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eBay Trying to Take on Amazon with Weak Moves

Posted on Wednesday, May 3rd 2017

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According to a BI Intelligence report, the US consumers spent an estimated $385 billion online in 2016 and are expected to spend $632 billion in 2020. The report also found that the number of online shoppers in the US grew by nearly 20 million last year to 224 million shoppers.

eBay’s Financials

eBay’s (Nasdaq: EBAY) Q1 revenues grew 4% over the year to $2.217 billion, ahead of the Street’s expectations of $2.206 billion. EPS of $0.49 was also marginally ahead of the market’s forecast of $0.48 for the quarter.

By segments, revenues from its Marketplace grew 2% to $1.8 billion. The improvement in marketplace revenues was attributed to its improved web platform that has been delivering improved user experiences. Stubhub revenues grew 18% to $210 million due to the completion of the integration of Ticketbis, which eBay acquired for $165 million last summer. Classifieds revenue increased 7% to $199 million.

Among operating metrics, eBay’s active buyers rose 2 million to 169 million at the end of the quarter. It reported that the gross merchandise value transacted on the platform grew 2% to $20 billion. GMV for Stubhub improved 6% to $916 million.

During the quarter, eBay repurchased 10 million shares for $350 million. It still has another $986 million left under its repurchase authorization.

For the current quarter, eBay forecast revenues of $2.28-$2.32 billion and EPS of $0.43-$0.45. The market was looking for revenues of $2.32 billion and an EPS of $0.48. For the full year, eBay forecast revenues of $9.3-$9.5 billion with an EPS of $1.98-$2.03. The Street had forecast revenues of $9.41 billion for the year and an EPS of $2.02.

eBay’s Improvement Plan

During the quarter, eBay continued to invest in initiatives to improve its platform. Besides improving its user interface, the company is also focusing on expanding market reach through mobile initiatives and regional expansion. To direct more traffic to its sites, eBay has been working on mobile platform and in building product catalogs on structured data. By connecting structured data experiences to its core organic traffic it has been able to secure users directly on its new browse pages when they searched for certain broad-based keywords. It is also integrating its database of over 25 million product reviews into its search experience to offer search results sorted by rating. It has also enabled users to upload pictures in product reviews so as to make the reviews more meaningful.

At the end of March, eBay began rolling out a new homepage. Using structured data and artificial intelligence, eBay is now able to create a shopping experience that will be customized to the user’s interests and shopping history. Users will be able to see a simpler and a more personal homepage that will help them discover new products as well. It is enabling a similar experience on its mobile app as part of the core mobile app released recently. The mobile app allows for a significantly simplified consumer selling experience that also leverages the structured data catalog to deliver a more efficient listing flow.

As part of its seller initiative, it announced several upcoming changes to pricing and performance standards. It will remove all third-party ads on view item and search result pages so that sellers will have a more direct access to market their inventory on eBay. It will also increase the number of promoted listing placements across the site.

eBay vs Amazon

As part of its efforts to compete with Amazon, eBay announced that it was working on introducing a three-day delivery guarantee on millions of products. The service will be called Guaranteed Delivery and will also include free shipping on millions of items. The service will be rolled out in the summer in the US. Users buying Guaranteed Delivery items will be able to get a refund or get a coupon if the product does not arrive on time. The shipping speed will still be slower than Amazon Prime’s two-day delivery. I simply don’t see eBay or anybody else for that matter being able to compete with Amazon on the logistics front. Amazon is way too far ahead of the game.

To take on Amazon in India, eBay recently announced a $500 million investment in India’s leading e-commerce site Flipkart. eBay was part of the $1.4 billion round that Flipkart completed last month. The funding valued Flipkart at $11.6 billion. The investment will make eBay an exclusive partner with Flipkart and will enable it to increase its penetration in the country by allowing eBay’s global inventory accessible to the Indian market. Additionally, eBay’s users will also have access to the Indian inventory provided by Flipkart. I am not at all convinced about this deal. Sounds like a whole lot of Brownian Motion to me.

Its stock is trading at $33.31 with a market capitalization of $36.1 billion. It touched a 52-week high of $34.74 earlier last month and has recovered from the 52-week low of $22.30 it had fallen to in June last year. eBay remains a sizable company in a large and growing market. The question, however, of how they will compete against Amazon’s dominance, remains.

Photo Credit: Mike Knell/Flickr.com

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