Landing : Athabascau University


Last updated July 4, 2011 - 11:40pm by Dickson Wai Hei Lam

eBay was established in September 1995 by the company founder Pierre Omidyar [1]. eBay is the largest and most popular online auction site worldwide with over 147 million registered users in 30 countries as of March 2005 [2]. eBay’s primary revenue comes from sellers who wish to list their item on eBay for sell. Sellers are charged for listing an item, the listing fees (called insertion fees) are calculated based on the reserve price or the starting price of an item [3] [4][5][6].  Potential buyers can browse the site, search for interested items and place bid / purchase on items free of charge. Regardless if the item is listed for auction, reserved price auction or fixed price listing style, once the item is sold, a final value fee will be charged to seller based on a percentage of item’s total cost to the buyer [3] [4][5] [6]. In addition to the insertion fees and final value fee, eBay provides listing upgrade service to sellers who wish to increase the promotional value of their merchandise as the source of secondary income [3]. Seller will be able to have their listing in bold font making it more attention-grabbing or add subtitle to provide more descriptive info about an item.

In year 2002, eBay purchased PayPal and integrated it into the core eBay business model [7] which is now accounts for 37% of eBay’s total revenue as of October 2010 [8]. PayPal provided a way for both seller and buyer to conduct business transaction in a secure way with having seller to disclose personal information including credit card number/bank account number to the merchant [9]. The information stays with PayPal and therefore PayPal act as a middleman to handle the transaction between buyer and the merchant. An interchange fee [10] is charged to the merchant for each transaction which consists of all fees paid to all companies that involve in the transaction – merchant’s bank fee, credit card transaction fee, etc [9]. However, PayPal does not profit from the interchange directly but profit the difference between the interchange and the surcharge. The surcharge is charged to seller when receiving money from the buy for a transaction based on a surcharge formula (30 cent fee + (1.9% to 2.9%)) [11].