By E-commerce was on the rise even before COVID-19 turned the world upside down. But the pandemic accelerated the growth by pushing more consumers to shop online.
In 2020, as per recent studies, U.S. e-commerce sales grew more than 30% from the last year owing to the pandemic. It came to light that Americans spent a whopping $791.7 billion online in 2020, up 32.4% in the prior year.
eBay is one of the oldest yet most influential e-commerce platforms around the globe. It was even regarded as the second most popular e-commerce platform as of June 2021.
Whether you’re interested in building your own e-commerce platform like eBay or just wondering how eBay works, this post is for you.
Here, we’ll help you give insight into eBay – its business model and revenue model to generate millions of dollars in revenue.
So, let’s begin with a quick introduction to what eBay is all about.
A Quick Overview to eBay
A multibillion-dollar e-commerce marketplace based in California, eBay was founded by Pierre Omidyar in 1995 and went public in 1998.
eBay is a prominent online marketplace platform for buying and selling a wide range of new as well as used products. It engages in both consumer-to-consumer (C2C) and business-to-consumer (B2C) transactions.
At present, eBay has a presence in more than 100 countries with 17M sellers and 147M active buyers from all over the world.
How Does eBay Work?
eBay has evolved from an online auction platform to a true marketplace platform that focuses on the consumer-to-consumer (C2C) and business-to-consumer (B2C) model.
The platform doesn’t maintain inventory. Instead, it acts as a middleman connecting buyers and sellers in one place to buy and sell items.
1. eBay for Sellers
eBay enables sellers to list their items under Auction-style listing wherein sellers have to specify certain things such as the minimum bidding price. Here, the highest bidder gets the item.
There is also another type of listing on eBay for sellers i.e., Fixed-price listing wherein eBay enables sellers to list their products with the “Buy It Now” option.
In addition to that, eBay even allows sellers to open their own store on the platform.
2. eBay for Buyers
When it comes to buyers, eBay enables them to browse through a wide array of items.
Depending on the type of listing, buyers can either bid on items listed under Auction-style listing or purchase them at the set Buy It Now price.
How Does eBay Make Money?
As per Statista findings, eBay clocked over $2.67 billion in revenue – which is a 14 percent increase year-over-year.
So, what strategies does eBay follow to make money?
eBay makes use of the following revenue models to bring money to the table:
1. Listing Fee Model
eBay enables sellers to list a minimum of 250 items per month on the platform for free. Once the limit is consumed, the platform starts charging a listing fee/insertion fee i.e., $0.35 for every listing.
Remember: there are certain categories on which eBay charges insertion fees between $20 and $300 per listing. For more information regarding it, click here.
2. Commission Based Revenue Model
Like most other marketplaces out there, eBay has adopted a commission revenue model wherein the platform earns a commission whenever sellers make a sale on the platform.
The commission earned by the platform is in the form of the “Final Value Fee”, which is measured as a percentage (3% to 15%) of the total amount of the sale and $0.30 per order.
3. Advertising Based Revenue Model
In addition to the Final Value Fee, eBay also makes money through its advertising services to its sellers as a way to promote their listings.
It works via the “Sell It Faster” option available in the Seller Hub that allows sellers to promote their products.
eBay empowers sellers to select an ad rate between 1% – 100%. The company has a simple rule: the higher rate of the ad, the more it will promote product listing.
eBay charges sellers the ad rate when a buyer clicks on one of their ads and goes on buying within 30 days.
4. Subscription-Based Revenue Model
Another way eBay makes money is through store subscription service to sellers who have set up their own store on the platform.
There are five tires of store subscriptions and have a look below at the fee charged by eBay per month when a seller goes with yearly renewal:
- Starter: $4.95
- Basic: $21.95
- Premium: $59.95
- Anchor: $299.95
- Enterprise: $2,999.95
In addition to these revenue models, eBay has acquired several companies. This mergers & acquisitions model of the company is able to bring significant money to the table.
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What Makes eBay Different from Other Marketplaces Like Amazon?
The e-commerce marketplace industry has many strong players besides eBay such as Amazon, Etsy, Walmart – to name a few.
But eBay is more than just an online marketplace that connects millions of buyers and sellers in one place. It is also an auction house unlike other e-commerce marketplaces out there.
To put it into simple words, eBay is the only platform that provides an auction of items in addition to enabling selling and buying products at a fixed price.
Thus, eBay attracts a pretty large audience from all over the world. People in possession of rare collectible items and those interested in such items find product auction listing on eBay an appealing feature.
In addition to that, eBay has several programs for both sellers and buyers such as a money-back guarantee, Top Rated Seller program, and Verified Rights Owner Program – to name a few.
eBay’s commitment to fostering a safe place to sell and buy online has helped it build and maintain a loyal customer base worldwide.
Conclusion
With that, you now know how eBay operates and makes money.
Its success today relies on various business and revenue models it has adopted: commission-based revenue model, listing fee revenue model, advertising revenue model, subscription revenue model and mergers & acquisitions (M&A) business model.
If you’re interested in building a similar online e-commerce marketplace like eBay, hire remote developers who guide you from strategy to the successful development of your product vision.
You can hire developers either from IT outsourcing companies or platforms like Upwork. If you’re serious about your venture, you should consider hiring dedicated developers from a software development company.
That way, you’ll get to work with fully managed and pre-trained developers who can give their contribution from day one. Moreover, you’ll get access to all experts – software developers, designers, and testers under one roof at competitive rates.
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