Ebay In Japan Business Strategy Case Study

Case Study Contents

  1. Introduction
  2. eBay – Company Background
  3. Pierre Omidyar – The founder of eBay
  4. Early Days – From AuctionWeb to eBay
  5. Meg Whitman and the growth of eBay
  6. eBay – Quick Facts
  7. eBay’s International Expansion
  8. Exhibit I – eBay’s Net Revenue by Territory
  9. eBay and its entry in Japan
  10. Exhibit II – Yahoo Japan and eBay comparative data (in 2001)
  11. Why eBay failed in Japan?
  12. Stiff competition from Yahoo Japan
  13. Not adapting to local culture and practices
  14. No first-mover advantage
  15. Low-key Marketing and Advertising
  16. The return of eBay to Japan
  17. Questions for Discussion
  18. Exhibit III: Selected Financial Data for five years
  19. Exhibit IV: eBay stock performance graph

Case Abstract

Issues/Information Covered

  • eBay’s entry strategy in Japan
  • eBay company background
  • Why eBay failed in Japan?

Introduction

“We were late to the market and entered when Yahoo!/Softbank had gained a lot of momentum through its Internet portal. eBay is committed to the Asian market and may return to the Japanese market when economic conditions are better and when they have a strategy that addresses the issues they currently face in Japan.”
– an eBay spokesperson in 2002.

Ever since its entry in Japan in 2000, eBay, the US online auctioneer was struggling. By the end of 2001, many analysts felt that eBay Japan should admit defeat and sell a majority stake in the venture to a bigger local player. But even then, eBay would face an uphill struggle. In February 2002, eBay, announced its decision to exit from the Japanese market after it failed to gain a foothold in Japan lagging behind market leader, Yahoo Japan. The company also announced that its Japanese language site would be closed and 17 jobs would be cut. All its Japanese customers would be directed to its US based auction operations/site. At the time, eBay was the number one auction site in all of the other 18 countries in which it operated and one of the few successful internet companies, having seen its profits soar even amid the dot-com implosion. eBay’s strategy in Japan had failed. Japan was a rare failure for the company.

Japan was critical to eBay’s success because it was the world’s second-largest Internet market. The gap had to be closed soon otherwise Yahoo Inc. could easily beat it in the rest of Asia. Yahoo Japan was the No. 1 or No. 2 portal everywhere except China. In December 2007, Yahoo Japan and eBay made a deal to link their auction sites and make it easier for their respective users to bid on and buy goods available on each other’s sites. A new website by name “Sekaimon” (‘gateway to the world’ or ‘global shopping’ in Japanese) – www.sekaimon.com – was launched in December. The site allowed Yahoo Japan users to bid on items listed on eBay’s US site using their Yahoo Japan ID. The deal made cross-border bidding easier and gave eBay another chance to woo Japanese consumers…

Keywords: eBay, Japan, International Expansion Strategy, Entry Strategy, local culture and practices, Yahoo Japan, Pierre Omidyar, Meg Whitman, first-mover advantage, AuctionWeb, Sekaimon, Internet Auction, Online selling and bidding, Online Marketplaces, PayPal, Skype, Half.com, Rent.com, Shopping.com, StubHub, Alando AG, iBazar S.A., NeoCom Technology Co Ltd., EBay’s international operations, online shopping business, Sanook, TOM Online

The land of the rising sun, as Japan may be rightly called, has not aided the rise of a few business enterprises. One of them being the biggest online shopping portal eBay.com which has faced immense critisicism in Japan. Japan being the 3rd largest economy by GDP growth and having a population of about 127 million, how could this model actually fail? Here are a few insights on what went wrong in eBay- Japan.

eBay

Pre entry of a competitor

eBay entered Japan in 2000 , immediately after Yahoo had left a buzz in the Japanese markets.

Thus it faced a huge amount of turbulence as it lacked the right business model before it ventured into the comparatively new eastern market.

Commission on sale

eBay provided the same schemes which were running in the US and charged commission on each sale of the product, completely ignoring the price conscious Asian customers. This burnt a big hole in the eBay account making less than break even trade transaction and running them into losses

No cash on delivery service

In the early 2000’s when Japanese people were comparatively new to using plastic money, eBay offered no solution to this problem and continued to demand the information of credit card numbers for their PayPal account.

Cash on delivery option if adopted would have made eBay a hit.

Lack of management

The whole of 1999 went in miscalculations and mismanagement as the website didn’t think it through before entering the new market. With lack of people management the whole organization went for a toss and could not beat its competitor in the much naive market.

Haphazard recovery

After discovering that the shopping portal was unable to make a mark in the online markets, eBay quickly resorted to flooding its website with other activities like online horoscopes; ad’s also proving them to go in vain.

Low marketing expenditure

Yahoo the rival to eBay spent about 8% of its revenue in marketing its website through hoardings, boards in restaurants and public places, advertisements on every Yahoo portal thus helping it capture about 90% of the market share, leaving a mere 3% for eBay.

eBay boasts of a US$ 12 billion revenue  but only $ 1.2 billion is accounted from the Asian countries.

The exit from Japanese markets within few years after its establishment and the decision to re enter in 2007 has made them unable to grab a stable position in the market. The only option left now is to wait and watch as a small blunder on its rival’s part could fix it into the position of the market leader as an online auction portal.

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