In its second-largest acquisition, Amazon buys the company for $970 million.
Retail chains may find eBay a valuable ally in their common struggle against Amazon.
EBay was the first blockbuster e-commerce success story. And so I was surprised the other day to hear eBay Inc.’s CEO talking up the allure of bricks-and-mortar stores.
“A lot of people really like shopping,” John Donahoe told me during an interview following his speech at the annual Imagine conference of Magento, the e-commerce software company now owned by eBay. “It’s entertainment, a social experience. I don’t believe in the demise of the store. There may be segments that go to stores less and less and less. But there are other shoppers who love going to stores.”
Donahoe may have good reason to pull for the survival of stores, and for the retail chains that operate them. For those retail chains and eBay are being pushed into an unexpected alliance against their common enemy—today’s blinding e-commerce star, Amazon.com Inc.
Signs of this alliance started showing up last year. In the fall, eBay created customized mobile apps for Macy’s and Best Buy. In doing so, eBay leveraged the mobile commerce expertise it has acquired in the past three years as it’s spent $3.5 billion buying up some 20 technology companies. While Wal-Mart had the expertise to create a similar mobile app itself, many retail chains don’t have the in-house talent to do it. Many chains likely would be happy to accept the help of eBay, which has emerged as a leader in mobile commerce.
Donahoe gave another example in our chat the other day. He says eBay plans to work with retail chain Kate Spade New York to put large touchscreens on store walls of the apparel retailer, so that consumers who can’t find a style, size or color in the store where they are can search for it online, using the wall-mounted screen as a kind of giant iPad. There are also large kiosks in Toys ‘R’ Us stores that offer the same online shopping opportunity. Both those chains are clients of GSI Commerce, one of the companies eBay has bought in its recent shopping spree.
Providing that kind of online and mobile expertise could help eBay solidify its relationships with those store-based retailers. EBay not only hopes they’ll continue doing business with GSI—most of whose 180 clients are retail chains—but also that they will use eBay to sell more of their excess and out-of-season inventory. Donahoe and his colleagues have been touting eBay to those retailers and major consumer brands as the perfect way to dispose of excess inventory—and even in-season stock—and Donahoe says that’s been successful. But a little goodwill can’t hurt.
(The eBay marketplace is clearly on the upswing, whether it’s because of big chains and brands providing eBay with more merchandise, or the many changes the company has made in recent years to the eBay.com site and its seller policies. After years of below-market growth, the value of merchandise sold on eBay’s U.S. marketplace increased 16% in 2012, in line with e-commerce growth, and by 19% in the fourth quarter, ahead of total e-retail growth. Global marketplace growth was 16% in the fourth quarter, which is important as eBay generated 56% of its marketplace revenue outside the U.S in that quarter. And the company has big plans for its international marketplaces, starting with Russia, as my colleague Katie Deatsch will explain in a story in the May issue of Internet Retailer magazine.)
There’s another big play afoot: PayPal, another eBay business unit, wants to grow from its roots as an online payment method to a way consumers pay everywhere, including at checkout counters in physical stores as well as on smartphones, tablets, TVs and any other web-enabled devices that may emerge.
To date, 23 national retailers have begun accepting PayPal in 18,000 U.S. stores. A consumer pays with a plastic card PayPal issues or by entering her phone number and PayPal password. That doesn’t make shopping any easier for the consumer, and Donahoe recognizes that PayPal will be successful offline only if it solves problems for consumers and merchants.
He has some ideas about how PayPal can do that. He points to a test at some Jamba Juice locations in California where consumers can use a PayPal app to order a smoothie for pickup at a designated time, then walk right up and collect their drink, without waiting in line. NCR, a major provider of electronic payment registers for stores and restaurants, is now building in PayPal functionality that will allow a diner to pay his check without waiting for waiter to deliver it. “One of the big challenges for restaurants is knowing when to deliver the check,” Donahoe says.
Another store-friendly feature of the PayPal app lets a shopper make a purchase at certain stores, and click that she wants to pick it up. When she walks in, screens on the store’s registers pop up her picture, name and order, so that employees can greet her by name. “It’s the kind of personalized service you used to get on Main Street, now enabled by technology,” Donahoe says.
Letting customers skip lines, restaurants turn over tables more often and stores deliver friendlier service, all address pain points for merchants and consumers. And good execution of these features, all just being tested, could win PayPal adherents among both shoppers and retailers. Add in the ability to store coupons and loyalty account information in a PayPal account—much handier than carrying paper coupons or adding several fobs to a consumer’s key ring—and eBay is making the case that PayPal is the ideal all-purpose payment mechanism for the future, whether consumers are paying in stores, online or via their mobile phones and tablets.
To sum up, eBay has three big revenue opportunities: building its core eBay marketplaces, extending PayPal into the physical world, and promoting the e-commerce technology it’s bought. In all three cases, good relations with big retail chains will help eBay achieve its goals. And retail chains may welcome eBay’s offer of expertise, especially in mobile technology.