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eBay’s enduring legacy: Spearheading the concept of B2C ecommerce

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You may be familiar with eBay’s origins, when its creator Pierre Omidyar added an auction section to his personal website and sold his broken laser printer for for $14.83 (£9.62). Since then the platform has hosted the sale of $700bn (£453.91bn) worth of goods including hundreds of thousands of cars, and generated something close to $72bn (£46.69bn) in revenue.

While the figures are compelling, they don’t reveal the full picture. It could be argued that eBay spearheaded the concept of B2C ecommerce. Prior to its launch ecommerce was in the process of being established, but it was the preserve of B2B operations, with platforms being used as online supply chains.

What eBay did was open up ecommerce for millions of ordinary people and small business owners, who didn’t have the resources, financial clout or technical know-how to set up fully functioning ecommerce platforms.

eBay introduced an incredibly disruptive business model that really showed what digital technology could do; prise open previously closed markets and provide small traders with a platform that broke down traditional barriers.

Classically, economic activity was driven by conventional markets with fixed prices. Not any longer, thanks to eBay. Its auction model introduced a whole new ballgame, in which price was set according to perceived value. A single cornflake in the shape of US state Illinois was sold for an eye-opening $1,350 (£875.41). A letter written by Albert Einstein in 1954 to Erik Gutkind, a philosopher, sold for a cool $3m (£1.94m).

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The company is full of quirky sales like this, but more importantly the platform levelled the playing field and enabled a business model that is now so common, no-one bats an eyelid.

eBay’s early genius was also evident in the way it cemented trust between strangers with its rating system, where buyers and sellers ranked each other based on their experience. The ratings are made public, so others can quickly establish the integrity of the buyer or seller.

This ranking system is today widely accepted as the way forward in the digital world, when trust has to be established between unknown parties. Just look at Uber and Airbnb. Both have a rating system at the centre of their online operations, which are critical to the success of their businesses.

eBay also pioneered online payments. In 2002 it acquired PayPal for what seemed like an enormously excessive $1.5bn. At the time, the online payment company was gaining ground but eBay’s acquisition sent it skyrocketing. This new application was an attractive proposition for eBay users, as they were introduced to an easy-to-use and secure method for buying and selling.

In effect, eBay’s acquisition of PayPal drove online payments to maturity, evident in PayPal’s recent market capitalisation of $41bn (£26.59bn) following its spin-off by eBay earlier this year. The company has an eye for astute technology acquisitions, snapping up Skype in 2005 and selling it for a weighty profit in 2011.

The online giant may have been born as an auction house but most of the goods on the site today, an estimated 80 per cent, are actually new. The company also has a somewhat hidden but deeply pervasive influence on web site building. By enabling users to effectively set up an online shop with a few simple clicks it sowed the seeds for dramatic advancement within the site building industry.

Some 20 years on and eBay may seem like old news; it doesn’t attract the sparkle and excitement of more recent online platforms, but it’s still one of the most significant online marketplaces, consistently ranking highly in popularity along with Amazon. eBay has been influential in creating the market in which all online businesses operate.

It has in some ways laid the foundation for all website building activity in the ecommerce sector. It has also paved the way for small businesses, granting them access to fully functioning and full-featured ecommerce web sites. It’s a long way from the early days of eBay but without the marketplace laying the groundwork, many online businesses wouldn’t be here today.

Laurent Gibb is CEO of Basekit.

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