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eBay (NASDAQ:EBAY) has made concerted efforts lately to improve its customer service with respect to sellers and buyers on its platform. We believe reduced take rates, innovative mobile apps for devices like the iPhone and iPad, and the launch of a new fashion platform will benefit eBay by encouraging sellers to list more merchandise on its platform.

Merchandise Listings on eBay Expected to Increase

We estimate that eBay Marketplaces constitutes around 50% of the $40 Trefis price estimate for eBay’s stock, making it the most significant business segment for eBay. We estimate that the number of Merchandise Listings on eBay will continue to increase from 2.9 billion in 2009 to 4.5 billion by the end of the Trefis forecast period.

However, there could be an upside of 10% to the $40 Trefis price estimate for eBay’s stock if the number of merchandise listings were to increase at a faster rate and reach 5.5 billion by the end of the Trefis forecast period.

Below we highlight three initiatives that eBay has taken that we believe will lead to more merchandise being listed on eBay marketplaces.

1. Reduced Take Rates Will Motivate Sellers to List More

eBay’s transaction take rate represents the average commission, as a percentage of the merchandise sale price, that eBay earns on every item sold. eBay has reduced its take rate over the last few years in order to drive volumes and sales. We believe that the take rate will continue to decline from 7.8% in 2009 to 6.8% by the end of Trefis forecast period. This will help encourage more seller listings.

2. Mobile Apps for iPhone and iPad Will Increase Seller Reach

eBay’s main shopping app for mobile phones has been downloaded more than 8.5 million times and eBay expects to generate $1.5 billion in Gross Merchandise Volume (GMV) from mobile apps in 2010. In comparison, we expect total eBay GMV (including mobile) to reach $63 billion in 2010.

Mobile apps will allow sellers to reach a wider audience of buyers, and importantly, reach them when they are considering a purchase at a store. With mobile apps, shoppers can more conveniently search eBay from their mobile phones to compare prices on eBay to merchandise they are considering in store.

Having access to a shopper that has high intent to purchase is extremely important for sellers and we believe that mobile apps help to improve seller access to such buyers.

3. Launch of Fashion Vault Will Increase Apparel Listings

eBay has recently launched a new category for apparel called the Fashion Vault. It has negotiated with top brands, retailers and designers to list their items on eBay at a discount to the retail price. eBay expects to generate more than $5 billion in GMV from clothing, shoes and accessories in 2010.

10% Upside to eBay’s Stock from Better Customer Focused Efforts

Although we forecast that the Number of Merchandise Listings on the eBay platform will increase to around 4.5 billion, there could be an upside of $4 (10%) to the $40 Trefis price estimate for eBay’s stock if it were to increase to 5.5 billion by the end of Trefis forecast period if eBay’s seller initiatives were to attract more sellers to its platform.

You can modify our forecast for the Number of Merchandise Listings on eBay above to see how eBay’s stock will be impacted if those rates were to increase at a faster rate than what we forecast.

For additional analysis and forecasts, here is our complete model for eBay’s stock.

Disclosure: No positions

Source: eBay's 10% Upside