eBay Growth Paradox

eBay’s grand problem is the need to support existing buyers while at the same time innovating to attract new ones. It is a problem because these two goals appear to be conflicting: existing sellers and buyers are not happy with the changes, but new users won’t come unless those changes happen. Devin Wenig, CEO of eBay, addressed this directly while discussing the company’s Q4 2018 results.

“As discussed last quarter, while some of the simplified buying experiences we launched have been positively received by new buyers, they were causing some conversion pressure with our existing buyer base. Give that dynamic, we stopped scaling these experiences to our existing customers. This in turn has created some downward pressure on GMV as we lap acceleration from last year. We’ll continue to roll out these experiences with new buyers.”

Devin Wenig, CEO of eBay

eBay appears to have walked itself into a dead-end. It reached close to $90 billion in GMV last year, adding more than $5 billion compared to $84 billion in GMV in 2017, which was also a $5 billion increase from $79 billion in 2016. The slowing percent growth is a direct result of the struggles having to maintain an experience for existing users while trying to attract new ones. “We stopped scaling these experiences to our existing customers. … We’ll continue to roll out these experiences with new buyers” is a nightmare situation.

It’s a classic Catch-22 paradox. eBay wants new shoppers which don’t want eBay, but to provide the eBay they would want, eBay loses existing shoppers. Pick one.

The company has spent the last couple years building out the structured data initiative, which expands data stored with each product and thus enables more product-focused functionality. eBay has been talking about the structured data initiative since at least the start of 2015. Four years have passed and it is yet to produce meaningful results.

Searching for “iphone” on eBay.com returns 15 million results. In October 2017 eBay launched group listings - a feature which groups search results by product using structured data. Once enabled it reduces the list to 120,756 grouped results. eBay wants to take it further, and make this the default experience. Existing users don’t, as per Devin Wenig’s comment.

96,147 out of the 15 million results for “iphone” can be shipped in two days. eBay rolled out Guaranteed Delivery, a membership-free Amazon Prime competitor, in September 2017. But more than a year later less than one percent of products sold on eBay are available with fast shipping, and the option is buried amongst a dozen more filters. It too is part of eBay’s future, but doesn’t seem to be clicking with existing users.

eBay Percentage of Sales From Fixed Price Listings

eBay has spent the last two decades growing beyond auctions - a feature which most users still associate eBay with - to get to the point where close to 90% of items sold on the website are not auctions. But the different perception is exactly the problem, and exactly why it has been hard to grow.

The issue with eBay is not that it is stagnant. The issue is that when it tries to innovate it backfires. eBay could revamp and modernize most of its infrastructure, but at the risk of upsetting existing users. Yet it needs to do that to grow long-term. eBay has spent the last few years - some say more than a decade - unwilling, unable, or maybe unsure to make a decision.

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Juozas "Joe" Kaziukėnas

Founder of Marketplace Pulse, Joe wears multiple hats in the management of Marketplace Pulse, including writing most of the articles. Based in New York City. Advisor to other startups and entrepreneurs. Occasional speaker at conferences.

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