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Wednesday, March 15, 2000
U.S. NET AUCTIONEER ARRIVES
eBay may herald an online revolution
The recent arrival of major U.S. online auction operator eBay Inc. may bring another online revolution to Japan, the world's second-largest Internet market.
"Our objective is to be a leader in Japan," Meg Whitman, president and chief executive officer of eBay, said in a recent interview with The Japan Times. "I think it will be a competitive market, but we have a very good chance of establishing a leadership position."
The California-based company launched a Japanese-language Web site ( ebayjapan.co.jp ) on Feb. 28.
Whitman's confidence stems from the success of the original eBay Web site in the United States and special sites in Canada, Britain, Germany and Australia.
eBay, which began operating as an auction site in 1995, has successfully developed the world's leading person-to-person online trading community with more than 7.7 million registered users around the world at present bidding on 4.2 million listed items -- just about any object from paintings to computers.
The company is still growing dramatically. In the fiscal year that ended in December, the company's net revenues increased 161 percent from the previous year to hit $224.7 million.
Before eBay came up with its Web site, auctions in the U.S. were very much at the high-end, and people did not really do business with one another in an auction format, the eBay CEO said.
"Many people had said to us this would not work. Yet, it caught on very quickly. We created an entirely new market," Whitman said proudly.
eBay charges between 30 yen and 240 yen to list an item. For each completed sale, it also charges a 5 percent transaction fee on the first 3,000 yen of the sale price, 2.5 percent on the portion of the sale price between 3,000 yen and 120,000 yen and 1.25 percent on any amount above 120,000 yen.
Although eBay is a pioneer of the auction site and the dominant player in the U.S., it is a newcomer here, and is expected to face a tough battle with other online trading sites such as Yahoo and Niftyserve.
To compete well in the market, eBay tied up with NEC Corp. and its Biglobe Internet service provider. NEC holds a 30 percent stake in eBay Japan KK, and the auction company's icon will appear on NEC's computer screens, according to eBay Japan.
Whitman admitted that Yahoo is its major rival here. Despite Yahoo's advantage of having entered the local market earlier and its attractive offer -- free listings of items on its auction site, Whitman believes her company can beat the titan.
"We have faced Yahoo in five other markets, and we have beaten them every single time with a fee model vs. a free model," Whitman said. eBay's theory is that charging could be an advantage because it increases the quality of goods that are on the site, according to the president.
"If I don't have to pay anything to list an item, I might decide to list my coffee cup. But if I have to even pay just a small amount, I have to think of an item that will really sell," she said.
"We think it is important to have a normal fee so that you have a high quality product, and the seller will be dedicated to good customer support," she added.
eBay is also trying out a new marketing strategy called "supershop" here. Listed items on eBay are usually provided by individual sellers, but to increase the credibility of the Japanese site from the beginning, eBay has asked a few brand name stores such as CD and video rental shop Tsutaya to supply goods for its site.
"Japan is the only market that really started supershops with real merchants bringing products to a market," Whitman said, adding that if it works here, the concept will also be adopted in other countries.
Whitman said that relations with NEC and large portals such as Biglobe are very important for eBay's success here, but she did not rule out the possibility of forming strategic tieups with other companies in the future.
"In the U.S., we have marketing relationships with 200 different companies," she said. "The objective here will be to find partners that can generate promotional opportunities for us."
Whitman also feels that the Internet auction business in Japan has the potential to grow, just as it has blossomed into a huge market in the U.S. and other countries that eBay has entered.
In the U.S., some people have even quit their jobs to be engaged full-time in online trading.
"It was never part of our plan. But people realized that they were making more money selling on eBay than they were in their jobs, and they felt comfortable becoming a full-time entrepreneur," she said. "We will see whether it will happen here."