Ebay reports bumper sales growth

ebayE-commerce giant, eBay, reported a six per cent increase in net revenue and higher sales. Net income rose by 424 per cent in the same quarter of last year.

In the company’s marketplace division, growth was 3.6 per cent, coming off the back of a 2.7 per cent decline in the previous year.

Neil Saunders, CEO of retail analysts firm Conlumino, said on a headline basis the company’s increase in net revenue represents a solid performance for eBay, and one that is a marked improvement on the uplifts that were being delivered at the back end of the prior fiscal year. Higher sales, coupled with a reduction in administrative and general costs and the removal of losses from discontinued operations, have helped to boost profits.

But, according to Saunders, behind the headline figures, the results still show some signs of weakness – especially in the company’s marketplace division. Growth was 3.6 per cent, but this comes off the back of a 2.7 per cent decline in the prior year.

“Moreover, all of the growth came from StubHub, where revenue increased by 39.8 per cent year-over-year. In isolation the traditional marketplace part of the division saw revenues fall by 0.2 per cent, an unfavorable outcome given last year’s weakness,” he said.

Saunders said as the marketplace business represents the biggest slice of eBay’s revenue, this is a worrying outcome, and one that underscores the fact that on the product side the business continues to lose market share and to underperform other online players, like Amazon, by a very wide margin.

“On the platform front, while eBay’s systems work well the shopping experience itself can be hard to navigate and therefore frustrating,” he said.

“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.”

Saunders said eBay has been actively addressing this with its initiative to create a more structured and disciplined listing process and added “it believes that 90 per cent of listings can be structured”.

“To date this has allowed eBay to improve the on-site experience with improved product pages and information that is easier to digest. However, while some of this is evident on the site, it does not yet seem to be having an impact on sales.”

“In our view eBay needs to go much further in revamping the whole online experience in order to bring it up to par with the likes of Amazon. This includes a more compelling landing page, easier search and navigation, and better pages for individual products.”

According to Saunders, this is all a work in progress, along with an increase in the number of listings covered by its new structured process which now stands at around 60 per cent, up from 37 per cent at the back end of last year.

“While we believe that, once complete, the impact on revenues will be positive, we also note that the improvements come at a time when eBay is facing greater competition,” he said.

“This is not just from rivals like Etsy, but also from a growing array of Chinese players like AliExpress which have become adept at shipping from the Chinese mainland to other geographies. As such, there is a sense that all of these efforts will help eBay stand still, but will not help it power ahead and grow share.”

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