eBay reports 4Q14 earnings: Investors need to watch this company in 2015 (Part 8 of 11)
eBay Deals is US hit
During eBay’s (EBAY) fourth quarter earnings call, management said the company has started to focus resources on its core shoppers. It will definitely put more emphasis on its highly successful eBay Deals business.
Deals-of-the-day businesses are doing well. In this e-commerce strategy, online marketplaces and retailers such as eBay or Groupon offer a single product for sale for a period of 24 to 36 hours. Consumers who are registered as members of the website receive online offers and invitations by email or social networking sites.
A news release by eBay in December stated that eBay Deals in North America surpassed $1 billion in sales for the first time in 2014. This was a remarkable achievement for a company that once offered a single deal a day when it first began.
Since then, eBay Deals has become one of the largest deals-of-the-day businesses in North America. Sales are driven primarily by customers’ demand for competitive prices, great buyer experiences, convenience, and free shipping.
Credit goes to eBay’s merchants
eBay has credited the success of eBay Deals to eBay’s merchants. These merchants provided the most competitive priced inventory to its customers during the holiday season. eBay Deals features some of the top brands across a variety of categories, including electronics, home and garden, clothing, shoes, and accessories.
Customers are opting for more and more deals on eBay Deals for a variety of reasons. Here are just a few:
- convenience and ease in ordering
- reputable and experienced sellers
- fast and free shipping
- low prices
This massive growth of eBay Deals puts competitive pressure on eBay’s peer Groupon (GRPN). Groupon is a deal-of-the-day website that features discounted gift certificates that consumers can use at local or national companies. Groupon’s active deals at the end of the fourth quarter were 0.37 million globally with 0.14 million in North America. Despite mounting pressure on Groupon, rising e-commerce spending on mobile devices may bring some positive news for Groupon investors.
Priceline’s acquisition of OpenTable helps it expand deal business
Priceline (PCLN) is a leading online travel company that offers accommodation services through Priceline.com, Booking.com, and Agoda.com. Last year, Priceline completed its acquisition of OpenTable, a real-time online reservation network for fine dining restaurants. It connects restaurants and diners online. Read more about this in Market Realist’s article Why OpenTable is an excellent acquisition for Priceline.
For a diversified exposure to eBay, investors can consider ETFs such as the SPDR S&P 500 (SPY). This ETF invests in the 500 largest US companies and technology sectors that make up 18% weightage.
Investors can consider ETFs such as the Dow Jones Internet Index Fund (FDN) for portfolio exposure to eBay. This ETF has about 5.3% of its portfolio invested in eBay.
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