The acquisition will add more than 300 products to L’Oreal’s lineup.
Far beyond its roots as an online flea market, eBay morphs into an e-commerce technology power.
The wake-up call for eBay Inc. came within the last two years, when its executives realized the competitive market they played in wasn't just about online versus offline retailing.
"Eighteen months ago we still saw the world as offline/online, and we would talk almost exclusively about how we could grow our share in e-commerce," says Alan Marks, who works on brand strategy across departments as senior vice president of corporate communications.
But startled by developments in the months that followed, the eBay execs, led by CEO John Donahoe, realized that the retail world was abruptly changing—in ways that offered new ways for eBay to grow.
"What started to change our thinking was mobile, and how quickly we had seen the consumer adoption of mobile commerce," says Marks, who reports to Donahoe. As consumers in stores began to tap into the web for product information via their smartphones, retailing began to change in fundamental ways. "We started to see, especially in 2011, that the lines between online and offline were not just blurring, but being obliterated," Marks says.
In response, eBay set out to become a provider of technology that would let retailers, large as well as small, reach consumers however and whenever they want to shop. No longer is eBay just trying to make its core marketplace, eBay.com, as appealing a place to shop as the web site of its main rival, Amazon.com Inc. Now eBay can compete with Amazon in a new way, by providing a range of technology that retailers will want to use, and that in turn will make it easier and more appealing for those retailers to sell on eBay.com.
It's a strategy born of necessity. Online competition in recent years, particularly from Amazon.com, has taken the bloom off the rose that was once eBay, where its flagship operation, eBay.com, has labored with the image of an online flea market, lacking the flashy web page designs and service levels common on other retail sites.
Even other basic product listing sites, such as Craig's List and Oodle, have been moving in on eBay.com's turf. (Oodle, founded by former eBay executives, operates Oodle.com and provides the platform for Facebook Inc.'s Marketkplace on Facebook.) Gross merchandise sales on eBay.com rose a paltry 4% in 2010 over 2009, far off the pace of the e-commerce industry as a whole, which increased between 10% and 15% during the same period, according to figures from comScore Inc. and the U.S. Department of Commerce. Amazon's sales, by comparison, grew nearly 40% in 2010.
In the past year, however, eBay has invested heavily in e-commerce technology. The company paid $2.4 billion for e-commerce platform provider GSI Commerce in March 2011 and a few months later bought the 51% it didn't already own of online retail software provider Magento. It has also snapped up several start-ups that specialize in mobile commerce, such as RedLaser, which lets consumers scan bar codes on product packages and search the web for similar products, and Milo, which shows shoppers the stores that have the products they desire in stock.
To top it off, eBay has developed X.Commerce as its overall strategy for integrating these new e-commerce technology assets with one of eBay's big strengths, its PayPal online and mobile payment system. Recognizing that a core problem retailers face as shopping becomes more complex is linking disparate systems together, eBay put at the core of X.Commerce a layer called Fabric that enables applications to share data.
For example, a company that develops an inventory management application could use Fabric to integrate its software with the Magento e-commerce platform as well as the eBay.com e-marketplace, so that a retailer that uses Magento could show available inventory to customers on its own e-commerce site as well as on its product listings on eBay.com. The same kind of integration also extends to other eBay properties, including the forthcoming new GSI Commerce e-commerce platform, version 11, due for launch later this year.
It's all about making eBay the prime source of technology to help retailers serve today's consumer across retail channels, Donahoe says.
"Across eBay, PayPal, GSI and X.Commerce, we have a robust portfolio of global commerce platforms and innovative mobile, local and social commerce technology assets," Donahoe said in a conference call with stock analysts in January 2012. "We are well-positioned to compete in the emerging new retail environment, and to help retailers of all sizes grow and engage their customers anytime, anywhere."
He added, "We are a different eBay today, no longer just an e-commerce leader but a stronger, more diverse global commerce company shaping the future of shopping and payments."
"Shopping is deeply embedded in our DNA," Marks says. "We understand how to create commerce platforms at scale." He adds that, unlike Amazon, eBay doesn't compete with the retailers it also serves as technology and services clients. That's a point eBay has have made for years but that could carry more weight as Amazon's muscular growth makes it more of a threat to other retailers and as eBay's technology offerings become more appealing.
While it's far too early to declare victory, eBay appears to be on the right track. Its 2011 revenue rose 27% over the prior year to $11.65 billion, helped by 29% growth in the transaction volume of its payments business, which earns fees for eBay. But the primary metric that many eBay followers watch, global gross merchandise sales on its e-marketplaces, grew 13% to $60.33 billion, including a 12% rise in U.S. gross merchandise sales to $22.87 billion.
Gross merchandise sales represent the total value of sales transactions (excluding motor vehicle sales) on all of eBay's e-marketplaces, including eBay.com, Shopping.com and events tickets site StubHub.com. Donahoe attributes the rise in e-marketplace sales largely to improvements eBay has made to the online shopping experience and to improved services, such as top eBay sellers offering free shipping and order tracking.