June 2, 2014, 4:49 PM

eBay plays the field

The e-commerce giant invests heavily in local, mobile and global commerce technology as it seeks to step out of Amazon's long shadow.

Lead Photo

Local, mobile and global. If online marketplace eBay Inc.'s business over the past few years could be whittled down to three words, those might be the most apt.

If it sounds like a lot of spinning plates, it is, says Christopher Payne, senior vice president of North America for eBay. But eBay has one common thread tying those spinning plates together: Technology.

"The next few years are going to hold more change than the last," Payne says. "Consumer expectations will only rise. Technology will only move faster. We want to be the company that brings the technology that helps you shop."

It's part of a strategy for making up ground lost over the past decade to archrival Amazon.com Inc., the largest online retailer in both the Internet Retailer 2014 Top 500 Guide and 2014 Europe 500. For years, eBay was the top destination for U.S. online shoppers in monthly rankings by Nielsen Online. But Amazon shot ahead during the 2008 holiday season and never looked back. In February 2014, Amazon ranked sixth among all U.S. web sites with 98.5 million unique monthly visitors while eBay stood at No. 15 with 61.5 million, according to web measurement firm comScore Inc. Amazon's strong growth has made it Wall Street's darling, with a market value of $153 billion in April 2014, which is more than double eBay's $70 billion.

Like a judo master, eBay is trying to use Amazon's strength against it, mainly by cozying up to retail chains that view Amazon as a threat. The more big brands and retailers that sell on eBay, the more attractive it's likely to be to consumers.

And ultimately consumers will determine eBay's success. They've been coming back and buying more, though eBay's sales volume hasn't quite kept up with e-commerce's growth rate. If eBay's many technology investments, global forays and new partnerships pay off, its global marketplaces will become increasingly attractive as selling platforms for brands and retailers, large and small. And that should, in turn, make eBay's sites even more attractive to shoppers.

In one respect, eBay towers over Amazon: profits. Between 2009 and 2013 eBay's total net profit was $12.9 billion, more than four times Amazon's $2.9 billion. That reflects its marketplace model—eBay does not buy merchandise, nor does it warehouse any goods. Amazon, which was the seller of record for more than $67 billion worth of goods in 2013, has to tie up capital in merchandise, and in the nearly 100 warehouses it operates around the world.

And while eBay hasn't touched Amazon's growth rate, which has been as high as 40% in recent years, it's made a marked comeback. The value of merchandise sold on eBay's marketplaces, excluding vehicles, increased nearly 13% year over year in the fourth quarter of 2013 to $21.518 billion, up from $19.105 billion in Q4 2012. Sales on eBay's marketplaces also grew roughly 13% for the full year, to $76.495 billion compared to $67.763 billion a year earlier. That's still below the 16.9% growth for U.S. online retail sales in 2013, according to the U.S. Commerce Department. But it's progress compared to 2011 when eBay sales grew only 5.6% in the all-important fourth quarter and 10.7% for the year.

Still, eBay has an image problem with consumers, as many of them don't realize that eBay's marketplaces are no longer mainly places where consumers auction off junk from their attics. In fact, auctions only make up around 30% of eBay sales, and only around 27% of goods sold on eBay are used.

But many consumers still think of the old eBay. A September 2013 survey of 500 consumers found 51.9% buy on eBay no more than two times annually. Of those respondents, 52.4% say they shop there infrequently because they don't have patience for auctions and one-third because they prefer to buy new versus used items, according to a report by Wells Fargo Securities LLC, which commissioned the survey. "Ultimately, we think communicating these changes to consumers will help drive further active user growth, which has already started to accelerate over the past seven quarters," the report's authors write.

In addition to letting consumers know this is not the eBay of old, the company is investing heavily in technology to offer shoppers features they can't find elsewhere. And appealing to smartphone and tablet shoppers is a key initiative.

EBay acquired technology companies RedLaser and Milo in 2010. EBay integrated the companies' technologies into mobile apps that let shoppers scan bar codes with their smartphones to check online prices while also checking availability in nearby stores. Today 40% of North American shoppers on eBay interact with the brand via a mobile device at some point during their shopping journey and 25% of North American sales on the marketplace come from a mobile device, Payne says.

The online marketplace's acquisition spree continued in 2013 when eBay bought StackMob, a mobile app developer, and paid $800 million for mobile-focused payments processor Braintree. Braintree's clients are mobile commerce heavyweights like web-only fashion retailer Fab.com, and Uber, an online service that matches ride-seeking people with taxis and other car services. Braintree said at the time of the acquisition it processed more than $10 billion in payments annually for 4,000 merchant clients in 40 countries, including $2 billion of payments made on mobile devices.

And eBay earlier this year bought 3-D computer graphics company PhiSix. The technology from PhiSix will enable eBay merchants to virtually demonstrate how clothing fits a shopper's body as she moves around, eBay says. That technology will also be available to the growing number of retailers that use e-commerce technology from companies such as the former GSI Commerce—which eBay renamed eBay Enterprise after its $2.4 billion 2011 acquisition—which hosts e-retail sites for such major retail chains as Toys 'R' Us Inc., PetSmart and Sports Authority. EBay also can bring that technology to more than 200,000 merchants around the world that use Magento, the open-source e-commerce software platform it also acquired in 2011.

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