants is high for Ebay.

Threat of substitutes: low

E-bay sells a very large range of products and this moderates the threat arising from the substitute goods. While there are other sellers selling similar products, Ebay is always in a position to expand its products’ list. This helps it adapt to the changing trends.

Competitive rivalry in the industry: Medium to high

There are both online and offline players that challenge the position of Ebay. In US alone there are several US and Non US brands which have entered the retail landscape. In other countries too local and international players are competing for market share. Apart from product range and customer service, the competitors compete on the basis of prices. All of this means intense completion to attract customers. In the online payments also the competition is expected to intensify. Apart from Apple Pay, Samsung has also introduced the option for simplified payment on its select models. These factors will continue to intensify the competition for Ebay.

Recommendations:

This analysis shows that the three factors that E-bay must remain most concerned with are the bargaining power of buyers, threat of the new entrants and the level of competition. Managing the bargaining power of buyers will be difficult and E-bay will need to focus upon marketing and prices to attract more customers and improve its position. The threat of new entrants too cannot be reduced. However, its brand image and recognition can still help it with the problem. However, it must focus on penetrating the Asian markets deeper for new opportunities lie there. Similarly, the intense competition in the industry does to have a solution either. A focus on customer service and customer convenience can help E-bay grab a larger market share. It must make use of Artificial Intelligence , Cognitive Intelligence and similar other technologies to improve its level of customer service.

Sources:

https://www.forbes.com/sites/greatspeculations/2014/11/24/ebay-through-the-lens-of-porters-five-forces/#5435cafcdd14

https://www.forbes.com/sites/ryanmac/2016/04/26/ebay-shows-signs-of-recovery-as-sales-grow-in-first-quarter/#706bf85510db