Business overview: An investor's essential guide to eBay

Part 4
Business overview: An investor's essential guide to eBay (Part 4 of 6)

Growth remains flat for eBay Enterprise

In June 2011, eBay acquired GSI Commerce, Inc. which provided commerce technologies, omnichannel operations, and marketing solutions for large, nationally recognized retailers and brands. GSI was rebranded as eBay Enterprise last year and has developed technology partnerships with big retailers including Barnes & Noble, Toys “R” Us, GNC Holdings, Aeropostale, Dick’s Sporting Goods, NBA, Radio Shack, and PBS. Last month, eBay Enterprise announced that the company has added 228 premier brands and retailers in 2013.

eBay enterprise revenueEnlarge Graph

eBay Enterprise accounted for 7% of the company’s total FY 2013 revenue. Revenue was up 3% to $1.1 billion for the full year but down 2% for 4Q 2013 due to growth pressured by merchant and channel mix, and reduction in take rate. Marketing services revenue growth was impacted by replatforming and branding efforts to consolidate nine companies into one. These companies are ClearSaleing, e-Dialog, FetchBack, GSI Media, M3 Mobile, MBS, PepperJam Exchange, Silverlign, and True Action.

The segment generated $1.8 billion in merchandise sales in 4Q, up 11%, and $4.2 billion for the full year, up 14%. eBay Enterprise enabled its clients to grow same-store sales 13% in the quarter and 15% for the full year, outpacing e-commerce growth rates in the U.S. While the company operates on a global basis, nearly all of its net revenues in 2013 were derived from its North American operations.

eBay said its enterprise clients are increasingly adopting technology from across the eBay portfolio: PayPal has 97% coverage with growing utilization of Bill Me Later; Marketplaces has 33 Enterprise accounts live on its platform and growing penetration of its eBay Now platform.

In November, eBay announced that Magento would become a part of the business unit bringing forward scalability, flexibility, and customization to multi-channel retailers including Rebecca Minkoff and TOMS. In 2011, eBay acquired Magento, the open source e-commerce platform that was combined with other solutions to form a unit within eBay called X.commerce.

CEO John Donahoe believes that unlike Amazon, eBay holds no inventory. eBay is just a commerce and payments platform that is supporting the small and large retailers to compete against Amazon in the changing retail environment. The company has seen criticism for doing away with the auction model that was the reason for its success, and for creating a model too similar to that of close its rival Amazon. Moreover, the policy of allowing smaller businesses and individuals to compete against major retailers on the same platform have left some smaller sellers dissatisfied.

eBay enterpriseEnlarge Graph

eBay Enterprise operates three primary lines of business: commerce technologies, omnichannel operations, and marketing solutions. Each of these three primary lines of business complements the other, which allows for cross-selling opportunities.

  • Commerce technologies provides retailers with storefront commerce solutions including secure shopping cart and checkout offerings, analytical tools, site management tools, such as catalog, content and promotions management tools, and guided product discovery capabilities. Commerce technologies also has an exchange platform, which is a unique set of integrated capabilities, services, and infrastructure that support a retailer’s distributed order management, multi-channel inventory management, fulfillment integration, payments processing, and fraud management and reporting.
  • Omnichannel operations operates five e-commerce fulfillment centers in the U.S., one in Canada, and one in the U.K. Within these facilities, eBay Enterprise utilizes warehouse management systems and infrastructure to provide customized direct-to-consumer fulfillment solutions, including order management, real-time order status updates, and reverse logistics services. It also provides customer care services for e-commerce.
  • Marketing solutions are focused on providing comprehensive solutions designed to help clients acquire new customers, convert more website visitors into buyers, build customer loyalty, and drive revenue across various channels. Marketing solutions offers full-service digital agency capabilities, brand marketing, email marketing, database management, mobile and social advertising, affiliate and search engine marketing, online advertising display retargeting, and in-depth analytics capabilities.

To see how online retailers are affecting brick-and-mortar retail businesses, see Must-know: Does e-commerce mean the end of malls?

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