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eBay's African Safari Commences with MallforAfrica.com (revised)

Zacks Equity Research

eBay Inc. (EBAY) has decided to test the African waters by joining forces with e-commerce startup MallforAfrica.com.

Both partners have confirmed that the partnership is financial, logistics and marketing based and does not involve any buyout.

Details of the Deal

The duo will create a new platform called eBay Powered by MallforAfrica, to open up transactions between U.S. sellers with a rating of 300 and above and African buyers. African buyers will have access to a variety of U.S. items that are being sold on eBay’s platform.

eBay will build its first warehouse in Nigeria followed by Kenya and Ghana. Expansion into these three countries is expected to be completed by the end of this year.

MallforAfrica.com, on the other hand, will take care of payments and logistics. It will accept local currency and digital payments from M-Pesa in Kenya and fintech partner Paga in Nigeria and pay U.S. sellers in dollars.

A Win-Win Situation

Through the partnership eBay seems to be eyeing the fast growing and big e-commerce market in Africa that could help it build a big customer base, going forward.

According to McKinsey’s Global Institute, online sales in Africa are expected to reach $75 billion by 2025, which is only 10% of its total retail sales capacity. Therefore, it will still have a huge scope to convert the remaining 90% of the offline sales to online.

Moreover, partnering with a local player eases the hurdles related to logistics, trade tariffs and economic regulations.

MallforAfrica.com, on the other hand, will receive a boost in its revenue as it now serves as a payment and logistics link between U.S. retailers under eBay’s fold and African consumers.

The company could benefit from the increase in number of active users on eBay’s platform going forward.  

eBay’s Bigger Dreams

It appears that eBay’s foray into Africa is a part of its broader turnaround strategy that it announced in February this year.

We will have to wait and see if this new venture helps the company to revive its ailing fortunes. Since its separation from PayPal Holdings, Inc. (PYPL) last year, the company has had to shut down almost all of its standalone mobile applications and its on-demand delivery service, eBay Now.

It has been facing stagnant revenues and growing competition from Amazon.com, Inc. (AMZN) as well.

About MallforAfrica.com

MallforAfrica.com is an online payments and shipping platform founded in 2011. The company is backed by UK private equity firm Helios Investment Partners and other companies such as Macy’s and Hawes and Curtis.

Currently, eBay is a Zacks Rank #3 (Hold) stock. A better-ranked stock worth considering is PetMed Express, Inc. (PETS) as it sports a Zacks Rank #1 (Strong Buy).

(We are reissuing this article to correct a mistake. The original article, issued yesterday, July 4, 2016, should no longer be relied upon.)
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