eBay Q3 2011 Results

October 20, 2011

ChannelAdvisor ChannelAdvisor By ChannelAdvisor

Yesterday (October 19, 2011), eBay released their third quarter 2011 results.   While these results are covered in detail by various Wall St. firms, we wanted to pull out some highlights that are relevant for eBay sellers.  Note that all of my numbers are ex-autos and ex-fx to get a clear picture of what’s going on.  I also pull a lot of information from the conference call that you can get on replay from ebay’s investor site or read the SeekingAlpha transcript here.


Key Metrics from the Q3 2011 Results (Marketplace unless otherwise denoted)

  • Overall GMV was up 11%
  • US GMV was up 14% (vs. e-commerce at 13%)
  • International GMV was up 10%
  • Active users grew 6% to 98.7m
  • Fashion was up 18%
  • Parts was up 23% (Complete category data is in the category details below)
  • Items with free shipping grew to 40%
  • Every day over 500,000 items are sold with free shipping in the US
  • eBay now has 3 purchases/sec on mobile
  • Sold items were up 10% – a 2 point acceleration from Q2
  • eTRS sellers now represent 45% of GMV and are growing 23% y/y
  • PayPal – up to 63 of top retailers (Added Target, JCrew, Zara)
  • PayPal on eBay grew to over 73% – up 2% – Note this should really accelerate as the Cart is PayPal only – I don’t think Wall St. analysts understand this, so probably a lot of PayPal upside starting in Q4 as this number essentially goes to 100% (or whatever it would be ex-autos)

All in all, it was a solid quarter and eBay seems to be growing right along with e-commerce which is good as they were losing share there for a while when they were lagging e-commerce.  eBay’s margins dipped in the Quarter and their fourth-quarter forecast was below expectations which has the stock down ~4% today as Wall St. resets expectations.  Also, a lot of people are worried about the PayPal growth rate which was it’s lowest ever (around 32%).

The Q+A session is always the most interesting and here’s a couple of nuggets from that.

eBay not going to compete with FBA

An analysts, Matt@Wells Fargo, asked (paraphrasing here) ….what about the test on fulfilment…

-I suspect he was asking about this fulfilment program that was announced in June to help Chinese sellers with CBT into the US. Swan and JD didn’t seem to know what he was talking about and Swan answered about GSI and then JD added this interesting tidbit:

One of the interesting things is we mentioned earlier that top-rated sellers represent almost 45% of the GMV on the U.S. site now, U.S. eBay site. And most of our top-rated sellers are reasonably sized businesspeople, and they’re not looking for fulfilment support. They actually feel like they’ve got their fulfilment capabilities and shipping abilities up to retail standard. So it’s not a loud crying need we feel with the fastest-growing segment of the eBay seller base.

Which should put to bed all the rumors that they acquired GSI for the fulfilment capabilities to compete with FBA.

Large Merchant Program

Interestingly they really played down the large merchant program and highlighted the Coach Factory Outlet deal which was really a coupon and not a true large merchant deal.

They did discuss the eBay Factory Outlet which was good to hear.

Category Details

One of the more popular features we publish is the detailed category information which you can see in this chart (click to enlarge).


As you can see the Coin category continues to do very well due to the demand for Gold and other precious metals.  I haven’t seen any press on this, but eBay has even opened a bullion centre to make it easier to buy gold which you can checkout here: http://goldandsilver.ebay.com/gold  (Hey if you put your life savings into this, you get a free coin – eTRS!).

Sometimes when eBay publishes results, everyone on Wall St. gets excited and upgrades the stock, etc. (bullish), other times they are very upset with the results and turn Bearish.    This time there was an interesting mix of opinions and I wanted to share some highlights that are applicable to sellers.  Only time will tell which camp is right.

The Bear case

Jeetil Patel @ Deutsche Bank has some interesting observations that add up to a bearish view on eBay’s Q4 and 2012 prospects:

  • First he points out that it’s somewhat apples and oranges to compare GMV a year ago to today because eBay now charges on S+H as well as core.  Only 30% of the items a year ago had free shipping so that’s 70% of the GMV that saw an artificial bump from S+H inclusion.  If the average item with S+H had a 8-10% ratio of core/S+H (e.g. $50 item with $5 shipping) then the bottom line is a good 8% of the y/y GMV growth could be attributed to that fee change vs. true organic growth.
  • JP points to European weakness and eBay’s explanation that it was due to Euro fluctuations.  JP theorises that perhaps the true root cause is competitive pressures from Amazon in the region.
  • Finally, Patel summarizes:

Simply put, we think that eBay is approaching an inflection point in its business in that competitive pressures (specifically Amazon Prime and FBA) are likely to shift consumer demand away from eBay in coming quarters. Increasingly, we think that eBay’s underlying economics work in high ASP and high-margin categories, yet in low-ASP and low-margin categories seller economics look to be negative. These economics are constantly being pressured by lower product pricing.

The Bull scenario

Shawn Milne at Janney had one of the most glowing bull cases on the Q, highlighting these points:

  • eBay’s playbook of driving traffic to eTRS will improve the buying experience
  • Increasing selection and improved buyer experience will allow the company to start taking share.
  • PayPal will continue to be a strong grower.

Which side of the fence do you fall on?

SeekingAlpha Disclosure – I am long Amazon and Google.  eBay is a strategic investor in ChannelAdvisor where I am CEO.