EBay just can't get a break - Top Stocks Blog - MSN Money
 
Search Top Stocks:

EBay just can't get a break

Posted Oct 16 2008, 02:27 PM by Kim Peterson
Rating:
Filed under: ,

EBay shares fell 8% after the company reported earnings and became the poster child for all that is wrong in retail. (They bounced back to close down 2.4% loss Thursday.) The results are "a harbinger of things to come for consumer-facing businesses over the next several weeks of earnings season," a Stifel Nicolaus analyst said yesterday.

Really? Let's take a look.

Quarterly sales rose 12% from the year-ago period to $2.1 billion. Operating margins ticked higher. Free cash flow rose to $543 million from $510 million a year ago. The company swung from loss to profit.

Other companies would be happy to get these results in the next few weeks. But not all is well at eBay, which is why analysts are all doom-and-gloom on the company right now.

The most glaring problem is that gross merchandise volume -- the value of everything that was auctioned -- skidded to a 1% decline over the quarter. GMV saw a 14% gain a year ago, but over the past year has been slipping to 8% growth. So a 1% decline is pretty significant.

A less obvious, but just as serious, problem is that eBay is structurally flawed. The technology platform and user experience need serious work, and though the company is tackling the issue it's not doing it fast enough. Pages are cluttered and search results are confusing. There isn't enough product information, and seller comments like "WILL EXPORT! 8% LIVE.COM DISCOUN IN STOCK INVENTORY!" make it clear that eBay can't shake off its flea-market sensibility.

Compare eBay's user experience to Amazon's. No, don't. There is no comparison.

This has been a tough and distracting year for eBay. The company has rolled out major policy and fee changes, suffering harsh criticism from buyers and sellers. It's in the middle of an internal restructuring, which, coupled with a ruthless economic downturn, is hurting the company more than anyone expected.

All of which led eBay to issue a gloomy fourth-quarter forecast. EPS will be in the range of 39 cents to 41 cents, far below analysts' expectations of 48 cents. And eBay said revenue would be between $2.02 billion and $2.17 billion. Analysts were looking for $2.42 billion.

EBay just announced layoffs of 10% of its workforce, which will only compound its internal problems, at least in the short term. Why eBay even had 16,000 employees in the first place is mystifying.

But I see two bright spots. The first is the PayPal financial unit, which saw a 27% revenue increase in the quarter to $700 million. The second is that the overall fundamentals still seem pretty good. Revenue is still on the rise, as is the number of active users and new listings.

EBay's issues are so unique that the company can't be viewed as a harbinger of other businesses. The company is a mixed bag, and things will get worse before they get better. The same thing can be said about the stock price.

Related reading:

EBay shares continue slide

EBay pushes PayPal on customers

EBay gets bid down

Drilling into eBay's numbers

 

Comments

 

There are a number of issues facing ebay right now.  I suggest interested parties take a look at some of the message boards and blogs attached to the site for an overview of what buyers and sellers -- the actual users, NOT ebay spin doctors -- are concerned about.

I'd sure like to know where  Donahoe got his stats from before deciding "new, fixed priced items with free shipping would be the major catalyst to improved user and revenue growth of its core business. Online stores with fixed price, new items are all over the internet, and finding what you are looking for is very easy.

A very large percentage of regular  ebay users liked the unique "flea market sensibility" for both buying and selling.  What made ebay so special and popular was it was the largest site of unique, rare, hard to find, one of a kind type things you can only find at flea markets. Ebay WAS a culture in and of itself, and many communitee members considered ebay like their second home and spent a great deal of time buying, selling, chatting in the forums and cheerleading ebay in their local communities which impacted new memberships in a positive way.

Now, there are lierally millions of casual sellers and small businesses being forced off the site in tiers as ebay courts large businesses. Many of these sellers ebay's driving off  are also some of the the most avid buyers on the site as well.

I was a power seller on ebay for almost 6 years, and  a large percentage of my best customers were folks that regularly had some items for sales themselves. Now, many of the small scale sellers are buying or selling on ebay. That's always been part of the culture of ebay that has been totally lost since Donahoe made so many radical changes which have undermined small businesses and casual sellers.

1) many sellers that once used to shop ebay regularly are so angry with ebay's lack of concern for small sellers that they've vowed to never shop on the site again.

2) The number of angry sellers are growing each day, and ebay is getting and will continue to get a ton of bad publicity both on the net and in communitees all accrossed the country.

3) Ebay claims new user growth was up 3 percent, but I'd venture to say 80 percent of that growth is actually sellers registering a new ID under a different name and email address  so they can speak freely in ebay forums without concerns of ebay retaliating. Each month ebay suspends many ebay members that speak negatively about ebay's new CEO, new policies and unfair treatment of the selling communitee.  Many ebayers  have been signing up for a new memebrship ID just for that reason, and I suspect much of ebay's supposed new user growth are not really new users at all.

4) Based on statistics gathered from sellerdome.com....nearly 35 percent of ebay's top 250k sellers no longer list any merchandise on ebay since Donahoe became CEO, and I suspect an even larger percentage of sellers ranked below 250k have quit using ebay's site.

5) Majority of small businesses and casual sellers that have stopped selling on ebay have been establishing  roots on other sales venues like ebids, ecrater, Ioffer, etsy, onlineauctions, bonanzle,  overstock, amazon, goantiques and a few other lsmall,but steadily growing sales venues.  Most smart sellers are informing their entire ebay customer base about their move to their new site which collectively has been gradually eroding some of ebay's normal buyer traffic and sales.

5) Many ex ebay sellers may not be the largest volume seller on ebay but have substantial inventory and have started their own websites using the advertising dollars they once spent on ebay for google ad words and other search engine advertising which collectively has and will continue to erode some of ebay's buyer traffic and revenues.

6) Virtually all the mass merchandisers, manufacturers, and large volume sellers on ebay ALSO have a website, and a large percentage of these sellers ebay is favoring heavily actually  promote their websites to ebay shoppers immediately after the intial sale is made on ebay rather than promoting their ebay stores which has and will conttinue to erode long term ebay revenues and user traffic. The cost of doing business on ebay is quite high after factoring in all the various fees associated with a sale, so it is advantagous for sellers with websites to encourage their buyers to shop their website offering discounts and other types of offers.

I realize the economy is sluggish right now, but in my opinion the growth of ebay's core business will continue to deteriorate regardless of economic conditions given many of these variable ebay once called NOISE.

I used to buy most of my business replaceables (ink cartridges, blank media, shipping supplies, etc...) on eBay because I could get a great deal.  But I honestly haven't bought or sold anything on eBay since last year and I don't even bother looking there most of the time.  eBay has turned a great site and experience into a nightmare.

If I want to sell stuff now, I just do a traditional garage sale or use Craigs List.

 I have been a buyer on ebay for the last 11 years with almost 1000 unique buys. This October ebay went to Paypal only and wouldnt let the sellers accept money orders. They have gotten too greedy and buyers and sellers are leaving in droves no matter what their stasistics say. i figure I spent close to $50,000 in that time but no more.

I used to be a small seller on Ebay.  They raised the fees substantially and eliminated a sellers ability to leave negative feedback on a buyer.  There are some really bad buyers out there.  The way the site is now structured, you almost have to accept payment through their captive PayPal company with more fees piled on.  These three changes drove me away, and I will not be back.  There are plenty of alternative sites available.  

Hello I just want to say ebay is a great place to buy new and used stuff!!I had a vintage glass pyrex coffee pot that is made all from glass and the glass strainer was broken.Try and find a New one??Go to ebay and you will find one.Vintage car parts!!ect..Donahoe you are insane messing with the way the site was run!!You have ruined the place!You need to tighten up and stop being greedy and help the very people moms and pops who got you there!You will make more $$$ Than you need.These are tough times and we need your support by being able to list the hard to find stuff A-Z as I mentioned above.Please change the feedback the way it was  (MUTUAL!!!)Have a heart don"t be a fart!!

Ebay’s results are positive: quarterly sales were up, cash flow was up, and the company produced profits.  Every now and then a company has to analyze its internal structure and do only little changes and not a lot. The drop in merchandise volume could be because of the weak economy or business going to smaller competitors.  Ebay will do much better once the world economy improves, and the company remains a leader with capable technical human resources as well as a top management team.  

Donahoe, you are ruining/have ruined a what used to be terrific way to buy and sell.

eBay is no longer a fun place to shop. Stripping your sellers of the ability to make a profit must be fun for you. Multpile policy changes, current greed, trickery, and down right offensive business practice's will be the final nail to drive the site into the ground.

The fix is simple "GET BACK TO BASIC'S"  BRING THE OLD EBAY BACK! That's when it was a great place to shop and sell.

i'm a small eBay seller/buyer. in the past, it's been great to unload stuff i don't need and procure items i do need at sometimes WAY low prices. however, the recent huge seller fee hikes combined with Paypal fees and escalating shipping overhead will only drive the company into the ground over the long haul. i am not willing to give away some 15% of every rockbottom sale in a self service auction format. wise up eBay- trim the fat and greed and get back to being the user friendly worldwide garage sale you once were.

I have been an ebay member for 9 years and have been having trouble for over a week trying to find out why I have had selling restrictions placed on my account?  I have tried every avenue to get an answer why.  I came to the conclusion that they were not concerned with me since I do not provide a large revenue for EBAY. Obviously, they forgot that is how they got started. Plus I have 100% positive feedback and all  my dashboard result are + and selling level has been raised? All I get is "it needs to go through Safe Harbor and were sorry, but you cannot call them, just wait for their email."  Meaning they will get to you when they feel like it!  I can understand if I was a potential sellerthat has fraud implications, but in my case the feedback/dashboard speaks for itself!  What a waste.  I could of listed and sold many items for EBAY over the last week which would of been good for both parties. but instead I am waiting on an e-mail I may not ever get since I was told it would take 24-48 hours, 5 days ago? And people wonder why Ebay is in financial turmoil?

Go figure!

Send a Comment

Comments must be directly related to the blog entry. Comments with offensive language will be deleted. Your e-mail address won't be displayed.

(please, no HTML tags. Web addresses will be hyperlinked):