Facebook sales are not serious competition for eBay says economist

Stephen Chapman's picture
by Stephen Chapman

As eBay celebrates 15 years of business in the UK, a Manchester academic says it will continue to hold its own against social networks.

While Twitter and particularly Facebook are offering to sell second-hand goods, without eBay’s fees, economist, Dr Omer Edhan explained that this shouldn’t worry the etailing giant.

“Buying on social media is a bit like popping to the corner shop for a pint of milk. eBay is the modern equivalent of a department store which offers a wide range of products and houses a collection of smaller retail units under its roof.

“Retail opportunities on social media are more like a convenience store because they provide a limited amount of merchandise to a more select customer. Because social media wasn’t originally designed for ecommerce it means that customers have to know where to find what they are looking for.

“In terms of the economic models, while game theory (an area of mathematical economics that seeks to determine how rational individuals choose to co-operate) applies to both ways of buying online, the market conditions are very different.”

Dr Edhan, a lecturer at the University of Manchester added:

“The market conditions on eBay are ‘thick’ because there are lots of buyers and sellers coupled with how well the search function works. Thick markets conditions are created when the chances of a deal being closed are much higher.

“One of the strengthens of eBay’s selling platform is that it is easy to determine the appropriate pricing that would give the individual seller the highest revenue per deal. The competitive setting of the platform and its security also adds to the thick market conditions because the buyer feels reassured that their transactions are safe and that they are going to get the item they paid for and that it is what they expected it to be.

“The market conditions on Facebook create ‘thin’ markets because the selling groups are more niche and will only work if there is a large enough set of people who care about that niche so that the site can attain critical mass.

“Social media platforms are not designed to encourage sellers to participate. This means that the seller would expect lower revenues. In addition, the trading environment doesn’t make the buyer or seller as confident that the transaction will be done in a safe environment.”

eBay UK was launched on 20th August 1999. It started out in America in 1995, originally under the name, Auction Web. The brand eBay came about because founder, Pierre Omidyar’s original website was called Echo Bay. Now, for every $100 spent online worldwide, around $14 is on eBay.

“The main secret of eBay’s success is the model of its online auction platform which is continually being replicated by its competitors,” continued Dr Edhan.

“Thanks to the rise of digital, never before has it been so easy to find and buy the retail products consumers want to have. There is a science to making customer journeys that work as intended. It is therefore crucial that eBay continues to ensure it can extend the ecommerce platform even further in order to stay ahead of its rivals.”

Enjoyed this? Get our latest updates in your inbox every day

Subscribe to Prolific North’s morning newsletter to keep up with all the most important things going on in your sector.