eBay Q4 2014 Results From a Seller’s Perspective

January 22, 2015

ChannelAdvisor Scot Wingo By Scot Wingo

Wednesday, January 21, 2015, eBay announced their Q4 2014 results.  The results were neutral for PayPal and negative for eBay:

Donahoe summed up the Marketplace performance: “Q4 was disappointing” and they expect the marketplace business to get “worse before it gets better.”

A couple of other comments were interesting from a seller’s point of view:

  • eBay plans to build a product catalog (there have been many false starts on this over the years).  The initiative was mentioned to be SEO driven.  It’s been our view for years that the lack of structured data impacts the user experience, so hopefully they are thinking about it from that angle as well, not just SEO.
  • eBay is laying off 7% of their workforce.  It was mentioned that this will be ‘heavier’ on the marketplace side of the house.
  • eBay is spinning off in an IPO or selling eBay Enterprise.  eBay Enterprise is the GSI business plus the Magento business.  We’ve had many calls from customers worried about the fate of Magento and it wasn’t clear from the call what eBay’s plans are for that.   It seems they are keeping the two pieces together and not selling separately.
  • In last Q3, Donahoe mentioned they are working on identifying the core customer for eBay marketplaces.  This quarter they revealed that the core customers are: “savvy shoppers”.  He described them this way: “We’re also sharpening our strategy with greater focus on the core consumer segment where we believe eBay can win savvy shoppers who love great value, unique selection, discovery and engagement.
  • To that end, eBay talked a lot about wanting to focus on and grow the $2b ‘eBay Deals’ program.
  • The two bright spots from the call were: 1. Mobile transaction volume grew 30% y/y which is strong growth.  2. cross-border trade (CBT) grew 20% and is now 21% of the marketplace GMV.

Marketplace segment key metrics and analysis

Here is our dashboard of key metrics we monitor from eBay’s Q4:

ebay_q4_14_dashboard

As you can see, there’s a lot of red on the dashboard.  Here are the three key metrics we are keeping an eye on:

  • GMV Growth – Overall y/y GMV growth was well below expectations and the e-commerce growth rate of 15%  coming in at 5% overall.  The US grew at 3% and international grew at 6%.  The primary drivers were SEO issues, the data breach, currency changes impacted cross-border trade (CBT) and they also talked about a lot of lower ASP items coming into the marketplace from external markets.  Reading between the lines, I think they meant China->US imports.  These put pressure on ASPs. You can see this in the sold items metric.
  • Sold Item Growth – At eBay (compared to Amazon), this metric ‘matters’ more because it is more relevant and tends to track GMV unless AOVs increase/decrease materially (which is why we watch it).  Sold items came in at 8.4% a decrease from Q3’s 9.1% and what you would expect given the GMV slow down.  The difference between sold item growth and GMV growth would be a decline in ASP (8.4%-5% = 3.4%).  In other words, ASPs declined 3.4%.
  • Active users – Active users has been a bright spot for eBay, but was quite slow coming in at 155m users, a 11% y/y growth rate.  The trend on this metric has been down for the last 3 quarters.  eBay cited SEO issues as the core cause here.

Other Marketplace metrics of interest

For sellers, the biggest headline from Q3 is the slowdown in US GMV. Donahoe called out a couple of interesting tidbits on the call:

  • 59% of transactions featured free shipping (41% did not) – a high watermark.
  • Fixed-price grew 7% (half the rate of e-commerce).
  • Auctions were a pain point, down 14% .

Action items for sellers from eBay’s Q4

This was another really tough quarter for eBay.   While we haven’t seen Amazon’s results for comparison, it’s clear that overall the eBay marketplace is losing share and eBay said it will get worse before it gets better.

If you are a seller, your action items from the Q are pretty clear:

  • A diversified strategy with many marketplaces and e-commerce channels is the best protection against any one channel having headwinds.
  • The ‘quadrant’ of fixed-price and TRS is where the growth is at eBay – the playing field is tilted heavily this way, so for most sellers it is worth the economic cost hit to be here.
  • Mobile and cross-border-trade (CBT) are big initiatives for eBay so you should try utilizing them by making sure your listings are mobile friendly and that you are experimenting with programs like eBay’s Global Shipping Program (GSP) and the UK-based Click and Collect, which appear to be growing much faster than eBay and e-commerce overall.

In early February, we will cover Amazon’s Q4 results.

Scot Wingo wrote this blog post. I am CEO of ChannelAdvisor.