eBay loses its shine

With net revenues flat on the prior year and with the total value of transactions between buyers and sellers on the marketplace site down by 3 per cent, it is safe to say that eBay has ended its fiscal year on a rather subdued note.

Admittedly, the strength of the dollar played a hand in diluting the numbers, but even on a neutral currency basis revenues rose by just 5 per cent and total transaction value by a meagre 1 per cent.

The currency neutral numbers in themselves are far from being dreadful but when set against the double digit growth rate of eCommerce markets around the globe, they look somewhat anemic and underline the fact that eBay is losing share within the online channel.

There are two main factors behind eBay’s slow growth: The first is greater competition from new online players; the second is the nature of the eBay platform.

On the platform front, while eBay’s systems work well the shopping experience itself can be hard to navigate and therefore frustrating. This is, at least in part, a function of the extensive inventory, over which eBay has little control; this makes it much more difficult for eBay to curate its products in a way that a traditional retailer is able to do.

Of course, eBay is not a traditional retailer, and nor should it be, but with online shoppers becoming more demanding eBay needs to work harder to create a more inspiring, and easy to use, platform.

To be fair, eBay has made some progress on this front with its initiative to create a more structured and disciplined listing process. This, in turn, allows it to be more savvy in highlighting key products, making it easier to discover relevant new items, and in creating a cleaner user interface. However, to date only 37 per cent of listings are covered by the new process so the project is something of a work in progress; it is not until it is more advanced that it will start to have a tangible impact on results.

This work is also critical from another perspective: that of rising competition. Although eBay remains a dominant force within the marketplace business, over recent years it has had to contend with the increased prominence of specialist players like Etsy. Although these rivals remain comparatively small, their focus is a source of advantage in the sense that their sites are more immersive, engaging, and easier to navigate. Not only does this make them destinations of choice for the areas in which they specialize, it also helps to drive good conversion and cross-selling. This is something that, in its own way, eBay needs to emulate.

Competition isn’t just from small players; it also comes in the form of the Amazon behemoth. While not a direct competitor in every respect, the growth of its successful Prime service has locked more customers into using its services and sites in a way that is unhelpful to eBay.

As it enters is new fiscal year eBay needs to get to grips with this more challenging backdrop.  

  • Carter Harrison is a retail analyst with Conlumino.

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