Casual Loop Diagram of C2C platform

Figure 4-5: Causal loop diagram of C2C platform

Figure 4-5 shows the causal loop diagram of this study. The causal loop includes seven positive and six negative feedback loops. For better description, this study arranged the causal loop diagram into four sectors: internal processes, customer, financial, and mechanisms.

Nowadays, Taiwan's major C2C platforms are falling into the vicious cycle of subsidy price and lower fees, which as hype marking strategy, to attract more users and goods when an emerging platform was created, at the same time, they have more easing policies for users to put their product on markets, everyone can be a seller. And those old platforms in the case of competition can only follow the promotion in order to prevent the loss of the

original customers. When Ruten.com first launched its C2C platform in 2006, it relies on no exhibition fee and transaction fee to attract customers, while yahoo bid charged 3 NT dollars per merchandise as the exhibition fee and 3%

transaction fee. Until 2009, Ruten began to charge 1.5% transaction fee.

Although Yahoo bid tried to rise the transaction fee to 4% in 2013 to increase income, it cause a number of users to transfer so that Yahoo bid reduce transaction fee to 1.49 after one and half year, while Ruten raise it to 2%.

Shopee auction first to attracted users with their slogans “free for transaction fee, free for shopping as reaching the set amount” when they came into the Taiwan market in 2015, after that Yahoo bid and Ruten.com also launched free shipping related activities.

Compared to marketing strategies, service innovation R & D and hardware upgrades can change the quality of platform services and accumulate platform word-of-mouth (see loop 5 and "The loop 8). But the R

& D and hardware upgrades have time delay effect, and “Available funds” is limited, the provider tends to use marketing tools. The use of subsidies or lower fees and other marketing strategies can indeed bring short-term use of the increase in the number of marketing results (see loop 6), but in the long run also caused the increasing in operating costs (see loop 2), reducing the platform operating profit, and ultimately lead to the platform can only increase the fee to increase profits (Ex: Shopee auction in 2017 began to increase 0.5% to 1.5% of the fee and continue to adjust the purchase amount required for freight subsidies).

Known from hype marketing model, relying on hype marketing to attract

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customers will also enhance “Customer quality expectation”, often resulting in a decreasing in satisfaction, in the long term, it is not conducive to the increase in word-of-mouth (see loop 7). While function development and hardware updates may also increase operating costs (ex: if the engine room increases, see loop 1 and loop 3), it also accumulated as wisdom capital, enhanced customer value, and cumulative word-of-mouth (see loop 5).

Both “Promotion” and “word-of-mouth” do have their marketing effect to attract new users and increase conversion rate, and ultimately enhance the customer purchase intention. As what we had mentioned above, the main income source of a C2C e-commerce platform is transaction fee, so consumers purchase behavior also increased the net profit of the platform, and resulting in an increase in the available funds what can be used for equipment upgrading, functional innovation (see loop 4) or as marketing expenses, finally, they formed loops.

In order to make the marketing effect have a better effect, platforms are often provide more simple registration mechanism, hoping to attract more users, such as Ruten.com, people can register 3 account through the same identity card number, and anyone can register Shopee auction by email. When the user rises, it will also have its own adjustment mechanism (such as the seller gave up the market because of fierce competition), but it is not obvious for there has no exhibition fee that sellers have little cost (see loop 11).

However, the simplicity of the verification process has also led to the rise of the dispute, many frauds and the sale of pirated goods events are carried out by the fake accounts (see loop 12). In fact, people can buy the auction

accounts which have been counterfeited evaluation on the Internet, or they can enjoy the service of account evaluation ascribed. And the increase in the number of users also brought the problem of insufficient platform load, resulting in the use of the customer's time, making them perceive time risk (see loop 13).

In Taiwan's three major platforms, only yahoo bid noted this problem, and amended. And the increase in the number of dispute events leads to an increase in the risk perceived by customer, such as the repeat posts increase time customer needed to search for what that want, resulting in customer perceived time risk; and fraud also led consumers to worry about the loss of property, making customers’ perceive economic risk. When consumers perceive risk rise, also led to the decline in the word-of-mouth of the platform and reduce the customer purchase intention (Peter and Tarpey, 1975).

In addition, information leakage, such as personal leakage or account theft, etc., will also increase the consumer perceived risk. Another negative impact of the rise in the users is that as the number of user increases, the platform load is also rising, resulting in a decline in the speed of the web, and consumer perceived time risk increases.

According to the above, although the discount, subsidies and other promotional tools have their usefulness, but this cannot solve the existing problems of platforms, platforms still need to focus on their own functional development to create more customer value to retain customers.

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