How eBay Works: Understand eBay Business Model & eBay Revenue Model

eBay is an online shopping platform which is popular for auctions and C2C (Customer to Customer) sales. The company was founded approximately 25 years ago on September 3, 1995 by Pierre Omidyar and is one of the pioneers in ecommerce industry. As of 2019, the net worth of eBay was reported to be $18.174B.

Over the past recent years, eBay has experienced increase in revenue even after COVID-19 onset. The shift of consumer behavior towards online shopping during restricted movement during COVID-19 has played a major role in this growth.

As per a report by eMarketer, ecommerce market is expected to grow by 17.9% in 2021, reaching a value of $933.30B. This growth is expected to transcend into the future and resultantly, its expected that ecommerce sales will make up to 23.6% of total retail sales by 2025 as opposed to mere 19% in 2019.

Such amazing future forecast has drawn interest towards the history of eBay and entrepreneurs are trying to understand how eBay works, what is eBay business model and how does eBay earn money. As professional experts in ecommerce mobile app development, we are here to answer these questions to set the stage for you to launch your ecommerce online marketplace like eBay.

See Also: Aggregator Marketplaces: How B2C Aggregators Work?

History Of eBay

The journey of eBay started when AuctionWeb was founded in 1995 as a sole proprietorship. However, the name was changed to eBay in 1997. The company expanded its operations and acquired PayPal and iBazar in 2002. The ecommerce online marketplace continued with its success and acquired rent.com, Craigslist and Skype in 2004 followed by acquiring StubHub in 2007. In 2008, the online marketplace eBay launched its mobile app. To continue with its success story, eBay launched a Global Shipping Program in 2012 and a 3 day or less delivery initiative in 2017.

eBay Growth Timeline

What Is eBay Business Model?

Initially, eBay was launched as an auction platform. The platform offered sellers a space to list their items for bidding. The customer with the highest bid could keep the listed item. However, eBay business model has evolved to become an online retail marketplace over the years.

Here is an insight into eBay business model to help you launch an online marketplace like eBay:

Key Customers: Key customers of eBay can be divided into three major segments namely Global Mass Market, shoppers and sellers. The platform attracts sellers who want to sell their products at a fixed price and the ones who want to bid off their products.

Key Channels: eBay has four key channels to reach its customers – mobile app, eBay website, social networks, and its digital stores.

Key Activities: As an online marketplace, eBay has four key activities. To start with, it facilitates B2C and C2C transactions. The company focuses on the customer experience and offers round the clock customer support. The third key activity performed by eBay is web development and server maintenance. It is essential to provide a smooth experience to its customers and ensure minimal downtime in the services.  Last of the key activities of the online marketplace is logistics. The logistics activities help in ensuring timely and efficient delivery of products to its customers.

Value Proposition: The success of every business is defined by the value it adds to the life or buying journey of its customers. For the buyers, eBay is an online marketplace that offers an inventory of a wide variety and category of products. It’s a global ecommerce hub that connects buyers and sellers from across the world.

Cost Structure: When understanding eBay business model to launch your own online marketplace, it is of immense importance to understand the expenses or cost structure of the company. The cost structure segment of eBay business model involves four main expenses. The first major expense of the online marketplace includes paying employee wages. The second expense is made to pay maintenance costs of the website, mobile app platform and other digital stores. Third element in the cost structure of eBay business model is logistics and marketing costs. The last element is marketing and developmental costs targeted at customer acquisition.

The essence of eBay business model lies in facilitating interaction between the sellers and buyers. So, how does the online marketplace work?

• Sellers can list their products on the online marketplace platform with necessary details such as product images, description, price and shipping details. In case the seller wants to list a product for bidding, he can list it on the platform with the minimum bid value, available mode of payments and bidding window.
• The online marketplace offers a fixed number of free listings to the sellers per month. For any additional listing, the seller has to pay a fixed price to the company.
• The buyers can easily login to the online marketplace via the website or mobile app. Buyers can search for products from different categories and compare the prices offered by different sellers to make a suitable purchase.
• The online marketplace also offers a Deals option to showcase the active deals available at the time for the buyer.

See Also: How to Start a Successful Multivendor E-commerce Marketplace?

How eBay Makes Money – An Insight Into eBay Revenue Model

eBay revenue model has different revenue streams:

• The first revenue channel of the online marketplace revenue model consists of the listing fee and final value fee charged to the sellers. As stated earlier, the sellers are offered a fixed number of free listings per month, beyond which the seller has to pay a fixed fee for every product listed on the online marketplace. For every successful sale, eBay charges a final fee to the sellers. However, any seller that is registered with eBay is offered a concession on the final fee.
• The company also generates revenue from online ticket trading via its acquired subsidiary StubHub.
• International trade is another major revenue generating stream for eBay.

Conclusion

Online marketplaces have become a popular shopping platform among users and the popularity is expected to rise after COVID-19. So, if you want to launch your ecommerce app like eBay, it is imperative to have detailed information about the business model and revenue model of eBay. As professionals in online marketplace app development, Code Brew Labs focuses on educating the entrepreneurs on requirements of app development, features and cost of developing ecommerce app like eBay.Let’s connect now!