How Is Competition Impacting eBay’s Average Spend Per User?

-7.45%
Downside
52.78
Market
48.85
Trefis
EBAY: eBay logo
EBAY
eBay

eBay (NASDAQ:EBAY) delivered better than expected first quarter results last week, but it still lags far behind its competitors, especially Amazon, as well as the overall e-commerce market in the U.S. in terms of sales growth and market share. In Q1 2017, eBay’s revenue grew just 4% year-over-year (y-o-y) to $2.2 billion driven by consistent single digit growth in both the marketplace and advertising businesses, but higher operating expenses led to a decline in operating income. The company has been trying to fight competition and improve sales through better product cataloging, enhancing seller experience and increasing marketing, which is impacting its bottom line.

Despite the slow pace of top line growth, eBay’s efforts have paid off in increasing its active user base. The company has reported a consistent rise in active users in the last year, from 162 million in Q1 2016 to 169 million in Q1 2017. However, the average spend per user has consistently declined for the past five quarters on a year-over-year basis.

ebay-37

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

Compared to an average spend per user of around $129 per quarter in 2015, the figure was $127 on a quarterly basis in 2016 and it declined to $124 in Q1 2017. The consistent decline over the last five quarters is a cause for concern for eBay, especially considering rising competition in the e-commerce space from Amazon, Wal-Mart, Target and even Groupon.

eBay’s management stated last quarter that it intended to ramp up TV advertisements to attract more millennials and work towards improving product search features on its website for buyers. Over the next few months, the company is also expected to launch a new authentication program for high-end goods and a guaranteed 3-day delivery program for about 20 million products on its website.ebay-39
eBay will be looking to bank on its 169 million strong active user base now and the new initiatives seem to be rightly focusing on the spend per user metric. eBay’s average spend per user per month is only $41.3 and declining further year over year. For perspective, Amazon Prime customers are estimated to have an average spend per month of around $125, and this metric is expected to rise going forward.

Have more questions about Ebay? Please refer to our complete analysis for eBay

Interactive Institutional Research (Powered by Trefis):

Global Large CapU.S. Mid & Small CapEuropean Large & Mid Cap |More Trefis Research