Here’s How eBay Can Drive Growth From eBay Local

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Recently,  eBay  (NASDAQ:EBAY) launched eBay Local in the United Kingdom which is aimed towards enhancing the marketplace experience by connecting buyers and sellers who are physically close to each other.  This new website allows local product searches based on the postcode and the output is a Google Map with products pinned, showing the price and distance of the seller from the postcode. A local marketplace can ensure quick delivery (or easy pick up) and provide the convenience of paying cash while picking up the product from a neighborhood seller. eBay already has 13 million products listed on this website.  We believe that, as the company tries to compete with the e-commerce giant Amazon and its faster delivery options, a local marketplace connecting buyers with sellers can develop, thereby fostering eBay’s transaction, revenue and user growth.

 Convenience Of Payment And Delivery Can Drive Transaction Growth

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According to our estimates, average spend per active user is a key driver for eBay’s valuation and more transactions on its marketplace can increase this number, impacting its valuation positively. We expect this number to increase marginally from around $510 in 2016 to around $520 by the end of our forecast period.

eBay Local holds the potential to drive this metric and encourage users to use the marketplace for more transactions, including second hand products. The buyer’s experience can benefit from the ability to identify a seller a few minutes away from the buyer’s location.  And the convenience of being able to pick up the product directly from the seller can enhance the experience as well. By using this facility, buyers don’t necessarily need to wait for the product to be delivered.  They can inspect the product (if the seller is willing) before effecting the actual transaction.  This feature should have a positive impact on the sale of second hand products on eBay’s platform. If the average spend per active user on eBay’s platform increases to around $600 by the end of our forecast period, there can be a 10% upside to our price estimate.

As eBay works on its turnaround program, one of its key goals is to make buying and selling easier on its platform. The company has taken several initiatives in this direction, including investment in technology to refine product listings, a more intelligent product search capability, providing easy shipping options to sellers and a richer inventory for buyers. These initiatives have started showing results, which we suspect is reflected in the 30% appreciation in its stock price over the past year. eBay has put consistent efforts in this direction over the prior year, including strategic acquisitions and its expansion into regions such as Africa and the Caribbean. We believe eBay local is another such initiative to drive volumes on its marketplace.  As this initiative makes buying and selling more convenient, it should drive revenues for eBay in future.

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