eBay Inc (NASDAQ:EBAY) Needs to Increase User Base and Order Volume

eBay Inc (NASDAQ:EBAY) needs to focus on increasing its user-base, like any other Internet-based business. More importantly, in order to satisfy investors, it needs to increase the merchandise volume of the orders that are placed by those users. Even though 2015 was a year of disappointing growth, there are modest expectations this year. The firm is set to release its Q1 2016 earnings tomorrow.

eBay Inc Needs to Make More Users Spend More

Even though eBay’s model of doing business may be a little different from how Amazon.com (NASDAQ:AMZN)  operates, it does not take away the focus from users. And these users need to be actively engaging with the website. At the end of 2015, the firm had 162 mn active users. This means that the number rose just by 5% in 12 months. In absolute terms, that is just 8 mn new users. However, the total gross merchandise volume was $82 bn during the same period. This indicates a drop of 1%. The impact of the strong dollar is visible, because it is actually an increase of 5% in constant currency terms.The firm is aware of these metrics where there is lots of room for improvement. Plenty of steps are being taken, from improving the user experience to boosting growth. For instance, information about the product is being made more structured, so that search engine traffic can be increased. By structuring the data, it means storing and presenting it in a way that is more easy to process in terms of searching, sorting, etc. For e-commerce products, it usually means classifying and labeling different inventory items according to their color, weight, etc.
The firm is also taking steps to giving better catalogs so that users are able to discover products more easily and that potential buyers are provided more relevant information.If judged solely from a user-base perspective, Amazon wins hands down. Based on 2015 data, Amazon has nearly double the number of users that eBay has, even after discounting those who aren’t active or didn’t spend on any orders over a 12 month period. The growth over 2014 figures too is about 10%. Amazon Prime, which is one of its main cash cows, grew its membership by as much as 51% on a year-over-year basis.

Taking A Share of the Retail Pie

Apart from competing with Amazon, how much can eBay Inc (NASDAQ:EBAY) grow? A lot if statistics are to be believed. E-commerce made up just 7.5% of the total retail sales during Q4 2015. One fact that can work in favor of eBay is that it generates a commission on each transaction mostly by connecting buyers to sellers. It does not have inventory of its own like Amazon. That can be a blessing in disguise, because certain types of overheads such as distribution costs and stockpiling risks get done away with. As such, there is not a huge need for keeping on reinvesting money. Particularly, it needs to make sure that users transact online instead of offline, and recently it published a survey result to drive home its point.

In a world that has its eyes locked on innovative cars, it seems that eBay Inc (NASDAQ:EBAY) wants to set itself apart by focusing on cars of yesterday. eBay Motors, which is a part of eBay Inc, had held a survey called as ‘America’s Aging Car Force’. On the 14th of April, it declared the results for the same. The results, not surprisingly, suggest that Americans having a vehicle which is more than five years old, whether it be a car or a truck, become emotionally attached to it. What is less obvious is that a majority of these who prefer to tinker with their vehicles themselves, are buying spare parts for the same online.

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Hiren Mehta

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