Why Does eBay Have Problems in Its Asian Markets, Research Paper Example

EBay’s entry into Asian markets appears to be either problematic or downright unsuccessful. The reasons for it are diverse and include tough competition, cultural barriers and often unfavorable features of local economies.

The article China May Be eBay’s Latest Challenge as Local Rivals Eat Into Market Share by  Mangalindan describes what seems to be eBay’s surrender in the Chinese market with chief executive resigning and selling part of the business to Tom Online, a mobile Internet company. Still, the most recent news of eBay’s entering into the provision of shipping procedures for connecting Chinese sellers with their American clients which was previously performed by China Post and the United States Postal Service (the agreement was signed on June 2, 2010) shows that eBay leaps at every opportunity to keep hold of the Chinese market.

The problems faced by eBay in China are largely explained by cultural differences. The relationship between two persons which allows one of them to provide services for the other is different in Chinese culture from that in American and eBay fails to develop the correct attitude. This relationship is called Guanxi in China. The notion rests upon the concepts of social status, understanding, influence, and personal contacts. Guanxi is closely related to corruption which unfortunately dominates Chinese economy. To win the Chinese market, eBay would have to abide by the rules and enter the corrupted Guanxi world, which is extremely challenging for the American mentality. Also, eBay had to face a tough competition in China with German Bertelsmann controlling e-commerce in the field of books and music and Amazon’s online retail site. In Japan eBay lost the market to Yahoo!. Yahoo! also owns 40% interest in Chinese Alibaba.com Corp., thus being one of the main rivals of eBay in Asia.

EBay is losing its previously prosperous South Korean market, which used to make two thirds of eBay’s southeastern revenues, to a new player – Gmarket. EBay loses in both pricing and product, which is in this case intangible and implies e-commerce services. Gmarket does not stick to eBay’s idea of an open auction and sells products at fixed prices providing at the same time a chance to negotiate them, which saves customer’s time. In addition, placing goods on Gmarket is cheaper than on eBay (its South Korean subsidiary Internet Auction). Gmarket attracts customers with ongoing special offers, sales and lotteries. Gmarket’s inspirational example was followed by older online retailers including Daum Communications, CJ Home Shopping, and GS Home Shopping which established online marketplaces and made the situation even worse for eBay. The latter even had to forego some of its working principles and also offer fixed-price sales which appear quite successful.

Still, eBay remains optimistic about its Southeast market. It is engaged in promotional activities such as participation in Singapore Fashion Week described in Ebay has its Eye on Southeast Asia by Chan. It also aims at expending the market due to enabling e-commerce via mobile devices, although the use of such appliances is still not common in most Asian regions. Moreover, eBay changes the format of the website to cater for local demands and cooperates with some local agents such as online portal Sanook in Thailand.

In conclusion, it can be said that eBay has problems with all the elements of a four P’s scheme in its Asian markets. Speaking of product, which in this case means e-commerce services, we see that it finds it hard to compete with such strong rivals as Gmarket, Yahoo’s subsidiaries etc. As for prices, to remain competitive they have to be reduced in comparison to other eBay’s markets. Placement depends heavily on the country’s rate of Internet access, which is very high in Japan and much lower, for example, in China. As to promotion, we have shown that public relations as its important element suffer a lot in the Asian region closing access to many parts of the market due to eBay’s failure to engage in the traditional system of relationships with a customer.

Works Cited

Chan, Isabelle. “EBay Has Its Eye on Southeast Asia.” 29 Oct. 2007, Business Week.

Ihlwan, Moon. “Gmarket eclipses eBay in Asia.” 28 June 2006, Business Week.

Ihlwan, Moon and Hof, R. “Out-eBaying eBay in Korea.” 17 July 2006, Business Week.

Mangalindan, Mylene. “China May Be eBay’s Latest Challenge as Local Rivals Eat Into

Market Share.” 12 Oct. 2006, Wall Street Journal, New York.