News Column

eBay Lays Out Aggressive Growth Plan, More Delivery Service

March 29, 2013

Heather Somerville, San Jose Mercury News

Online shopper

Investors gave a collective fist pump and its stock jumped more than 4 percent Thursday after eBay (EBAY) announced ambitious growth projections and plans for new delivery and in-store pickup services.

The company laid out an aggressive plan to increase online marketplace sales 47 percent by 2015, and executives said the San Jose company will improve its mobile technology and payment system, PayPal, to dominate in emerging markets such as Russia.

No longer is the company an auction house for obscure vendors; it's aiming to be a global powerhouse,

partnering with some of the world's largest retailers, including Target and Best Buy. Executives also said Toys R Us stores would rank toys based on their popularity on eBay.

eBay Marketplaces chief Devin Wenig said brick-and-mortar merchants are "beginning to fight back" against online retailers like Amazon, and "our goal is to become the partner of choice for merchants."

eBay aims to hit $110 billion in total merchandise sold through its online marketplace by 2015, a projection that handily beat Wall Street expectations. JPMorgan Chase analyst Doug Anmuth had predicted $101 billion.

Bill Smead of Smead Capital Management in Seattle said the bullish forecast underscores the widely held belief that eBay CEO John Donahoe is

one of the best visionaries in Silicon Valley. Analysts say Donahoe began a turnaround effort after he took the reins in 2008 that not only saved eBay from the demise that befell so many other dot-com companies, but also put it on track to rival Amazon.

"We're in the early stages of changing the way that people shop, and eBay is definitely one of the two or three companies that are right at the leading edge of benefiting from that," Smead said. His firm owns about 320,000 eBay shares.

But threats still loom large for eBay, whose success in part hinges on how well brick-and-mortar retailers navigate the online world. As big as eBay's coffers have grown, even larger Internet companies -- such as Google (GOOG) -- are vying for e-commerce domination.

eBay's prospects depend on finding more customers in emerging markets, particularly in Brazil, Russia, India and China, also known as the BRIC nations. International sales are about 61 percent of eBay's business; most of that is from BRIC markets. Already, eBay and PayPal are hot in Brazil, and now the company is turning its sights on Russia, a country where eBay orders are placed every three seconds.

Wendy Jones, who heads cross-border trade at eBay, said that next month the company will launch an app to offer customers deals at brick-and-mortar shops in and around Moscow. Until recently, she said, the eBay website was only in English; now it is translated into about eight languages.

"The Internet is a megaphone," Smead said. "It allows you to be a powerhouse in the local neighborhood and a powerhouse in Russia at the same time."

Analysts for Keefe, Bruyette & Woods wrote that eBay has the potential to grow its customer base in BRIC and emerging markets more than six times through 2015. That kind of growth could drive eBay's total active users around the world from 112 million in 2012 to 200 million by the end of 2015.

eBay also announced that it will offer in-store pickup and scheduled delivery and that it will expand its same-day delivery service, eBay Now, to Chicago and Dallas this summer. eBay Now launched in October in San Francisco and expanded to New York and last month to San Jose. Customers can get purchases from local retailers that will be delivered within an hour to anywhere they want in the city.

Same-day delivery has quickly become the new norm for retailers, despite a lineage of failed attempts that have come before, including the infamous demise of grocery deliverer Webvan. Last year, Walmart rolled out same-day delivery in San Jose and San Francisco, and Amazon started the service in 2009.

It's too early to know if eBay has struck same-day delivery gold, but the company may not have a choice but to forge onward. On Thursday, Google asked Bay Area residents to help the company test its new same-day delivery service with an unlimited, free six-month trial.



Source: (c)2013 the San Jose Mercury News (San Jose, Calif.). Distributed by MCT Information Services.