Marketing

eBay's changing business model responds to omnichannel challenge

March 30, 2015

Global

March 30, 2015

Global
Martin Koehring

Senior Manager for Sustainability, Climate Change and Natural Resources & Head of the World Ocean Initiative

Martin Koehring is senior manager for sustainability, climate change and natural resources at (part of The Economist Group). He leads Economist Impact's sustainability-related policy and thought leadership projects in the EMEA region. He is also the head of the, inspiring bold thinking, new partnerships and the most effective action to build a sustainable ocean economy.

He is a member of the Advisory Committee for the UN Environment Programme’s Global Environment Outlook for Business and is a faculty member in the Food & Sustainability Certificate Program provided by the European Institute for Innovation and Sustainability.

His previous roles at The Economist Group, where he has been since 2011, include managing editor, global health lead and Europe editor at The Economist Intelligence Unit.

He earned a bachelor of economic and social studies in international relations from Aberystwyth University and a master’s degree in diplomacy and international relations from the College of Europe.

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It is easy to assume that relatively new companies, such as eBay or Amazon, are leading the charge towards online and hybrid shopping, wiping out traditional retailers as shopping habits change in their favour. In fact, these companies are themselves having to change fast to keep up with rapidly evolving consumer habits. In the space of just 15 years eBay's business model has changed fundamentally, for example, and it continues to evolve.

Set up as an online auction site, most of eBay’s business is now selling new goods for a fixed price. "More than three-quarters of our listings today are 'buy it now'," says Valerie Nygaard, eBay’s senior director of buyer experience. The company's growth has been as fast as the changes to its business model. In 2013 its gross merchandising volume (excluding vehicles) was above US$76bn globally and continuing to grow fast, up 13% on 2012.

As expected from an online specialist, eBay is an expert at many of the basics demanded by consumers, from simple ordering and delivery procedures to an effective mobile app. However, as Ms Nygaard points out: "We face the reverse challenge to bricks-and-mortar retailers." She points to the formation of eBay Collections, allowing customers the chance to browse their favourite things on the site as well as in physical stores. "It gives us a shop window," she explains. As well as allowing eBay to highlight offers from the millions of different items available on the site, shoppers can create collections around the areas that interest them, from vintage clothing to computer equipment.

eBay is also working hard on data analytics techniques to identify customers' tastes and offer them the right things in marketing e-mails, recognising the value of the huge amount of information that it holds. "You have to be careful not to overload people with offers," warns Ms Nygaard, acknowledging how annoying endless sales messages can become.

Perhaps most intriguing, however, is that eBay, in many ways symptomatic of the new online competition that troubles traditional retailers, also recognises that it must become a part of the omnichannel revolution. Its own research shows that close to one-third (31%) of customers visit a store before making a purchase online, but also that a greater percentage—34%—research online before buying in-store. Simply put, eBay needs to co-operate with the retail chains that use it as a sales channel.

In the UK alone it now has tie-ups with more than 100 retailers. For eBay, this allows it to get around some practical problems, such as offering options for home delivery. Its customers can now opt to pick up their packages from Argos stores, for example. For retailers already using eBay heavily as a sales channel, it allows the one-time auction site to become a part of their omnichannel strategy, rather than being in opposition to it. See something in-store, buy it over eBay and then have it delivered to the store or to your home. It's a natural fit, and a big shift in the way of doing business for both eBay and traditional retailers.

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