How eBay conquered the world

What is sold on eBay?

Almost everything. In less than a decade, eBay has transformed the way the world shops, turning housewives into tycoons and tens of millions of people into obsessive bargain hunters. Among the 971 million items sold on the site last year were antiques, cars, and consumer electronics worth more than $1 billion. More eccentric offerings have included a Tupperware container purported to be filled with wind from Hurricane Frances and a Gulfstream jet, advertised for $10 million.

Who founded eBay?

Subscribe to The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

SUBSCRIBE & SAVE

Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

Sign up

A French computer programmer called Pierre Omidyar, who conceived the idea after noting his wife’s passion for collecting the quirky Pez candy dispensers. Omidyar realized that the best way to bring her together with other collectors was via the Internet. He launched eBay, in September 1995, as a central location for trading collector’s items: coins, stamps, back issues of magazines and newspapers. But soon everyone was visiting the new site: Floated on the Nasdaq stock exchange in 1998, its shares were valued at $234 at the peak of the dot-com bubble.

Has it retained its value?

No. Share prices fell following the dot-com crash, and a share is now worth about $83, giving eBay a stock market value of $30 billion. But that is still greater than the value of General Motors ($23.4 billion). Unlike other dot-com companies, eBay still thrives, with operations in 38 countries. Last year about $23.8 billion worth of goods were traded on the site, and eBay itself made gross profits of $1.75 billion. And Mrs. Omidyar now has more than 400 Pez dispensers in her collection.

Who uses the site?

There are almost 105 million users registered in 38 countries around the world. Some regular eBayers have become so addicted to trading on the site that they’ve set up their own businesses, scouring charity shops and garage sales for items to sell online. Established businesses, too, have found eBay an effective way to sell. In the U.S., 430,000 small businesses rely on it for a significant proportion of their income.

What is the big attraction?

Price—and instant access to a vast potential marketplace. Sellers often find they are able to locate buyers for things they couldn’t sell otherwise, including hurricane air, celebrities’ chewing gum, and antiques growing dusty in their attics. eBay, in fact, claims that the success of its antiques trading has helped push up antiques prices by 10 percent. And for buyers, the thrill of the auction itself is highly addictive. Many compulsively trawl the 2 million items on sale at any given time looking for bargains. Bidders obsessively track the progress of their auctions to see how their bids are faring. eBay will even send bidders mobile phone alerts to update them on the progress of auctions.

How does the auction system work?

Almost entirely on trust. Buyers and sellers agree to exchange money and goods, usually on the basis of little more information than appears on-screen. Sellers post photos and descriptions of their items and may respond to e-mail inquiries from potential bidders. Auctions last anywhere from one to 10 days, and there will often be a flurry of bids in the closing minutes. To improve trust, eBay uses a feedback system, with both sides posting comments about each other once a transaction is complete. In this way, regular traders can build a reputation for honest dealing. But the problem remains that, once a deal is agreed, the onus is on the buyer to send payment and on the seller to send the goods. There is not much that either side can do about it if the other reneges on the deal.

Is there much fraud?

Surprisingly little. eBay estimates that of the 971 million items for sale on its Web site in 2003, only about “1 percent of 1 percent” were fraudulent. Yet fraud is still a problem. When the fifth Harry Potter book was published last year, a vast number of first editions signed by the author, J.K. Rowling, were offered for sale. But according to a rare-books expert, only two or three of the 50 or so books advertised at any one time were genuine. Moreover, eBay is used increasingly to sell stolen goods, pirated CDs, and fake designer items. Tiffany, the high-end jeweller, is suing the site, after concluding that 75 percent of the goods on the site labeled Tiffany are fake. It is demanding $1 million for each bogus item sold. In response to the rising complaints of fraud, eBay employs 800 people to spot and track down false claims.

How has the site evolved?

In its early days, the vast majority of sellers were individuals. Today, a growing proportion are established businesses, which means eBay is increasingly acting like a standard Internet retailer. Thus some 27 percent of goods are sold at fixed prices, often using the site’s “Buy It Now” feature, which allows buyers the option of buying immediately at a given price, rather than waiting to see what the price works out to at auction. Professional traders with several of the same item to sell are particularly keen to set a fixed price, rather than auction each item individually. This formula has proved so successful that many traditional retailers have set up their own branded stores on eBay. There are now 181,000, up from 110,000 last year. Slowly but surely, the world’s online flea market is turning itself into the world’s online Wal-Mart.

Tips for shopping on eBay

Get acquainted with the Web site by taking eBay’s comprehensive guided tour.Go shopping at night. You can pick up a bargain on auctions that end in the early hours, when few competitors are online.Don’t put in a bid until you have thoroughly checked the description of any item that catches your eye. If there’s anything else you need to know about the item, you can always e-mail the seller.Scout around to make sure no one is offering the same item at a more competitive entry price.Read the on-site feedback about sellers, paying particular attention to their delivery record. Check whether delivery is included in the price.Beware of last-minute bidders. Some users wait to the very last seconds in order to trump a bid.