Brief Excerpt from Industry Overview Chapter:
Companies in this industry operate auction websites for consumer-to-consumer or business-to-consumer trade of new and used goods. Major US companies include eBay, which dominates the industry, and eBid; major companies based outside the US include Argentina's MercadoLibre and China's Taobao (owned by Alibaba Group).
Demand is driven by consumers' personal income. Profitability of individual companies depends on effective marketing to build a base of buyers and sellers. Larger firms enjoy economies of scale in technology purchasing, customer service, and telecommunications. Smaller firms compete on outstanding customer service and providing niche products. The US electronic auction industry is concentrated: the top four companies account for about 85% of industry revenue.
PRODUCTS, OPERATIONS & TECHNOLOGY
Internet auction companies operate websites that allow sellers to list their merchandise and buyers to bid on the items. The sophisticated auction software monitors bids and determines the winning buyer at the end of the auction period. Unlike traditional auctions, which have set times and locations, internet auctions are generally open 24 hours a day and can reach buyers in remote markets. After an auction closes, companies may rely on third parties to facilitate payment or shipping between parties. Companies may certify or pre-qualify buyers and sellers to minimize fraudulent activity.