“Social networks not serious competition for eBay,” says expert

It’s interesting and unusual (and refreshing) to see university brains turning their consideration to the ever-changing world of ecommerce. But that’s exactly what economist Dr Omer Edhan of the fine University of Manchester has been doing. And I like his findings.

He doesn’t reckon social media sites like Facebook will offer a challenge to marketplaces anytime soon because of the way people shop and the way they approach different web experiences.

He notes: “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 continues: “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.”

If you want to read more. Dr Edhan’s comments continue here.