Has eBay Turned a Growth Corner?

We were recently evaluating our August results and saw an interesting data point that I wanted to share with readers. One of the measurements we follow closely is Same Store Sales - this basically compares the current year period (August 09 in this example) to the prior year (August 08) and strips out any customer adds/attritions so we get a clean apples to apples picture of what's going on.

For the first time (in a loooong time), eBay (EBAY) showed positive SSS GMV growth, coming in at 4.6%. In the first Q, eBay was in the negative 10% range, and then in Q2 came in around -5%, so it's interesting to see a pretty material swing here. Of course this begs the question - why? which we'll cover later. First I wanted to share our SSS data in graphical form through August 09:

This chart has the following elements:

• ChannelAdvisor SSS - CA's all in SSS trends - this counts ALL channels.
• eBay SSS - we've covered this
• Amazon SSS - Amazon SSS - this is primarily in the EGM (Electronics and General Merchandise) as we don't have a lot of exposure to the media/video games categories.
• Comscore - Comscore regularly reports ecommerce trends and recently came out with a bearish dip for the August Back to School season showing - 3% y/y.

As you can tell from the chart, Amazon (AMZN) is on a pretty strong growth trend and shows no signs of letting up. Overall CA e-commerce is growing right around 10% y/y which is a slight improvement from the first part of the year and a material improvement from Q408.

Now let's dig into the eBay blip that you can clearly see from the chart.

Why are eBay SSS up?

Peeling the onion on the data, we noticed a couple of things contributing to the increase in eBay SSS:

• eBaySSS fixed-price is growing at a really strong clip (40%+) vs. eBay auctions which are declining at 20%. Sellers have finally gotten the message and moving their business models to the FP30 format and abandoning the auction format in wholesale. The scale of the FP business is now large enough to start to move the needle on SSS - earlier in the year the FP growth was masked by the scale and decline of the auction business.
• Bing - Bing was running some nice promos in August and had the eBay cashback at 10%+ for most of august
• We're annualizing the recession - Economics peg the start of the recession at March of 08, but it hit consumers (and consequently ecommerc spending) in the Aug/Sept timeframe.
• Anecdotely eBay seems to be doing more marketing - we noticed this first in the EU in Q2 and now it is trending up in the US.

Is this a blip or a sign of a turn-around?

It's too early to call if this is a one-time blip or if we're seeing a trend that indicates eBay has turned the corner, so we'll be keeping an eye on September and how things play out. I do think the late-Sept changes will be largely positive for transactions (especially search changes) so they should be helpful.

Sellers - let us know if you are seeing improvements, or not, and your thoughts on if we're seeing a turn-around with eBay or not.

Disclosure: I am long Google and Amazon. eBay is an investor in ChannelAdvisor.

Comments

[lostonline:]

Of course the auctions are down. eBay has done everything in its power to make the auction format unattractive. Sellers have to think hard before engaging in an auction. Fixed priced options are promoted and auction type sellers disadvantaged. eBay of today is not the same as when it established its core. Is it better? In my opinion, no.

Sep 10 09:44 AM

[redbaron:]

My business continues to decline, but I mostly use the auction format for my small antiques and collectibles. In most years, our business picks up from Oct-Jan, and it will be interesting to see how it works out this year. We are anticipating a normal recovery from the summer doldrums in this last portion of this year, but if it doesn't happen, we will further reduce our listings. This company quite obviously, does not want our business, and is doing most everything it can to discourage our kind of sellers. IMHO

Sep 10 10:30 AM

[ebaysales:]

Scott...

I am a rather large ebay seller with a feedback rating at almost 200,000 which is over 99.9% positive, and a Marketworks client. There are a few BIG PIECES of the puzzle that I believe you are missing here.

1. SSS.... Yes, my ebay sales are also up over the same period last year, BUT, I have had to list TWICE as many items just to increase my sales dollars by a crappy 5%, so my profit margin is WAY down over the same period last year. How is that "better"???? It is costing me more money in fees to do basically the same dollar sales figures.

Fixed price sellers turnover is about 5% at BEST. Therefore, substantially more items have to be listed in order to sell just as many items as a year ago. That is fact.

2. This is the big one. I have mentioned this to you before. I honestly think this is something that just about everyone, even the stock market "guru's" have missed. It all has to do with GMV (Gross Merchandise Value) of all the proucts sold on the entire ebay site.

Okay....here goes.

On September 16, 2008, ebay changed forever....for the worse as far as I'm concerned. That is the historical day that ebay started the FP30, and the ridiculous Best Match search system. That is ALSO the day when ebay selected numerous major catagories and implimented a "maximum S&H fee" that could be charged. Case in point, all the MEDIA catagories. This was HUGE!!!!! Here is why...

Let's use CDS as an example. Before 9/16/09, a seller could list a cd for $1.00 and charge $7.00 in S&H (very wrong I believe, yet just about every seller did this). This was a VERY common theme!!! Most media sellers did this....which is why ebay cracked down and said that $3.00 was the max that could be charged in S&H for a cd.

Therefore, what used to be listed on ebay for $1.00 plus $7.00 S&H now has to be listed at $5.75 plus $3.00 S&H ($5.75 becasue of the 15% FVF on the item).

Okay... PRIOR to 9/16/08, $1.00 went towards ebay's GMV. NOW, $5.75 goes towards GMV!!!! That's more than a 500% increase in GMV for MILLIONs of items!!

So it only LOOKS as though "same store sales" are up. In reality, they are not!

Let's use a simple example. Suppose a seller sells 100 items using the math above at $1.00 each in 2008. That is $100 worth of "store sales" and $100 towards ebay GMV. Okay....now in 2009, that same seller's business is DOWN 50%, so he only sells 50 items in 2009....BUT he has to sell them at $5.75 each. That is $287.50 in "same store sales" and ebay GMV!!!! That's a 287% INCREASE!!!!!!!!!!!!!!... yet that seller sold 50% LESS product!!

How is that "good"?????? How do those numbers show "ebay turning the corner"?????

There are over 1.5 MILLION cd ads on ebay right now. Use the math above and multiple it by 1.5 MILLION, then multiple that number by the 13 WEEKS in a reporting quarter!!!! It works out to be a HUGE number in a earnings quarter.....yet ebay's GMV continues to fall?????

Now multiple this GMV number by the over 2 MILLION dvd ads....the 2 MILLION book ads.

It's GIGANTIC!!

Now consider that ebay is promoting "free shipping", and as you know, there is no such thing as free shipping. The seller simply ads the shipping cost to the price of the item. So what does that do???? RAISE GMV EVEN MORE compared to this same time last year!!!

And again, ebay GMV has fallen DOUBLE DIGITS every quarter since Q3 of 2008 (old ebay).

This is substantial! With the September 16th changes ebay put in place last year, GMV should have INCREASED by an incredible amount in Q4 of 2008....yet GMV DROPED by 16%!! It then DROPED again in Q109 by 18%!!! What would that drop have been if there was no such thing as "free shipping" and a maximum shipping value in some catagories??? Would it have been down 30%???? 35%???? MORE???? My sales figures sure droped by that much at the snap of a finger in 2008.

This GMV factor is HUGE. By you saying that ebay has "turned the corner" is simply NOT TRUE!!! You are comparing the "new ebay" GMV to the "old ebay" GMV of a year ago. 2009 GMV "should" be up by 25%-30% based on the "free shipping" push, and maximum shipping allowed in major catagories. BOTH these fundamental aspects "push" more money into GMV.....without selling a single additional item. Ebay is manipulating the GMV numbers, by "pushing" more dollars into GMV, just like ebay is "pushing" auctions of the face of the planet.

If ebay were to return to the old day of promoting "auctions", I strongly believe ebay would see an instant return to success.

Do you remember Ebat Express??? Ebay's "fixed price marketplace"??? Where is it today??? GONE, that's where. WHY?? because when buyers had a choice (a REAL choice) between the auction process and the fixed price process.....THEY CHOSE AUCTIONS!!!! So ebay express failed.

So what does ebay do??? Ebay basically took a "failed idea", Ebay Express, and incorparted it into a highly sucessful idea, auctions. What happens when you take a sick person and put him in a room with a healthy person? The healthy person gets SICK! The sick person doesn't get healthy!

So saying that "same store sales" are up really does not take into consideration all the factors that exist "now" compared to "exactly 1 year ago".

The GMV numbers for ebay continue to drop....even though ebay has created the "perfect storm" to substantially INCREASE GMV, yet it has not increased.

The first true "apples to apples" comparison will be Q4 of 2009. THAT will be an "old ebay Q4 vs. new ebay Q4" comparison. Right now, you and everyone else is comparing OLD EBAY ( an incredible monster) to NEW ebay ( an out of touch company).

For what it's worth.....

Sep 10 11:22 AM

[ebaysales:]

...sorry, last paragraph above should be that Q409 vs Q408 will be a "NEW ebay vs. NEW ebay" comparison.

Sep 10 11:30 AM

[User 484380:]

Interesting Comments from "ebaysales", he has a point about the GMV, though I do not think this was the motive for the changes.

eBay Express didn't make it - because the overall cost of products GMV+Shipping was higher than it was than in even Bricks and Mortar stores. Yes, there were deals, but they were drowned out by the lack of deals in the inventory on Express.

Essentially, Express exposed how bad some of the sellers really were - and where the vast majority of poor buyer experiences were originating. Those experiences drove buyers away from the marketplace - to places like Amazon.

Sep 10 12:31 PM

[eBay +++:]

When eBay Revenue is up, it's just a Dog and Pony show right? Just a house of Cards? How could it be anything else right?

Pure B.S.....

Sep 10 05:58 PM

[convex:]

most of Ebay stock is held huge institutional investors who hold it as part of their overall portfolio...Ebay's increase is just going along with the wave of the overall stock market , NOT from anything they are actually doing to " IMPROVE" anybodies experience on Ebay...I have never seen a company alienate it's own customer base and create so much BAD publicity for itself as this company has over the past year...I will be amazed if sooner or later the horrible negative feedback Ebay has created for itself doesn't come back to bite it , Really HARD !

Sep 10 07:06 PM

[Bob C:]

On Sep 10 05:58 PM eBay +++ wrote:

> When eBay Revenue is up, it's just a Dog and Pony show right? Just
> a house of Cards? How could it be anything else right?
>
> Pure B.S.....

I guess eBay is doing better than I thought since eBay+++ has not been down-sized, yet.

How's that finger doing, with it still stuck in the dike, trying to hold back the flood of eBay bashers?

We will keep bashing, and bashing, and bashing!!!

Sep 10 09:21 PM

[eBuyer Feed...:]

I can your point but how well is eBay's performance following the economy? Do we even know how to separate the economy's actual effect from eBay?


On Sep 10 05:58 PM eBay +++ wrote:

> When eBay Revenue is up, it's just a Dog and Pony show right? Just
> a house of Cards? How could it be anything else right?
>
> Pure B.S.....

Sep 10 09:24 PM

[leapingcat:]

Ebay's constant tinkering can only be seen as a way of giving the impression of a constantly improving financial summary. 'ebaysales' has given a really detailed and brilliant summary of how the smoke and mirrors of the media changes have worked. But also, quarter by quarter, changes which increase sellers costs for no measurable benefit but increase Ebay's bottom line, higher listing fees, higher FVFs, higher shop fees, etc are quietly brought in. I think the day is coming soon when they will have run out of ways of extracting even more fees from the same or declining sales and the sky will be black from the flapping of wings of chickens coming home to roost.

Sep 11 04:02 AM

[Philip Cohen:]

Shill Bidding on eBay: Case Study #2

Shining some light on the more sophisticated and therefore slightly harder to detect shill bidding activity by some “professional” sellers on eBay auctions

Oh no, not another case study on shill bidding on eBay auctions? Yes, sorry, another one. This time a spreadsheet analysis of multiple auctions from some "professional" sellers from the US and Australia. Needless to say the analysis demonstrates, once again, that, contrary to eBay's claims, shill bidding by some “professional” sellers is rampant on eBay auctions. The full comment and spreadsheet download links at:
www.auctionbytes.com/f...

Sep 11 08:14 AM

[meridian575:]

Yahoo Finance has an article predicting a rise in E-commerce solutions with regards to the economic downturn and how it affects how people are spending money. Essentialy, analysts do not see a a slowdown as much in media and online expenditures
finance.yahoo.com/news...

Sep 11 11:38 AM

[pmetsho:]

f

Sep 15 02:06 AM

[pmetsho:]

I've been a buyer on Ebay since 2002. About a month ago I needed to sell a few items, so I thought I'd try my hand in selling them on Ebay. I guess I've been oblivious as to how ridiculously high Ebay's fees are.

These items I sold retail at brick & mortar stores for ~$28. I had been able to grab 4 of them on sale at $20 each. I listed them on ebay and here were the fees:

Ebay Insertion + picture fee: $1.00
----
My highest grossing item sold for $27.49 (+$4.95 shipping)
Ebay Final Value fee: $2.41
$1.24 Paypal fee.
----
Total fees taken by ebay and paypal=$4.65. The buyer sent me $32.44 (fv+s&h). So...knock down my $32.44 to $27.79, and this was my highest margin item of the 4 I sold.

I consider myself lucky-3 of my items sold, 1 didn't. The two others that did, sold for approx ~$22-$24.
When counting the total costs/fees and sales, I basically broke even...I may have made about $2-3 dollar in profit overall.

I've learned that unless you have a item/product where you have a significant cost advantage over other retail channels, It's very difficult to maintain a decent margin. I'm not sure how all those power sellers maintain margins as well as their sanity on Ebay....The Ebay/Paypal fee combination double dips into your sales, and really is off-putting to me. I wouldn't waste time selling any item less than $50 on Ebay...I know that's kinda what they want, and have been moving toward, but...It's just wreaks of corporate greed and is a slap into the face to the sellers and community who make Ebay what it is.

Sep 15 02:51 AM