eBay’s Q2 2014 Results – A Seller-Oriented Deep Dive

July 18, 2014

ChannelAdvisor Scot Wingo By Scot Wingo

Wednesday, July 16, 2014, eBay announced their Q2 2014 results.  The results were largely mixed at a corporate level:

  • Overall Revenue – Met expectations coming in at $4.36b, in-line with expectations.
  • Payments – PayPal did very well and is growing much faster than e-commerce.  We don’t cover payments here, but a couple of tidbits are toward the bottom of the post.  Essentially PayPal helped reverse the negative trends in the ticket and marketplace business.
  • Tickets – Tickets are still a tough area (StubHub vs. TicketMaster, etc.) and eBay is in defensive mode here.
  • Marketplaces – We’ll dig into this one, but largely the MP segment under-performed growing at just 8% vs. e-commerce’s 13% growth rate. eBay disclosed that June was 7%.  eBay’s management cited the ‘multiple bodyblows’ of the data breach and Google SEO as the core reason.

 

Marketplace segment key metrics and analysis

Here is our dashboard of highlights

Ebay_q2_results

There’s a lot going on, here are the key things we’re keeping an eye on:

  • GMV Growth – Overall y/y GMV growth was well below expectations primarily due to the data breach problem that eBay had starting in May.   This seems to have hit them on the international side (8% ex-FX growth vs. domestic at 10%) and resulted in overall growth of GMV at 8%.  From a benchmark perspective, this is 5%  below the 13% ComScore e-commerce growth rate.  Also, based on our SSS Amazon grew in Q2 at an average of 29.8% y/y.
  • 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 9.5% a descrease from Q1’s 11.4% and what you would expect given the GMV decline. The fact this was higher than the GMV growth rate, indicates a move towards lower ASPs which could reflect consumers buying lower priced items due to concerns stemming from the data breach.
  • Active users – This was the bright spot for the marketplace segment.  Active users grew to 148.9m – a 14% y/y growth rate which means 3.9m new buyers came to the platform in Q2.  This is the best signal of the future we have and it was great to see this metric coming in with good momentum.

 

GMV Growth slowdown

For sellers, the biggest headline from Q2 is the slowdown in US GMV which was attributed primarily to the data breach during Q2.  eBay required all users to change their passwords which created a ton of friction and seems to have been tougher on the international business. Donahoe called out a couple of interesting tidbits on the call related around to this:

  • Top Rated Sellers (TRS) was 50% of GMV (conversely non-TRS was 50%) – this is a new high watermark since eBay has been discussing this datapoint.
  • 56% of transactions featured free shipping (44% did not) – another high watermark.
  • Cross-Border-Trade was 26% – this is a new high watermark, but it wasn’t exactly clear if this includes PayPal or was a specific marketplace metric.
  • Fixed-price grew 19%
  • Auctions were a pain point, down 7%
  • Top-Rated sellers grew at 14% on a SSS basis according to eBay.
  • Competition -management did say that they are facing a fair amount of competition and specifically on pricing.  This was mentioned in the context of stubhub and marketplaces, so it wasn’t clear if there was anything specific to marketplaces here.
  • Marketing – eBay cranked up marketing spend on the marketplace (Digital marketing such as SEM, display ads, etc.)

Finally, eBay mentioned that June GMV was up only 7% and July was recovering a bit, so this breach headwind could continue into Q3.

Why was ChannelAdvisor’s SSS so much higher than eBay’s?

We’ve been asked why our SSS sometimes doesn’t track eBay’s results and one reason is that our customers have for the most part moved off the auction format, so our data have a higher FP/Auction mix vs. eBay overall.  On top of that, ChannelAdvisor has reported a roughly 80/20 domestic/intl revenue mix in recent quarters whereas eBay is closer to 40/60 domestic/intl.  Also, we believe our customers have a strategic advantage due to our technology platform which we believe helps them to grow faster and more efficiently.

Action items for sellers from eBay’s Q2

This was a really tough quarter for eBay and while we haven’t seen Amazon’s results for comparison, it’s clear that overall the eBay marketplace is not growing as fast as e-commerce overall, therefore it is losing share.

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 and make sure you are 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.

Next week we will cover the Amazon results on sister site Amazon Strategies.

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