Jumping the E-Gun!

Jumping the E-Gun - eBay's system problems are a lesson for other electronic commerce providers - Company Operations - ColumnENT, Sept 8, 1999 by Bill Laberis

In June of last year ebay's system went down for 22 hours, creating the cyber equivalent of a huge "closed" sign on eBay's front door. As a result eBays stock dropped the next day, significantly a $4billion dollar market value drop. In addition to their market loss they lost an estimated $5 million in revenue. Suddenly the convenience was taken away from the seller/customer. Shipments were delayed and auctions were placed on hold, nothing more than a minor bump, or so one would think.The bottom line came down to the fact that eBay was not ready nor did they anticipate a total systems failure. This seems odd since they are a company that’s livelihood depends a functioning computer system and network.

Instead of taking blame for their faulty system they blamed their vendor Sun Microsystems for the outage. Sun released a statement saying it was related to a human error, but all in all it was apparent that eBay was not prepared. This young company that grew fast had lost sight of what needed to be protected their system. This was a major wake up call for many other e-commerce sites.

Stress tests should be ran on systems like the one implemented by eBay. When companies grow rapidly stress tests are often forgot about. The overload of visitors and transactions on these sites needs to get estimated and the sites must be prepared for the demand that they are going to incur. Online transactions put a major stain on a system, therefore a backup is needed. Companies should also pretest instead of using the shotgun approach.

Since e-commerce is fairly new there aren’t very many models to follow, so a lot of it is learn by doing or watching others mistakes and learning from them. Basically the managers of these companies need to be more aware of their risks and plan accordingly.

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Can eBay continue growing?

2. What are the problems that eBay is currently facing?

a. eBay is facing many problems in this growing market of e-commerce.
According to this case study its growth rates are slowing in the US and Germany its growth rates have slowed in the United States and Germany by increased seller fees, but they have been made up for in the French and Italian markets. EBay has been working hard to gain the Chinese market but it is slower to take off due to the other types of auctions already offered there.
b. eBay has also encountered trouble with the some specific target area markets such as real estate, travel, new-car sales, and expensive collectibles. They have recently launched a new VoIP technology that is aimed to increase the communication barrier between the buyers and sellers. The one problem is that many sellers are not interested in adding this option to their pages.
c. Compliance is also a major issue because of the various laws and regulations when it comes to e-commerce. Ultimately eBay may be liable for its members, when they sell false goods or leave negative feedback to other consumers and customers.
d. By far honesty is eBay’s main challenge. Are sellers being truthful about there items? In my opinion they don’t do a very good job in this area. I have a friend that purchased a high end item from eBay and she paid a pretty cost only to discover upon arrival that it was a replica and that the seller had not been honest. When she contacted eBay they took the sellers side. Also identity fraud and theft have been a major issue.
e. eBay’s main issue is keeping its customers and sellers happy. I don’t believe they have thoroughly tackled this effort.

5. Will eBay be successful in the long run? Why or why not?

Maybe, I think eBay will stay successful as long as another e-commerce site doesn’t start up that offers better security and seller/buyer service.
eBay needs to focus more on monitoring their security and also their sellers merchandise. They need to offer better customer service or eventually the negative word of mouth might catch up to them. I know many people that will NOT shop on ebay, due to horror stories from other friends.
They do have a good advantage due to their recent partnerships with Wiki and MyCollectibles. They will be able to move in on the niche markets associated with the wiki’s and also with people that have a passion for collectibles. As long as people are too lazy to go out and shop for what they need eBay will continue to flourish.