Running head: EBAY IN ASIA 1

EBay's Brief History

Originally known as AuctionWeb, Ebay, Inc. was founded in 1995 by Pierre Omidyar,

who was looking to create an online marketplace with a flea market feel. Since then, eBay has

become one of the largest online auctions providers in the world. Originally, the company was

focused in providing customer-to-customer connectivity in order to spur online sales. This

strategy was successful from the start. Thus, creating a natural succession to the business-to-

consumer and business-to-business model. eBay's reach transcends that of its beginnings. The

company has an online presence worldwide, as well as operations based in Latin America,

Europe and Asia. The company has been successful at incorporating web technologies to

enhance its customer experience. In order to provide a more secure way to transfer payments, the

company acquired PayPal in 2002. PayPal provide eBay's registered users a way to used their

credit cards and banking information in a more safe and secure environment. When there is a

dispute related to an eBay transaction, PayPal holds the payment until the issue is resolved. eBay

charges the seller a three percent of the total amount of the transaction as a fee to use the PayPal

service.

With the purchase of Rent.com, eBay expanded its customer offerings to the real estate

arena. Additionally, in 2005 eBay acquired Skype.com an internet telephone company that offers

video and audio communication online. With the addition of Skype.com, eBay increased its

customer base to 480 million registered users. One of the factors that makes eBay successful is

the ability to create a sales function without keeping inventory, shipping products, providing

warranty, or managing returns.

Key Factor of eBay's Failure in the Asian Market

The initial introduction of eBay's business into the Asian market was plague by a lot of

missteps. eBay failed to understand the buying habits of the region. The company modeled its

Asian business with little variance from the way it was run in other countries. By doing so, eBay

executives failed to employ an effective adaptation strategy in order to relate to the local

consumers.

"Adaptation does not requires business executives to forsake their ways and change to

local customs; rater, executives must be aware of local customs and be willing to

accommodate to those differences that can cause misunderstandings."

(Cateora & Graham, 2005).

The fact that eBay used the same marketing and operations approach in its launches in

the U.S. and European markets, did not guaranteed that the same level of success was to be

gained by the same strategy in Asia. The company felt too comfortable with its branding and did

not make enough marketing efforts to promote it in the Asian region. Another blunder was

eBay's slow reaction to local competition from Yahoo, Alibaba, Joyo and other online auction

companies.

These problems could have been, if not prevented, at least foreseen, would have the

company engaged in a deep marketing analysis of the region. This analysis would have given

eBay a better understanding of what the local consumer were looking for in an online auction

website.

Comparison of Strategies Between eBay and Yahoo

These two companies embarked in the same business, but with different approaches. The

most striking difference between these two enterprises is that Yahoo entered the Asian market as
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part of a joint venture with Japan's Softbank Corp. This association gave Yahoo access to

business intelligence that was aligned with the Asian culture, and shed light regarding the Asian

consumer buying behavior. Yahoo's initial entry to the region was known by the offerings of its

free news, chat rooms, email and online games services. So, by the time the Yahoo decided to

promote and established its online auction website, the local consumer was familiar with the

Yahoo brand. Yahoo's initial revenue stream in Japan was coming from local advertising on its

website. It decided to charge customer fees seven years later after its inception.

In the other hand, eBay came into operations in the Asian market, from its beginning, as

an online auction site. There was not an emphasis on marketing or brand adaptation. eBay used a

credit card payment method that was rejected by its Asian users. At the time, the most common

method of payment for online purchases in Japan was bank wires or COD. eBay also imposed a

five percent commission per transaction, while at the same time, Yahoo did not. eBay's initial

offerings was targeted to collectible items, it was later learned, that the Japanese consumers were

more interested in buying new products online.

"eBay placed an emphasis on used collectables when launched in Japan as had been

successful in the US. Japanese consumers however were interested in new products and

Yahoo provided that. Consumers failed to switch over and eBay Japan's site was closed

in 2002." (Wingfield, 2005)..

Assess eBay's Shift to Tom Online

Tom Online was founded in 2000 and before its association with eBay, its main offering

was cellular phone related products. As discussed earlier, eBay has not managed to successfully

enter the Asian market because of the lack of understanding of the local economy, cultural

approach to auctions, and the ignorance on the buying behavior of the local market. The strategy
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to shift eBay operations to a local player like Tom Online could give eBay access to business

intelligence related to the buying habits of China.

eBay is following the pattern that its most thriving counterparts and competitors decided

to adopt earlier on in their entry strategies. Yahoo partnered with a local internet provider,

Alibaba.com, and Amazon has done the same with Joyo.com. These synergies have given these

companies the leverage of brand localization and recognition.

Formulate Strategies for eBay for the Asian Market

The differences between the American Market and the Asian Market are sufficient to

propel a company to make changes its marketing approach. In the U.S., consumers are more

likely to trust a stranger with their money. We seen this practice every day when people let other

people invest their money, purchase items without touching it or inspecting it.

In contrast, these practices are absent the Asian culture. Trust is a valuable commodity in

Asia, and not many people will trust their money to strangers. This is one of the main reasons the

preferred method of payment for online auctions are bank wires or COD. These payment

methods protect consumers in case the product is faulty, not delivered, or not what they ordered.

How do you strategize around these barriers? The answer might lie in acquisitions. eBay

should seek to acquire a company that already has the potential to become a big player in the

online auctions arena in Asia. It should do so without significantly altering the already in place

management structure.

If entering the Asian market is not done through acquisitions, then in order to overcome

the lack of Asian cultural knowledge within executives at the higher levels in eBay, the company

should seek to integrate more Asian personnel in their ranks. By doing so, eBay can once more
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create the communal nature of its vision, and effectively project a sense of belonging among its

Asian customers.

References
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Cateora, P., & Graham, J. L. (2005). International Marketing (13th ed.). New York, New York:

McGraw-Hill Irwin.

Wingfield, N. (2005, September 27). The Other eBay: Amazon Is Winning Over Small Vendors.

Wall Street Journal , p. B4.