Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.
*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.
No doubt times have been tough in Europe. Britons are so concerned about paying their bills they are selling their possessions (46%), buying lottery tickets (12%), and entering competitions (42%) according to the J.Walter Thompson austerity index released August 8. It's not just bad in the UK, 90% of the Spanish and French are worried about making ends meet.
Times have been tough for the two e-tail giants in Europe as well, Amazon (AMZN +0.01%) and eBay (EBAY 0.01%). CNBC's Jim Cramer characterized eBay as, "... the U.S. company that complained the loudest about European weakness," in his segment on companies possibly benefiting from a European recovery. On its second quarter earnings presentation the company commented on the macro environment that, "Europe (was) slower than we expected, impacting both PayPal and Marketplaces."
Amazon's second quarter was also affected by European weakness with net international sales only up 13% compared to robust US net sales growth of 30%.
Ready for a recovery
Despite these discouraging results, in 2012 of 820 million Europeans, 250 million were e-shoppers and that percentage is expected to grow exponentially with the European Union pushing for a doubling of online sales from 2011 levels. Europeans average spend was 1,243 Euros and the fastest growing segments were eastern Europe, followed by Southern Europe but all of Europe saw double-digit growth in e-shopping. (See enlightening infographic here.)
Forrester Research expects online commerce to grow 12% annually in Europe through 2016 with much faster rates in southern Europe. Of interest in their report is that showrooming is growing as a phenomenon in Europe. Bricks and mortar retail prices aren't sitting well with people who are taking in lodgers (4%) or making their children take jobs (4%) as the austerity index details.
Any recovery would be good news for Ebay's Marketplaces (Fixed Price, Auction, and Motors), its more challenged division. Marketplaces still makes up half of revenues with second quarter reporting 120 million active users worldwide. Marketplaces is expected to grow by only 14% and PayPal will grow by 22% as CEO John Donahoe predicted at an analyst day in March. Analysts have less sanguine expectations for 15% 5 year EPS growth yoy.
Most of the bull case for eBay has centered around the success of PayPal, especially PayPal as a mobile wallet. While PayPal only generates 42% of revenues for eBay, in the second quarter those revenues grew 21% year over year. These increasing European e-commerce trends bode well for PayPal in particular.
Pay Pal has an expanding global presence supporting several European currencies including the euro, pound sterling, and Scandinavian currencies. For the last seven quarters PayPal's international segment has comprised 51% of total PayPal revenues. International revenue from PayPal came in at $827 million in the second quarter growing by 21% year over year.
For eBay's Marketplaces it all comes down to getting new European sellers who can make money without a hassle. That has been the continuing attraction of eBay sellers who have migrated to Fulfillment By Amazon, available in the European countries of Spain, the UK, France, and Italy. It's been available for some time in the US, Canada, China, and Japan.
Amazon also has a program, FBA Export (Fulfillment by Amazon), which allows members to sell to 26 European Union countries. It even offers "local language customer service" in addition to the usual FBA services of storing, packing, and shipping.
Despite these defections to FBA the trend is improving for eBay Marketplaces. July same store sales numbers were released by ChannelAdvisor on August 13 showing a 20.4% increase and up from June's 17.7% rise. The rate of same store sales growth increases has been accelerating since the March quarter's 15% same store sales increase.
Meanwhile, Amazon's July same store sales growth also rose 24.9%, but the same store sales growth rate has been steadily decelerating from 40% plus in the September 2012 quarter. These numbers do not break down into international and domestic and ChannelAdvisor notes that July is traditionally a slower month.
It's a small world, after all
Amazon and eBay are well positioned to take advantage of these trends whichever way the economic winds blow in Europe. Whether you believe in the distressing numbers from the Austerity Index or a gradual European recovery eBay and Amazon are upping the game and benefiting their European customers by making, selling, and buying on their platforms ever more attractive.
Alert: Top Cash Back Card Now Offers 0% Intro APR Until Nearly 2027
Enjoy 0% intro APR on purchases and balance transfers for 15 months—plus up to 5% cash back in popular categories.
Motley Fool Returns
Market-beating stocks from our flagship service.
Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 2025-08-29 01:00:39.246212.
Discounted offers are only available to new members. Stock Advisor list price is $199 per year.
Calculated by Time-Weighted Return since 2002. Volatility profiles based on trailing-three-year calculations of the standard deviation of service investment returns.
