Sales on eBay in the US declined 9% in the fourth quarter, and the number of sold items globally shrunk 4%. While the company did provide reasons for the shrinking sales on the platform, those reasons merely distracted from the fact that the fundamentals are not working.
Scott Schenkel, the interim CEO at eBay, attributed this poor performance to two factors: reduced marking and internal sales tax in the US. Scott said that the company has reduced marketing that was not attracting buyers with high lifetime spending and that internet sales tax is increasing prices buyers see at checkout and are thus purchasing less, particularly large dollar items.
As a result, eBay ended the year with GMV shrinking from $89.8 billion in 2018 to $85.5 in 2019. To hold its revenue flat while seeing declining GMV trends, the company has increased its transaction take rate - the percent of GMV it captures as revenue - to 9.0% in the fourth quarter, an all-time high. More recently promoted listings and managed payments have contributed to that.
The company said that over 1.1 million sellers promoted more than 320 million listings in the quarter. Up from 600,000 sellers promoting 200 million listings in the fourth quarter of 2018. eBay has adjusted the mix of promoted and non-promoted listings at the top of search results, which now start with five sponsored product ads. Thus the third-party sellers are spending more on fees while the overall sales are not growing.
In the US, eBay’s market share of online shopping is second only to Amazon, but while the rest of the market is growing, eBay is shrinking. eBay is mostly excluded from the conversation about the future of the retail industry, despite its size. Unfortunately for the company, not only has traditional retail spending not shifted to eBay as it transitioned away from auctions, new upstarts have chipped away at its niche markets like fashion resale, sneaker collectors, and handmade goods.
Reduced marketing to increase margins is not going to help the company regain its relevance. eBay isn’t working, and by trying to stay afloat, it won’t be able to find what could make it work.
