For eBay, ‘Collections’ And ‘Local’ Strategy Are Important
As Alibaba gears up for its U.S. IPO, eBay (NASDAQ:EBAY) remains focused on creating a better customer experience and is not worried about the competition from the Chinese e-commerce behemoth. Going forward, e-commerce will be a multi-trillion dollar opportunity, which implies that it doesn’t have to be a zero sum game and there is room for everyone to prosper. eBay has managed to grow its buyer base, PayPal accounts, total payment volume and gross merchandise volume (GMV) at an impressive rate. While the secular trend of consumer shift to online shopping has been one of the biggest drivers, eBay’s own efforts cannot be discounted.
Going forward, the company intends to focus on improving the user interface and browsing experience, and its ‘local’ strategy. ‘Local’ refers to giving customers the flexibility of buying products online and picking it at a local store as and when they want. With these efforts, eBay intends to create value differentiation as well as compete more effectively against Amazon (NASDAQ:AMZN). eBay is also promoting PayPal’s credit feature in order to drive sales. However, the revenue contribution of such services still remains small at this point. Its ‘Bill me Later’ service accounted for 4.4% sits U.S. addressable GMV and 2.1% of U.S. merchant services total payment volume.
Our current price estimate for the company stands at $60, implying a premium of about 15% over the market.
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eBay’s Collections To Improve User Experience
eBay’s chief product officer recently talked about how the company and its customers are involved in building curated collections of products based on themes. The initiative is relatively new and attempts to simplify and improve online buying experience. This also brings social aspect of shopping into spotlight. eBay’s customers have already created over 1 million such collections which help buyers discover products that they wanted but never knew about. The company launched this feature in the U.S. in late 2013, and began introducing it in the U.K. in March 2014. [1] The essence is that with the growing product catalog, the number of products has increased so much that simple search is not sufficient anymore. eBay and other retailers will need to revamp their user interface to make online shopping faster, easier and fun.
Why Pick Up From Local Stores Is Important?
eBay has been aggressively rolling out its new delivery system of ‘click and collect’. The company has entered a partnership with Argos store chain in the U.K., wherein customers can choose from more than 6 million listings from over 100 sellers and collect their purchased items from more than 100 Argos stores across the country. This is somewhat similar to what Amazon does and will help eBay compete better globally. The company is testing similar strategy in the U.S. as well. The reason why it will be easy for eBay to push this initiative in the U.S. is because when a customer picks up a purchased product from a store, he or she has to enter the store and is likely to buy additional merchandise. This works well in the favor of physical retailers, which makes them likely to comply with eBay’s business proposition.
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- eBay adds Pinterest-like social features to UK site, The Telegraph, Mar 6 2014 [↩]