BrainTrust Query: Here Comes eBay!
Through
a special arrangement, presented here for discussion is an excerpt from a current
article from Insight-Driven Retailing Blog.
Although I did not expect
eBay to acquire GSI Commerce, I can’t say it was a complete surprise. In 2010
eBay made some interesting acquisitions leading up to this latest one.
These
include:Â
- 12/2010 – brand4friends (German flash sales site)Â
- 12/2010 – Milo (In-store product inventory)Â
- 12/2010 – Critical Path (Mobile apps)Â
- 03/2010 – Magento (E-commerce software)
- 06/2010 – RedLaser (Mobile apps)Â Â
I previously discussed the acquisition of Critical Path Software and RedLaser
as part of their mobile strategy, where they are leading the m-commerce charge.
Magento and Milo certainly helped build their ability to host e-commerce sites
for brick-and-mortar retailers, although I know of none that have signed on.
GSI
Commerce was founded in 1995 with a focus on selling sporting goods. Today
they continue to be a leader in that space but also host traditional brick-and-mortar
retailer websites like Toys “R” Us, Zales and Aeropostale.
“The acquisition of GSI, which offers the most comprehensive integrated
suite of online commerce and interactive marketing services available, will
significantly strengthen our ability to connect buyers and sellers worldwide,” said
John Donahoe, eBay Inc. President and CEO. “Combined with eBay Marketplaces
and PayPal, we believe GSI will enhance our position as the leading strategic
global commerce partner of choice for retailers and brands of all sizes.”
According
to The Wall Street Journal, eBay’s “web savvy” may
help many of GSI Commerce’s e-commerce clients compete better with Amazon.
But eBay also stands to benefit if it is able to turn many of GSI’s retailers
into eBay sellers. It’s also expected to help its sellers by leveraging GSI’s
order processing and shipping expertise.
“Technology is changing how consumers shop, and retailers and brands
are changing how they compete,” Mr. Donahoe added. “With its complementary
strengths, GSI will extend the power of our portfolio. With eBay, PayPal, GSI
and our global platform capabilities, we are focused on delivering new ways
for retailers and brands of all sizes — from sole proprietors to large
merchants — to
drive innovation, engage customers and help people shop anytime, anywhere and
on any device.”
It seems that eBay wants to not only be the online selling
engine for micro-commerce but possibly move upstream and power retailers’ e-commerce
websites. This reminds me of the failed attempt (in my opinion) by Amazon to
host other retailers’ websites. In fact, Toys “R” Us used to be hosted by Amazon
until they had a dispute and the toy retailer moved to GSI. Target is still hosted by Amazon for the time being, but since they compete on so many items, this never made sense to me.
So will eBay be able to unfold this strategy successfully like
they did with their PayPal acquisition, or will this be another Skype idea?
At this point, I’m leaning toward Skype.
Discussion Questions
Discussion Questions: What do you think of eBay’s acquisition of GSI Commerce? In what ways may GSI help eBay compete against Amazon?
The acquisition makes sense. Unlike Amazon, eBay creates marketplaces, where buyers and sellers meet. eBay’s auction model needs a jumpstart, and the GSI takeover will certainly provide it.
I’m not going to declare absolute failure, but I will declare doubt.
I’m not sure GSI’s clients (many of which are high-end apparel companies) will be keen to have eBay as their marketplace provider. Amazon has a bit more cachet.
This seems like a logical growth step for eBay. They are essentially expanding the reach and capabilities of their core business, which is buying and selling electronically. Skype was about people communicating, which was not their business model. GSI is about buying and selling, which is their business model. That said, they are still up against the best in the business and size, in and of itself, is no guarantee of success.
eBay vs Amazon! It’s a matter of trust. I buy a lot off eBay and have seldom been burned–BUT it’s always a crap shoot. On the other hand, Amazon would seem to be fool proof (me being the fool). When you buy from Amazon, I believe you are buying from an internet retailer. Buying from eBay is mostly buying from an individual (most of whom are not licensed by anyone to sell anything–it’s a garage sale!). Now, how is eBay’s purchase of anybody going to take the risk out of buying from eBay? Maybe they have more money than sense. And if they have all this money to buy up things, then why are they raising fees?
eBay’s acquisition of GSI Commerce makes a lot of sense. From GSI’s point of view, they have enormous opportunity in extending their existing web presence through mobile, social networking, emarketing, even reaching out to the physical stores. eBay helps them significantly in these efforts. From eBay’s point of view, this acquisition gives them entry into almost 100 name retailers, a powerful set of ecommerce-related services. It stands eBay next to Amazon as the two powerhouses in ecommerce.
My experience with eBay somewhat parallels Dennis (lots of purchases, (very) few problems, but a persistent fear I’m one disaster away from being disenchanted); but the attraction has always been the bargain aspect, and this represents a further migration from that concept to an EDLP, buy-it-now model where eBay is less of an intermediary and more of an active participant…it might make sense, but it might alienate a lot of current users if attention paid to one aspect detracts from the other.
Could make a very powerful and unique entry into the amazon/walmart.com competitive world. In the end, eBay core capabilities may well have little to contribute to a very powerful force assembled out of the other pieces. This could be fun to watch, and more fun to get into the fray!
eBay’s purchase of GSI might be theoretically appropriate but I question the merit of eBay straying too far from its core business. PayPal clearly provided a key benefit for its core customer base and while I can see how eBay covets Amazon’s market presence — it should — this isn’t likely to help them achieve that kind of stature.