What if merchandise prices on eBay continue to decline?
eBay (NASDAQ:EBAY) is known primarily for its marketplaces (ebay.com, half.com) where buyers and sellers exchange a variety of merchandise online.
Marketplaces’ core proposition is to bring buyers and sellers together for a low transaction fee. In the process, eBay marketplaces provide greater choice and value for buyers while providing sellers access to a large buyer base and cost effective marketing.
Historical Decline in Average Merchandise Prices
The average selling price of merchandise on eBay has been declining for the past few years. This happened in part because of the weak economy which led buyers to adjust their spending habits.
We estimate that the average selling price (ASP) of merchandise on eBay will increase from 2010 onwards due to improving economic conditions resulting in higher consumer spending. We estimate that the ASP will increase from $51 in 2009 to $64 by the end of Trefis forecast period.
What if Pricing Declines Continued?
Despite our forecast for a rebound in average pricing, it is possible that merchandise prices could continue falling for two reasons:
- Increased preference for used, rather than new items
According to eBay management, an increasing percentage of merchandise sold is used rather than new merchandise.
- Better methods of internet price comparison may disadvantage eBay’s higher priced items
The proliferation of pricing information online and merchandise-focused search results has made it easier for consumers to bargain hunt online. Merchandise sold through eBay is not always the lowest price and we believe that greater price comparison will disadvantage the sale of higher priced items.
You can modify our forecast for Average Selling Price of Merchandise on eBay above to see how eBay’s stock will be impacted if the merchandise ASP continues to decrease instead of increasing as we forecast.
For additional analysis and forecasts, here is our complete model for eBay.