Ebay Shutdown Case Study

EBay shutdown its Asian Web sites realizing that China and Japans, fast growing internet auction market was difficult to master. Also, eBay did a terrible job of marketing its services with the intent of becoming the major leader in the Asian auction markets. Moreover, eBay made the same error that most foreign companies did. The company faulted in developing its web site into a consistent Asian template. Ebay thought that its leading brand image would have the same effect in Asia as it did in the United States.

Ebay shutdown its main Web site realizing that China’s fast growing internet auction market was difficult to master. The decision was also seen as a sign of the pressure Chinese government regulations put on foreign companies to set up joint ventures, even when they may be reluctant to do so for fear of helping to turn their Chinese partners into global rivals (Hafner, Stone, 2006).

Unlike eBay’s then competitor TaoBao, the company initially charged listing fees. Surprisingly, eBay’s listing fees were not one of the top reasons consumers used TaoBao over eBay. Chinese consumers preferred brands they were familiar with and from people whom they trust. Many critics argue that high prices are the main reason for eBay’s failure (China Market Research Group, 2007). The same critiques believe Chinese consumers prefer free or low cost choices.

EBay should have offered free services with the intent of becoming the major leader in China’s auction market. Also, one of eBay’s goals should have been to make the Chinese consumers comfortable buying and selling on the internet.

Additionally, eBay’s payment system, Paypal, did not faultlessly include escrow into its auction procedure. However, Alipay, TaoBao’s equivalent of Paypal, made escrow a vital part of their buying practice. TaoBao has eaten into eBay’s market share by allowing users to list sale items without a fee, whereas eBay typically charged for such listings (Mangalindan, M., 2006). Consumers felt confident paying money to Alipay and then only releasing the money after they had their purchase in-hand… (China Market Research Group, 2007).

Also, eBay made the same error that most foreign companies did. The company thought that its leading brand image would have the same effect in China as it did in the United States. They did not focus their brands correctly. EBay sought to promote its auction portal with a similar layout and similar features to those found in its American version, which Chinese consumers found far too empty (China Market Research Group, 2007).

China’s youth also contributed to eBay’s missteps. They averaged 18 hours a week compared to 12 hours for American youth. This was an indicator of the enthusiasm China’s youth had to make online purchases. This was a critical area that eBay failed to exploit. The cost of ignoring this market also contributed to eBay's failure to beat Yahoo! in Japan.

In Japan, e-bay began its Japanese venture five months after Yahoo! began its online site in September 1999. A year afterward, eBay grasped only 3% of the market, which had grown to $1.6 billion. Also, eBay took too long to strengthen its Japanese site with advertisement that appealed to consumers. At the same time, eBay Japan also took a low-key approach to marketing, relying on its usual formula: rather than spend big bucks on advertising, just let auction fans spread the word (Belson, Elgin, & Hof, 2001). The plan eventually failed because eBay’s