eBay’s marketplace growth is losing steam (EBAY)
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eBay reported earnings for Q3 2018, announcing that it brought in $2.6 billion in revenue, up 6% year-over-year (YoY). Its marketplace’s gross merchandise volume (GMV) for the quarter totaled almost $21.5 billion, growing 5% YoY.
However, this is a steep drop from the 11% YoY increase seen last quarter, marking consecutive quarters of slowing growth in the metric. Prior to this trend, eBay’s marketplace GMV growth rose or held steady for four straight quarters, peaking at 13% YoY.
The e-tailer’s marketplace growth has been hurt by existing eBay users who are slow to adapt to changes to its shopping experience. eBay is making changes to its marketplace to bolster its long-term performance, namely emphasizing products more than individual listings.
But, because existing shoppers aren't adjusting to these changes quickly, it hindered some of eBay’s plans to scale features in Q3, CEO Devin Wenig said on the company’s earnings call.
New users aren't having issues with the changes because they have no prior familiarity with eBay or associated expectations, but the changes are making eBay different from what long-time shoppers are used to. eBay is planning to roll out changes faster for new users and slower for existing ones going forward to account for this.
eBay intends to focus on customer acquisition through marketing to combat this issue. Since new users are responding better to eBay’s new tactics, they have the potential to boost its marketplace GMV growth faster than existing users, and the company plans to target its marketing toward these users to attract them specifically.
This could pay off since eBay is “well recognized, but not always well understood,” according to Wenig, and it may be easier to educate new customers about what eBay is and what it wants to be, rather than changing the perspectives of existing shoppers.
At the same time, eBay expects significant growth to come from segments other than marketplace transactions, just like Amazon, suggesting that these top e-tailers’ future growth may lie outside of retail. Wenig pointed toward payments and advertising as notable growth opportunities for eBay, and it's possible they could help supplement eBay’s slowing marketplace growth.
Amazon has also seen its growth decelerate in its online store sales segment, with segments like AWS and “Other,” which includes advertising, growing much faster. These e-tailers have tremendous revenue from their marketplaces, making it hard to consistently improve their performances. As a result, they may be looking to invest elsewhere to propel their growth in the future, but they still won’t be walking away from their huge retail businesses.