eBay Q2 Results Preview

July 17, 2012

ChannelAdvisor ChannelAdvisor By ChannelAdvisor

eBay will report their second quarter results after the bell this Wednesday (July 18th).  In this post we preview what we’re looking for from a seller’s perspective from the report.

Wenig pre-announces strong user growth and goal to double eBay GMV in three years

One interesting point this quarter: in his talk(s) at eBay On Location (EOL), eBay’s new marketplace President, Devin Wenig told attendees that y/y active user growth was really accelerating and was in the double digits (so 10%+).  I don’t think anyone on Wall St. picked up on this and since it was said in Q2, could point to a stronger quarter than many are forecasting.  He also states they have an internal goal to double in three years which would be a 26% annual growth rate (with compounding), which is essentially double what they are growing as of Q1. We’ll see if they share that with Wall St. or if it was more of a statement to get seller’s jazzed up.

Will eBay announce a new CBT solution?

Finally, Wenig has been out talking publicly about a new international program for sellers coming soon (Cross Border Trade or CBT in eBay-speak) – perhaps that will be announced on the call.  The way he describes it:

  • The seller opts into the program
  • Their items are now shown across all eBay international channels
  • Let’s say a buyer in the UK purchases from a buyer in the US.
  • eBay shows the UK buyer their fully loaded shipping costs including tarifs/customs.
  • eBay sends a ship notification to the US buyer to send to a US-based reshipping facility
  • The reshipping facility receives the item and then ‘reships’ it to its UK destination.
  • eBay updates the UK buyer on the status of the item as it works through the system.

This type of service is provided by third parties such as FiftyOne and Bongo today for non-eBay transactions and has some interesting pros/cons to think through:

Pros:

  • Requires zero extra work for the seller
  • The buyer is fully informed of their costs
  • Smart reshipping can combine packages to reduce overall shipping costs
  • Increased selection globally
  • If eBay sees this as a profit centre, it could be a new source of revenue.  Historically eBay has used shipping as a revenue driver vs. Amazon’s approach of funding shipping, so it will be interesting to see what they do here.

Cons:

  • Double shipping adds costs to the equation
  • Double shipping adds time to the equation – folks in the UK expect their items the next day pretty much, something taking 10-14 days may not go over well
  • A lot of international buyers want sellers to send things as gifts so they can avoid taxes and tariffs, this new system will not allow for that.
  • Complexities – how will this impact feedback and DSRs
  • In most of these models, the reshipper takes ownership of the goods and thus is on the hook for returns and chargebacks and what-not.  This adds a whole bunch of complexity that will be tough for eBay to navigate and will probably add seller complexity.

Unknowns

Finally, Wenig hasn’t stated what the economic model will be.  If eBay sees this as a profit centre, it could be a new source of revenue (pro for Wall St).  Historically eBay has used shipping as a revenue driver vs. Amazon’s approach of funding shipping, so it will be interesting to see what they do here.  If they do see it as a profit centre, someone has to fund that and historically it is the eBay seller that does, so that could be a negative and slow adoption of the seller side of the equation (supply).

For example, let’s say you are shipping a pair of shoes to the UK and the costs is $15.  If eBay marks that up 30%, or ~$5, then they either have to get the seller to fund the $5, or the buyer.  International buyers do tend to be ok with higher shipping because in most cases the reason they are shopping outside of their borders is to get to some unique selection, so they tend to be less value concious, but there is a limit and eBay has to realise they are competing with off-eBay alternatives that aren’t as expensive.

eBay Q2 Results Tracker

In addition to the user growth and CBT solution, Wall St. is watching for any macro-economic headwinds.  For example, the EU is still under pressure and Comscore came out with e-commerce numbers in the US this week that were less than robust.

Here’s our key metrics tracker with eBay’s guidance and Wall St. expectations: (click to enlarge)

Ebay_q2_tracker

Stay tuned…

As usual, we’ll be tracking the results and will have a summary shortly after they are out.  Also, Amazon reports on  

SeekingAlpha Disclosure -I am long Amazon and Google. eBay is an investor in ChannelAdvisor where I am CEO.