When eBay (NASDAQ:EBAY) was first starting, it was an online consumer-to-consumer auction house. But over the last 20 years or so, eBay has transformed into more of a business-to-consumer marketplace. While it still has millions of items for sale from individuals, a lot of eBay's business now comes from big sellers using the platform to reach eBay's broad global audience of over 170 million buyers.
As a result, 90% of items sold on eBay are now at a fixed price, just like you'd buy them on Amazon (NASDAQ:AMZN) or Walmart (NYSE:WMT). 80% of items sold on eBay are brand new. 70% of items are shipped to buyers within three days.
But eBay's VP of Americas, Scott Cutler, says most shoppers don't know those numbers.
That presents an excellent opportunity for eBay to craft a message catering to shoppers who want to buy new and want to buy now, and don't want the uncertainty that comes with buying something used at auction.
eBay is the second-largest online retailer in the United States, but its growth is severely lagging the market. eBay's gross merchandise volume increased just 7% year over year in the first quarter in both the U.S. and internationally (on a foreign exchange neutral basis). Comparatively, e-commerce sales increased 16.4% in the U.S., according to the U.S. Census Bureau.
eBay's growth is even more underwhelming when compared to Amazon and Walmart. Amazon grew online sales 13% on an FX-neutral basis, but its third-party seller services and subscription services (which make up an increasingly large part of its business) grew 39% and 56%, respectively, in the first quarter. Walmart reported a 33% increase in online sales in the first quarter, and it expects to reach 40% online sales growth for the full year.
Amazon and Walmart round out the top three online retailers in the U.S., so eBay's size isn't what's holding it back from growing quickly -- it's communicating with customers the value eBay can deliver, and then executing on that message.
Ramping up marketing and product development
In order to attract customers, eBay has ramped up spending on marketing and improving its products.
Specifically, eBay is investing in its brand, communicating why shoppers should consider eBay when they're looking to make a purchase. The company is also investing in promotional discounts to incentivize things like purchasing through the eBay app, which it's found has a better user experience and creates more loyalty.
Additionally, eBay is investing in its product to make the shopping experience better. Beyond the aforementioned app, eBay is looking to revamp its listings with product-based listings. Instead of searching for something and having to sift through each listing from hundreds of sellers, eBay will aggregate each listing for the same product and present a single product page to the shopper. It will use AI to determine which seller receives priority on purchases based on price and seller feedback.
A product-based listing experience is more similar to shopping on Amazon. It's also something Walmart is struggling to maintain as it adds millions of items from third-party sellers to its online marketplace. Cutler says the product-based experience will roll out to customers this month, starting in big categories like electronics, where products are generally standardized.
eBay's continued investments in marketing and product development will weigh on the company's operating margin for some time, but it should help accelerate gross merchandise volume growth on the platform. Ultimately, creating a better shopping experience and making sure people know about it will result in greater long-term earnings, and it's a positive to see eBay taking steps to remedy its market-lagging results.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Adam Levy owns shares of Amazon and eBay. The Motley Fool owns shares of and recommends Amazon. The Motley Fool recommends eBay. The Motley Fool has a disclosure policy.