eBay (EBAY) has launched several initiatives to try to grab the spotlight during Amazon’s (AMZN) Prime Day shopping event. Prime Day is Amazon’s equivalent of Alibaba’s Single’s Day and JD.com’s 6.18 shopping festival. This year, the event will run on July 15 and 16.
To coincide with Prime Day, eBay plans to host a rival shopping event. The event, Crash Sale, will be held on July 15. Crash Sale will allow people to purchase items at steep discounts of more than 80%.
With Crash Sale, eBay is looking to capitalize on Amazon’s woes. During last year’s Prime Day, Amazon’s site crashed amid a huge surge in traffic that made it difficult for customers to complete purchases. In a press release, the company said, “If history repeats itself and Amazon crashes that day, eBay’s wave of can’t-miss deals on some of the season’s top items will excite customers around the world.”
Amazon competitors expect a troubled Prime Day
Many Amazon competitors are betting the company will have trouble during this year’s Prime Day. In a recent survey, workplace social network app Blind found that 60% of eBay employees believe Amazon’s site will crash during this year’s Prime Day. At Walmart, 47.4% of employees believe Amazon will crash on Prime Day. Even at Amazon itself, nearly 30% of workers believe the company’s site will crash.
To grab even more attention from Amazon’s Prime Day, eBay has opened a July discount shop. Between July 8 and 22, eBay is running Summer Brand Outlet, a shop offering huge price discounts on top brands such as Adidas, Rolex, and Michael Kors.
Amazon’s Prime Day highly anticipated
There are good reasons eBay is trying hard to hitchhike on Amazon’s Prime Day to boost sales. A PwC survey showed that 52% of consumers plan to delay purchases until Amazon’s Prime Day arrives to enjoy discounts. With Summer Brand Outlet, eBay is trying to tell consumers they don’t have to wait to unlock discounts. Running through July 22, the shop may also suit Amazon shoppers who miss out on Prime Day deals.
The PwC survey also found that 55% of consumers plan to shop around for deals from other retailers. eBay has positioned Crash Sale as a great alternative to Amazon’s Prime Day. eBay is trying to narrow the gap with Amazon, which currently dominates the e-commerce space. This year, eMarketer estimates Amazon will capture around 47% of the US e-commerce market, beating eBay’s estimated 6.1% share.
eBay views Amazon’s Prime Day as a threat
Amazon’s Prime Day poses a huge threat to eBay, as it helps Amazon build a loyal customer base. In the PwC survey cited above, more than 60% of consumers surveyed stated that Prime Day discounts were a major enticement for signing up for a Prime membership. These discounts are even a greater driver among young consumers: 73% of consumers aged 18–24 reported that Prime Day deals led them to buy Prime membership. Prime costs $119 per year but is also available in special packages for students and people on government assistance.
In addition to discounts, Prime members enjoy free delivery of their purchases. These factors combined make them Amazon’s most loyal customers. According to Consumer Intelligence Research Partners, Prime members spend an average of $1,400 per year on Amazon shopping. That figure more than doubles regular Amazon shoppers’ annual spending of $600.
eBay keen to save its skin
eBay’s attempts to compete with Amazon’s Prime Day may not be just an attempt to win over new customers, but also defend against losing customers to Amazon. As people who opt for Prime membership tend to stick with it and spend more with Amazon, eBay is careful not to allow its customers to land on Amazon’s marketplace.
eBay finished the first quarter with 180 million active shoppers on its marketplace worldwide. Amazon doesn’t provide regular updates on the size of its customer base, but the company disclosed in 2017 that it served more than 300 million consumers around the world. Chinese e-commerce companies Alibaba, Pinduoduo, and JD.com finished the first quarter with 654 million, 443.3 million, and 310.5 million active shoppers on their marketplaces, respectively.
Last year, eBay started handling payments for some of its sellers, shifting from PayPal, its main payment processor. According to eBay, handling payments internally will cut costs for sellers. These cost savings would allow them to list their items at even more competitive prices and lure more shoppers to eBay.
In the first quarter, eBay’s revenue rose 2.0% YoY (year-over-year) to $2.6 billion. The company, scheduled to report its second-quarter results on July 17, said in April that it expects its revenue to grow 2.0%–4.0% YoY to $2.6 billion–$2.7 billion in the quarter.
eBay derives most of its revenue from its marketplace business. In the first quarter, the business generated $2.2 billion in revenue and contributed 85% of eBay’s total revenue. eBay’s other businesses. StubHub and Classifieds, generated revenue of $230 million and $256 million in the first quarter, respectively.
Elliott proposes selling StubHub and Classifieds
In January, activist investor Elliott Management proposed that eBay should sell its side businesses to focus on its core marketplace business to create more value for shareholders. Elliott owns more than 4.0% of eBay. After Elliott made its recommendations, eBay said it would review its options for StubHub and Classifieds. This review could result in the businesses’ sale or spin-off.
Selling StubHub and Classifieds may allow eBay to focus on its core marketplace business and unlock some cash. However, dropping the side businesses would also leave the company less diversified. Many e-commerce companies are keen to diversify as the industry becomes crowded and growth slows.