eBay shows strong growth but the competition is rising (Part 5 of 8)
Online and traditional retailers invest heavily to leverage the growing eCommerce market
The eCommerce market has shown strong growth in the past few years. According to eMarketer, the B2C eCommerce worldwide sales market will grow from $1.25 trillion in 2013 to $1.50 trillion in 2014 at a growth rate of 20%. The report also mentions that this market will grow to about $2.35 trillion by 2017. No wonder online retailers such as eBay (EBAY) and Amazon (AMZN) are investing heavily in order to leverage this growing market. Not only pure online retailers but also traditional brick-and-mortar retail players such as Wal-Mart Stores (WMT) and Best Buy (BBY) have increased their presence online. Even Google (GOOG), which historically had no presence in the eCommerce market, has started testing its same-day delivery service for shoppers.
How eBay uses customer data to grow its business
During the conference call to announce eBay’s Q1 2014 earnings, management mentioned that it uses customer data in four ways.
- Risk-decisioning: eBay leverages customer data on the eBay site and Paypal to provide superior risk-decisioning, which enables eBay to offer money-back guarantees through eBay Buyer Protection.
- Credit: eBay acquired Bill Me Later (BML) in 2008, which facilitates credit services offered by unaffiliated banks. eBay mentioned that Paypal has been combining BML’s traditional credit storing mechanisms, which helps BML grow its transactions, with superior loss performance. Management mentioned, “It’s an example where we have more data about a given merchant especially that happens to be an eBay seller, so we can more easily extend credit confidently, seamlessly and conveniently.”
- Marketing: Customer data helps eBay in offering other products that the customer might be interested in buying. On this, management mentioned, “When we know a PayPal user that hasn’t recently transacted on eBay or we know someone’s buying in certain categories and we can use our — the category level detail we have on eBay to help promote a cross-category transaction on PayPal.”
- Customer support: Customer data helps support staff understand customers’ concerns by taking the holistic view of the customer. eBay has started to integrate all sorts of rewards programs into the Paypal Wallet. Management commented, “So rather than creating confusion with our own rewards program, what we’re doing is taking that same money we could invest in our rewards program and investing it in technology, investing it in lower take rates to enable others to provide rewards and we think that’s the better way to get PayPal’s ubiquitous extension across the web, mobile and over time offline.”
Browse this series on Market Realist:
- Part 1 - eBay shows strong growth but the competition is rising
- Part 2 - eBay announces the end of its proxy war with Carl Icahn
- Part 3 - Why eBay lags behind other Internet companies in mobile users
- Information Technology