Seeking Alpha
Research analyst, long/short equity
Profile| Send Message|
( followers)  

eBay (NASDAQ:EBAY) is testing a new same-day delivery service called "eBay Now". Once you hit the "Bring It" button, your personal eBay shopping valet will pick up the signal and deliver the item to wherever you are-the office, home or the nearby coffee shop. The delivery fee for your first three purchases (which can't cost less than $25) will be waived, after which point a $5 surcharge will be tacked on.

It's still in beta mode as of yet. We might expect something from eBay very soon though.

"Same-day services are satisfying both the convenient need of online shopping and immediacy factor of offline," says Scot Wingo, chief executive officer of ChannelAdvisor, a global e-commerce software provider.

Though previous attempts at same-day delivery didn't come to fruition, will eBay be any successful at it?

Understanding the Business Dynamic of eBay

If we look at the business dynamics of eBay, it is not very hard to understand that eBay mainly connects retailers with online shoppers.

When that is the case, it's pretty easy to imagine that all eBay has to do now is sell through the local stores of Target (NYSE:TGT), Nordstrom (NYSE:JWN) and Walgreens (NYSE:WAG). Nevertheless, this will lead to even increased consumer spending online and higher revenue for those above-mentioned retail stores.

In fact, if we look at it from this viewpoint, most of these retail sites are actually competitors of Amazon (NASDAQ:AMZN). I don't know whether this will turn out to be bad for Amazon or not.

The ecommerce market is worth over $43 billion last quarter in 2012. So, there's place for everyone. But when eBay is gearing up so hard, it's best for Amazon to take some counteraction measures.

A Glimpse of 2011's eBay Acquisitions

Is it really important to know about the acquisitions? Is there any relation with the above news? Well, knowing what eBay is up to will definitely give you an edge in making an intelligent decision like the smart investor.

On January 14, eBay completed the acquisition of Brands4friends, Germany's largest online shopping club with approximately 3.5 million registered club members, for around $200 million.

On June 20, eBay completed the acquisition agreement of GSI Commerce (NASDAQ:GSIC), a leading provider of ecommerce and interactive marketing services, for approximately $2 billion.

On August 11, eBay bought Zong, a leading provider of payments through mobile carrier billing, for approximately $240 million.

On August 17, eBay bought Magento, a leading open source ecommerce platform, and a year back, it already bought Milo, on which this same-day delivery service would be based.

It seems that eBay has spent a lot of money for better market reach enhancement, easier mobile payment facilitation and aggressive acquisition of potential clients.

The more clients it acquires, the better experience it offer to the users, the wider it spreads the wings…the better for their bottom-line.

Does It Show On Its Financial Sheets?

Sure, it does. Quarterly revenues increased to $3.4 billion last quarter this year from $2.2 billion during the second quarter in 2010, for the ninth time at a stretch. Just going by this information, eBay seems to know what it is doing. More revenues always signify business growth, good for us, investors!

Quarterly operating income rose to $695 million last quarter this year compared to $485 million same quarter in 2010. Operating income says whether the company is performing positively or negatively.

eBay recently sold Skype for over $2 billion. This is just another part of the business streamlining process, for better operating profit margins.

eBay has spent a lot of cash till the second quarter of 2011, and that certainly showed in the cash flow statement. But as the balance sheet shows, cash and cash equivalents have been piling up fast since then, and to follow that, eBay has recently announced the pricing of a $3.0 billion underwritten public offering of its senior unsecured notes due 2015-2042.

I can sense something is up eBay's sleeves, and I supremely believe that we will see further developments in the coming few years ahead.

Source: eBay Beta-Tests Same-Day Delivery; Good Times Ahead In 2012