Here’s Why eBay Is Partnering With WineDirect

-6.15%
Downside
52.05
Market
48.85
Trefis
EBAY: eBay logo
EBAY
eBay

Recently eBay (NASDAQ:EBAY) announced a partnership with WineDirect, the industry leader in providing a direct-to-consumer service for wineries.  The partnership will provide eBay users direct access to 1,400 wines in WineDirect inventory via eBay Wine, a marketplace for wine eBay established last May.  The recent partnership with WineDirect signals the expansion of eBay’s wine portfolio giving consumers more options to choose from collectible, rare and everyday wines based on different varieties and regions. While e-commerce in the wine segment is at a nascent stage and forms only 1-1.5% of total wine sales volume in the U.S., the direct-to-consumer (DTC) shipping for wines is expected to increase at a rapid pace over the next few years. According to ShipCompliant, wine sale revenues from the DTC/e-commerce channel reached $2 billion in 2016, registering an 8.1% increase from 2014. We believe eBay’s strategy to broaden its wine portfolio will attract more consumers to its platform, driving revenues from this segment in the long term.

Capturing The Growth In The Online Wine Market Through A Diverse Portfolio

Through its partnership with WineDirect, eBay will offer its shoppers access to a large selection of wines from small and mid-size wineries. Its customers will also be able to send wine bottles as gifts for special occasions. This partnership will lead to a significant increase in eBay’s wine portfolio which should attract more buyers to its platform. One of the key aspects of eBay’s strategy to increase the number of users on its platform is to offer a wide variety of products, focusing on boutique sellers and providing inventory which is not available elsewhere. Through its partnership with WineDirect, the company is looking to adapt a similar strategy for its wine segment. By offering wines from smaller wineries, the company is providing access to its customers to wines which might not be available online elsewhere.  This strategy can increase the number of users on its platform, which is a key driver for its valuation.

Relevant Articles
  1. Up 19% YTD, Where Is eBay Stock Headed?
  2. Trailing The S&P By 20% This Year, Can eBay Stock Rebound?
  3. Down 4% YTD, What Should You Expect From eBay Stock?
  4. eBay Stock Is Down 7% YTD, What’s Next?
  5. What To Expect From eBay Stock?
  6. eBay Stock To Post Mixed Results In Q1

We estimate eBay’s users will reach nearly 210 million by the end of our forecast period. However, if this number grows at a rapid pace and reaches 240 million by the end of our forecast period, there can be a nearly 10% upside to our price estimate.

eBay is banking on a strategy to have a rich inventory on its platform which will attract buyers looking for convenient options to buy products which are not easily available elsewhere. As it looks to capture the growth in the online wine market, we believe the partnership with WineDirect will broaden its portfolio of wines, bringing in wines from smaller wineries on its platform which should drive user growth in the long term.

Global Large CapU.S. Mid & Small CapEuropean Large & Mid Cap