E Commerce And Online Auctions

Decent Essays

Threat of New Entrants
The e-commerce and online auctions industry is highly fragmented, with a large number of independent players occupying 78.2% of the market. With a low concentration, the two major players, Amazon and eBay, account for only 21.8% of the e-commerce and online auctions market. This indicates low barriers to entry as it not difficult for prospective competitors to establish an online shopping platform. Additionally, there are few specific skills required to participate in the market. Existing operators possess a number of competitive advantages over new entrants, such as reputation of product quality and consumer loyalty, while providing secure payment methods that have been enhanced for years. Furthermore, they also …show more content…

In response to high competition, companies had to differentiate themselves by practicing aggressive price-cut activities, including seasonal promotion and discount. Some organizations also began investing heavily in advertising and offering free shipping service as a way to attract new customers and sustain loyalty. Consequently, the industry expected to generate average profit margins amounting to 7.1% of revenue in 2014, although overhead costs remained low. Additionally, the intense competition has led to a new breed of online retailing businesses operating in a slightly different model, known as ‘social commerce.’ With attempts to generate more sales and reduce costs, websites such as Groupon and LivingSocial rely on word-of-mouth promotion and require consumer group participation in order for customers to receive a discounted price. These social commerce sites are expected to increase in popularity and contribute to overall industry growth in the upcoming years .
Power of Suppliers
The industry benefits from broad categories of businesses and individual suppliers. Since products could be obtained from numerous domestic and international suppliers, the bargaining power of suppliers is relatively low to medium. This is particularly apparent with industry giants who attract tens of millions of sellers to list products in their marketplaces, leaving each supplier with limited negotiation power. However, due to the intense

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