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8 posts from April 2009

April 23, 2009

New white paper - eBay Spring Changes Analysis and Recommendations

At ChannelAdvisor, we've been diligently studying the Spring Changes that eBay announced last week and talking to both sellers and eBay for more information.  Since we have Catalyst next week we aren't able to do our customary webinar so we decided to get the information out in the form of a detailed white-paper that you can find here.


What we've done int he white paper is try to give everyone a jump on the changes that will come mid-June with some actionable things you can (and should) start doing now.  I think the biggest change is multi-sku/variations and I'm excited to announce that in partnership with eBay at Catalyst they will be showing the feature live for sellers in their QA environment before it hits the live site. I saw a sneak peek of this and I think of all the features in the last 18 months it has the potential to have the most impact (positive for those that adopt and negative for those that don't) on sellers and of course the buying experience.

We'll have more on multi-sku here after Catalyst, but this whitepaper has the next chunk of information and some thoughts on how to prepare for multi-sku today.  Also if you are using the eBay selling tools (turbolister, blackthorne, seller manager, etc.) you will want to really think about the implications of multi-sku and how you use those tools today.  More details are available in the white paper.


April 22, 2009

E-commerce Battle Royale - 2 big days in the eBay vs. Amazon ongoing battle.

Today, 4/22, at 5pm, eBay announces their Q1 results.  Tomorrow, 4/23, Amazon reports their Q1 results.

Although at analyst day, eBay's John Donahoe took great pains to explain why the companies don't compete, nobody (merchants or Wall St.) buys that argument.  It's clear at every level that Amazon is taking huge share from eBay while eBay deals with their ongoing 'core marketplace' issues.

In fact if you look at the Q4 results:
  • Amazon grew at 18% (that's the entire busines - I'm sure the seller business was much higher)
  • eBay's GMV grew at -12% 
  • eCommerce grew at -3% (comscore) 

Thus in Q4, Amazon grew a whipping 21% faster than ecommerce and a stunning 30% faster than eBay.

It's going to be interesting to see if eBay can do better than the - 12% - there are arguments on either side of that bet.  Also, can Amazon continue it's 20%+ > ecommerce growth AND it's > 30% growth over eBay.

As eBay is shedding some distractions like StumbleUpon and Skype, the focus on the core marketplace will get more intense than it is today and all eyes this afternoon will be on any signs of improvement or worsening in that busines.

ChannelAdvisor's Q1 data

At ChannelAdvisor we track same-store-sales closely and here's what we saw in Q1.  While we are a small % of eBay+Amazon's GMV, historically our data tracks pretty closely to what is going on at the larger companies.  Same store sales takes out any data skewing from customer adds which are pretty significant.

We look at our data on a monthly basis and in Q1 each month is roughly 33% of the Q so you can average to get a feel for the Q.

  • Ecommerce:
    • Jan - 3% y/y growth
    • Feb - 4% y/y growth
    • March -  9% y/y growth
  • eBay:
    • Jan - -12% y/y growth
    • Feb - -10% y/y growth
    • March - -5% y/y growth
  • Amazon:
    • Jan - 40% y/y growth
    • Feb -  47% y/y growth
    • March -  55% y/y growth

So looking at our data, it looks like ecommerce in general started to rebound in March with eBay and Amazon both benefiting from that lift about the same. 

Again there are lots of caveats to this data -for example, we don't see any media GMV for Amazon, it's all what is called EGM - Electronics and General Merchandise.  So it's very possible that Amazon could have had a terrible or great Q on that business and we wouldn't see that.  So think of these as directional datapoints that have to be put into context.  Also we are annualizing our significant release of our Amazon UK product so that is causing some unusually large growth in that geography that is ChannelAdvisor customer specific most likely.


Wall Streets Expectations for eBay and Amazon

eBay concensus estimates:
  • Q1 Revenue - $1.94b-1.98b
  • Q1 EPS - $.33-$.35
  • Q1 US GMV Growth - -15% to -10%
  • Q1 Intl GMV Growth -  -2 to 2%
  • Q2 Rev guidance - $1.98b-$2b 
  • Q2 EPS guidance -  $.35-$.37
Amazon concesus estimates:
  • Q1 Revenue - $4.7b - $4.9b
  • Q1 EPS - $.31
  • Q1 Op Income - $260-$285 
  • Q1 US Rev growth - 13%-16% 
  • Q1 Intl Rev growth - 13%-16% 
  • Q1 Third-Party Mix - 30%-33%  
  • Q2 Rev guidance - $4.5b - $4.65b 
  • Q2 Op Income guidance -  $240-$265

We'll have a wrap-up here on Friday so we can compare how the two companies did.

SeekingAlpha Disclosure - I am long Amazon and Google


April 15, 2009

**UPDATED: Third-party checkout / checkout redirect clarification from ChannelAdvisor

**Update - eBay has officially clarified that the program is not going away here.  Thanks to Dinesh and team for jumping on this erroneous information quickly.  "To reiterate, we are not eliminating third party checkout on June 15..."

---original post follows---

We don't usually use this blog for official ChannelAdvisor company business, but today is one of those rare occurances where we need to clarify some things and this is the best venue for it.

There's a fair amount of confusion floating around this morning and has been over the last year as rumblings (without any official announcement) have been going around that eBay is going to cancel what we call Checkout Redirect / Third-party checkouts.  In eBay-land, we call this program 3PXO (Not to be confused with C3PO - your friendly chatty protocol droid).


Ina@AuctionBytes has a piece out this morning that has caused a good bit of confusion that I wanted to attempt to quell at least amongst the ChannelAdvisor customer base. In short, this article is completely incorrect as eBay is not eliminating third-party checkout in the foreseeable future.  I'm not sure what Ina's source is, but we have a call into her to clarify and she's not available at this time.  I'll update this post as I learn more.  You will note that there is no eBay quote or link in the article so perhaps this was hearsay or specific to another vendor's decision or ProStores.  Perhaps the correct title is Prostores ends checkout redirect.  Also, it is our understanding that eBay is significantly limiting the program from 100's of participants to a handful (including CA), so maybe that's the source of confusion.

In any case, in this blog post, I provide a brief background of the program to help understand its importance and then detail the changes as we know them that are and are NOT coming around the 3PXO program.

Background

On October 23, 2001, eBay introduced their checkout system.  Prior to that we had a 3PXO, that wasn't automated (buyers had to click on an emailed link vs. a redirect from 'pay button').  In December of 2003, eBay implemented checkout redirect which made the process easier/seamless for the buyer.

The need for both 3PXO and Checkout Redirect came about because ChannelAdvisor started to bring larger merchants to eBay (Motorola, IBM, etc.) and existing eBay powerseller-type merchants started to hit bigger-business issues that the eBay checkout wasn't (and still isn't BTW) equipped/designed to handle.

Thus, merchants could continue to sell on eBay with the buyer experience being that at time of payment, the consumer would be routed to our 3PXO via checkout redirect.  When the consumer clicks the 'pay now' button on eBay, they are routed to the checkout in a secure fashion where we then take them through a richer checkout experience.

The list of shortcomings of the eBay checkout system is expansive and the top reasons large sellers can't use it are:
  • UPS exclusivity - eBay has an exclusive deal with UPS.  If you use FedEx you are hosed.
  • Tax calculations - The eBay checkout fails at basic tax calculations, many businesses also have multiple-nexus and other 'enterprise tax' needs that aren't met by eBay Checkout.
  • Payments - eBay checkout is Paypal-exclusive with some merchant credit-card capability coming, but tightly managed by eBay and far from 'open'.  Also, while eBay allows paper payments (if the buyer requests), those options are gone from the eBay checkout. 
  • Promotions - Sellers want to offer a variety of promotions.  The eBay checkout is very limited in this ability.
  • Store integration/ eBay Up-sells -  Because of the listing fee system at eBay, lack of a cart and the poor up-sell engine it usually doesn't make sense to list accessory items (e.g. shoe cleaning kit) and try to add them to orders to increase average order value (AOV).  3PXO gives sellers the strategic ability to do that outside of eBay and in addition to the bump in AOV, enjoy no-eBay fees on up-sells.  This is accomplished with an integration with the seller's e-commerce site that allows both eBay and store items to be put into one cart - a system that we have found buyers really enjoy and of course so do sellers.
  • Branding/Customer retention/customization - With our 3PXO, sellers are able to ask questions that you see in almost every checkout flow on the Internet like - how did you hear about us, do you want to tell a friend, do you want to subscribe to our newsletter, etc.  
That's the short list of strategic functionality, at least at ChannelAdvisor, we had to implement in order to continue to have sellers keep growing on the platform past the eBay checkout limitations.

One other data-point that is interesting and important.  It is our understanding that the ChannelAdvisor 3PXO has a higher completion rate than the eBay Checkout system.

ChannelAdvisor and 3PXO Changes in 2009 
While eBay has made some cosmetic changes to the eBay Checkout system, the enterprise selling limitations to the eBay Checkout I detail above still exist today and will for the foreseeable future.

At eBay Live last year, rumors started to circulate that eBay was thinking of canceling 3PXO.  In our one-on-one meetings with eBay we learned this was not the case and we used that opportunity to help educate a bunch of people new to eBay marketplaces why 3PXO exists and why it needs to keep existing.  We found them to be very open and understanding which was good.  However the lack of a public statement on this has continued the confusion going unfortunately.

Earlier this year, eBay did express their desire to ChannelAdvisor that they would like some tweaks to the checkout branding and the elimination of up-sells.  We were planning on using Catalyst as a venue to discuss this with customers and have them share their thoughts with eBay on the importance of those two elements of 3PXO.  eBay would like us to implement these changes by mid-June, but we have not committed to any changes at all, much less a time-frame.  Also, we strongly feel that our resources would be better spent on revenue-generating features such as support for the new resolution process and multi-sku/variations that were announced yesterday.  

We have asked for and expect to see some public clarification around this topic from eBay later this week since the AuctionBytes story has caused a good bit of confusion in the marketplace.  I will update this post once that comes out.

ChannelAdvisor and the eBay Checkout
We do have a small number of eBay selling customers that for a variety of reasons have told us they would prefer their buyers go through the eBay checkout vs. our 3PXO.  Usually it's because they don't need/require the functionality I mentioned in the background section.  That's fine and it's our intention to work on the ability to offer sellers the option to use eBay checkout OR ChannelAdvisor's 3PXO.  We're in the early stages of figuring out how that would work and we'd like to get that out for the holiday selling season in 09, but we're going to have to wait and see what other changes has in store for us (the collective us) in the Fall so we can see if we should prioritize something in front of eBay checkout support that has a bigger opportunity for our customers to drive GMV. To be crystal clear, this would be optional.  We would support both our existing (and eBay supported) 3PXO and eBay Checkout. 

Conclusion and an action item for sellers.

I wanted to take this opportunity to say that for our customers reading this, we take our role as your advocates with eBay very seriously and that is the reason we have pushed back HARD on both the scope and timing of even these small 3PXO changes, much less our frustration over eBay's lack of public commitment to 3PXO to match their private commitment.  While we are doing everything possible in our advocacy role, sometimes it helps to have you contact eBay directly about material business issues and this is one of those times.

Therefore, I encourage you to call your TSAM or the folks in seller development and let them know that the 3PXO program is important to you and list some of the reasons why elements like up-sells and branding are important to your business as well as any other features you utilize, like tax calculations.  If you're coming to Catalyst, that's another great venue to let your voice be heard on this topic.

It's also important for the folks at eBay to understand that an unintended consequence of small and large 3PXO changes could be that you effectively sell less on eBay if your economics deteriorate.  For example, if up-sells generate $X/month of profit to your eBay business and that were to go away, it would change the economics of the eBay channel for you. Or for argument's sake, let's say eBay were to enforce the UPS exclusivity and you had to change from FedEx to UPS, you likely would be forced to increase your S+H or take a material margin hit for example that would make the eBay channel less viable for you.

If you're not passionate about 3PXO, that's of interest to me as well - let me know in comments as that will definitely help us prioritize our optional support for eBay Checkout.

If you have any clarification questions, please leave them in comments and I will definitely address them.  For customers, there's also a private thread on the SSC if you prefer that venue.

Thank you for your continued support - back to our regularly scheduled programming of eBay strategies and news.

Scot Wingo
CEO
ChannelAdvisor
[email protected]

April 14, 2009

eBay Announces Spring Changes - buyer/seller/wall st analysis.

eBay is now rolling out changes twice a year and today they announced what I'll call the Spring changes.  While these are announced today, they will 'roll' (as we say in the biz) in mid-June.  I suspect the next set of changes will be fall-based, probably September/October oriented as a Spring/Fall cycle works best within the overall retail cycle (e.g. don't rock the boat in Q4 and early Q1.

I'm going to cover the changes in broad strokes, for sellers that want more details, eBay is offering a variety of opportunities to learn more:
  • Announcement board post is here with details here.
  • Webinars coming April 16  (Thursday) and April 21 - details here.
  • There's a town hall scheduled for April 16 as well - details here
  • And then there's a special discussion board where eBayers (aka Pinks) will be answering questions about the changes. (Warning these boards are not for the feint of heart or people that don't like spending 3hrs wading through some crazy stuff to find a nugget of information).

But first, A brief editorial on the new eBay schedule

I think eBay's move to a two release/yr schedule is a positive for both sellers and partners (yes like ChannelAdvisor).  Historically it was very hard for both sellers and partners to plan and react to the constant monthly barrage of changes that eBay rolled out. Also due to the frenetic schedule, there typically was not access to APIs or a test environment to make sure things 'work' before release, so we were constantly having to 'test in production' which isn't fun for anyone.  I view the move as a clear positive that the company is not only listening, but changing their ways.  Some sellers are skeptical that eBay will really adhere to this and there is some squishiness in there - for example, it's not clear what is considered 'major' and included in the two releases and what's minor and will come out off-cycle.

You can also tell that eBay is making a real effort to improve the communication of these changes - just look at all the opportunities listed above for sellers to learn more.  A year ago, there might be a townhall (not as effective as the webinars IMO, but better than discussion boards at least) and that would really be it.

Moving to two releases makes eBay really think things through and have high impact across the board as well as making sure partners are up to speed and ready when things actually hit production vs. later.

Conclusion: Big thumbs up for both the communication and the move to a two release calendar.

The elephant in the room - what didn't change?

It's been a nail-biting Q1 as eBay sellers have been waiting with bated breath to see if eBay is going to increase fees for 09.  Once the usual Jan. 'fee hike' timeline passed, the anxiety level increased so it's good to get this behind us.  Wall St. has also been very anxious, hoping that eBay would eliminate listing fees to put them more on par with Amazon.

Interestingly enough, eBay is sticking with the fee changes made last year and didn't announce any changes.  I think seller's will breathe a sigh of relief - some will be disappointed that eBay didn't lower fees and Wall St. will now start to wonder if zero listing fees are coming in the Fall.

Now for the changes

As a backgrounder, you may want to read my 'eBay 2.0 series' if you have time as many of my comments on eBay this year will be colored by that series.

For each change, I list the implication for each of eBay's constituents - buyers, sellers and 'Wall St.'  The release falls into three buckets - improved shopping experience, returns+guarantees (aka TRUST) and seller efficiencies.

I. Buying improvements - New item page, basic photo zooming, catalog-pages, multi-sku/variations (there are like 10 names for this one), buyer incentives.
  • Buyers - incremental positive.  These are all good incremental improvements for buyers.  I'm not sure about the catalog pages yet as I don't have any idea how well consumers like them - they are definitely more of an amazonification of eBay so you lose a lot of that 'serendipity' that makes eBay special.  However, do you really want serendipity when you are looking for the Back to the Future DVD?   
  • Sellers - slight positive, but mixed with some negatives - Catalog is going to require a good bit of work for sellers not already using that system (and many fight it tooth and nail).  However multi-sku is going to be a HUGE, HUGE, HUGE (I'd put that in blinking 40pt font if I could) change for sellers.  I'll do a separate post on this later this week,
  • Wall St - neutral -  Some wall st'ers are looking for a silver bullet to eBay's challenges.  I frequently hear: "Can't they just fix search and fix this thing?" My typical response is that if you compare the eBay buying experience to Amazon, eBay has maybe 100-200+ projects they need to execute on.  There are no silver bullets.  There are bronze shotgun pellets.  The Spring release is 5-10 of those which is progress, but incremental non silver-bullet progress.  Another interesting note - multi-sku is going to dramatically collapse the number of listings on eBay.  There are still pockets of analysts that believe there's a direct correlation between eBay's listing data and GMV and they are going to (incorrectly) freak out when listings in the apparel category drop by 75% over the next 6 months.  That should be interesting to watch. 
 II. TRUST - eBay is making two big changes to trust.  The first is they are going to make it much easier for buyers to ask for and receive returns.  There will be some common area on eBay (probably in myebay) where you can say "I want to return X".  This is going to be a big change for eBay sellers -many of whom will argue tooth and nail to not take any returns.  There are also lots of 'as-is' sellers on eBay that will have fun with this one.  Second, there's the "eBay Resolutions".  this is a big one as it looks like eBay is moving to really guaranteeing every transaction, but that message isn't clear in the seller-oriented post. 
  • Buyers - strong positive.  As a buyer on eBay that's had several SNAD/INR claims, and had to get certified letters from handbag experts and junk, this is a big win.  The proof is in the pudding, but I'm going to give eBay the benefit of the doubt on the execution of this. If it rolls out with tons of caveats and limits and 10 step processes, it will go to negative though.
  • Sellers negative - The resolution piece is going to put eBay in the middle of more disputes. eBay+paypal are historically known for quickly siding with buyers and then deducting the amount from your PP account.  Sellers are going to hate that aspect of this -especially smaller sellers.  Smaller sellers are going to really dislike the return policy and, guess what, when you make returns easier and in buyer's faces, returns spike up.  eBay sellers are going to take a hit to their P+L here. 
  • Wall St -  positive - I think Wall St. will see this as eBay closing a big trust gap with Amazon.  Personally, I'd prefer if eBay chose a simpler to understand name like "eBay guarantee" or something, we'll have to see what the buyer side of this looks like.

III. Seller efficiencies - eBay announced a couple of initiatives around making sellers more efficient.  Most of these were around eBay's seller tools which aren't widely used by the larger sellers so I think they positives for the smaller single-channel-eBay folks.  The Smart-FAQ feature could be a big win, we'll have to wait and see there.

  • Buyers - No implication
  • Wall St - neutral 
  • Sellers - positive - It's good that eBay is thinking about how to make sellers more efficient. Most sellers I know would rather they just lower fees though ;-)    

Spring Summary

In conclusion, I think this is a good balanced set of changes - some that favor buyers which make sellers nervous, others that favor sellers and some meaty changes - e.g. multi-sku that we'll be digging into more that are going to require some deeper thought and planning from sellers that want to be ready for June 15.  FYI, ChannelAdvisor will be supporting all of these initiatives (especially multi-sku) for the release so stay tuned for more details on that.


SeekingAlpha Disclosure - I am long Google and Amazon
  


April 13, 2009

eBay News roundup - Changes, PayPal, Skype, Gmarket and more!

I was away for Spring Break and coming back today wanted to summarize some things going on in the world of eBay that is relevant for sellers:


  • SOLD OUT!  ChannelAdvisor Catalyst (April 28-30) is now sold out.  Unfortunately our venue does have a hard limit on the number of people we can have in various presentation rooms and we are at our limit. This is interesting because earlier in the year we were wondering if e-commerce businesses would be investing in taking their business to the next level and expanding to new channels or if they would just hunker down in 09.  I guess our concerns were wrong!
  • Changes are coming!  eBay is going to announce their big 1H09 changes tomorrow - we'll have reaction/analysis here.  eBay previewed multi-sku at Catalyst UK, so I think we'll have some US details tomorrow. 
  • The Dreaded PayPal Call - More and more sellers are getting the 'dreaded PayPal call' where PP is asking them to keep a 3-5% 'reserve' going forward.  For many sellers this can mean $20-100k locked up in your account indefinitely.  More on this topic later, but be ready for the call when it comes.  
  • Skype - NYT reports that the Skype founders are preparing to make a bid to buy back the company from eBay.  Having done a transaction similar to this (although microscopic in comparison), these kinds of deals can be very very very hard to get done so I wouldn't count on this one getting done.  Also, it's interesting to think about an eBay Corp without Skype. This is one of those 'be careful what you ask for' kind of events as I think eBay would invest most of the proceeds in non-marketplace areas as they have historically and we'd be 5 steps further down the path of eBay corp becoming Paypal corp - the payments company with a little marketplace biz hung off the side. 
  • Gmarket - Speaking of marketplaces -  NYT also reports that eBay is looking to buy more of Gmarket out of Korea.  Gmarket has successfully blended fp and auction in Asia so there's some good geography expansion mixed with maybe some good solutions on what ails the US market to be had there.
  • Wall St call - For you wall Sters out there, I'm doing a call with Justin Post @ ML/BOA tomorrow (4/14@11am ET ) to discuss the Q1 trends we saw and if the timing works we can talk about eBay's announced changes.  Shoot Justin a note for details.
  • eBay Earnings - Remember that eBay's earnings are set for April 22 after market close.  We'll have the usual roundup here for that as well.
SeekingAlpha Disclosure - I am long Amazon and Google
  

April 11, 2009

Some e-commerce SMBs are thriving in the recession...

Sophias

I was excited to see ChannelAdvisor customer, Sophias Style, get some really great press this week.  They were first featured by local TV station, KETV.  Then their local paper, the Omaha World-Herald ran this piece.  Finally, the story went national with stories on CNN and MSNBC.


A couple of thoughts on this coverage, I'd love to hear yours in comments too:
  • I was excited that Jake worked a stealth Star Wars quote into the OWH piece - did you catch it? 
  • At ChannelAdvisor, we're really proud of the success these guys are seeing and are happy to have played a small part in that success - congrats guys!
  • Jake+Belinda have been coming to Catalyst for years now, if you're coming, you can meet these rising stars in a couple of weeks and learn more about the keys to their success.
  • For all you sellers out there, here's a call to action - let your local business news media know you are doing well, hiring, growing.  The press is starved for this kind of news right now.  Notice how Belinda's pitch mentioned eBay, but always talked about the company as an ecommerce company.  There's a negative connotation out there around eBay so don't pitch yourself as an eBay business. 
  • Sophias Style is a perfect case study of what I call the e-commerce lifcycle. 
    • Started on eBay to get their niche figured out and build a core competency in sourcing that niche and understanding the buyer. 
    • Expanded to other channels once they had the above figured out. 
    • Now enjoy a very diversified business with 3-4 sales channels that allow them to implement more advanced 'waterfall' strategies and other margin-maximizing techniques.
  •  My favorite Sophias story.
    •  At Catalyst 07 (I believe), Belinda was on the stage with 2-3 other sellers to do a live town hall with Bill Cobb.  Bill asked the sellers on stage what eBay could be doing better.  The other three sellers had good specific feedback.  When it was Belinda's turn,  she gave a very intelligent, articulate and extremely empassioned response that basically was something like: "Mr. Cobb.  We love eBay.  We owe eBay for our start in e-commerce and want to actually stay on eBay.  However the policies you have enacted that raise our fees without adding value, constantly change the site with no upside and a Trust and Safety Dept. that is running wild have forced us to look elsewhere for growth.  What are you going to do to try and keep growing retailers like us on eBay?".  The crowd of 200+ stood and applauded - Cobb was speachless. 
    
SeekingAlpha Disclosure - I am long Amazon and Google

April 03, 2009

UK E-commerce Report - thoughts from Catalyst UK

Fish and Chips and Lobster-flavored Crisps...

I'm fresh off the plane from Catalyst UK and wanted to put together some observations from my trip over to London.  What's great about Catalyst UK is in a short time span, you can get a very detailed view of e-commerce in the UK and even Europe.  There were some interesting trends that I wanted to share that I think our US readers will find of interest.

In this post, I'll start with some Macro observations about e-commerce in the UK and then detail some more micro / ecommerce channel specific observations.   I realize some of this is outside of the 'eBay Strategies' purview, but for now this is the best place to put these thought.  On the eBay front, eBay UK previewed/discussed something called Multi-Sku that I think is going to have a major impact on sellers so I'll be doing some more in-depth blogging on that in the near future.  Also, everyone at eBay is obsessed about Net Promoter Score (NPS) all of the sudden, so I want to cover that soon as I'm sure we're going to be hearing a lot more about it and it at some point will impact sellers.

Macro view
The economic situation in the UK is very similar to the US.  Consumer confidence is way down, the credit problem is massive and unemployment is significantly on the rise.  However, on the e-commerce front, it's very different than the US.  Before heading over the pond, I did some research and found three sources of 09 UK forecasts:
  • IMRG Cappuccino - A shop.org like group of retailers in the UK.
    •  They forecast an 08/09 growth rate of 15% - at £50b
  • eMarketer - US based online research firm
    •  They forecast an 08/09 growth rate of 14% - at £68b 
  •  Forrester - US based research firm (includes Jupiter now)
    •  They forecast an 08/09 growth rate of 4-5%  
So looking at those numbers, you see a big diversity of forecasts out there.  Before landing, I was thinking the Forrester numbers or lower would probably be the best bet.  After arriving in the UK and talking to hundreds of retailers, I'm starting to believe the IMRG/eMarketer growth rates could be what we see.

Why is UK e-commerce growing at 15%?

So what's difference in the UK that's going to allow it to grow at 15% vs. the flat to up 5% most forecasts point to in the US?

Well, they say a picture is worth 1k words, so here's one:

Uk_catalyst


This is a picture I took at Piccadilly Circus which is the London equivalent of Times Square.  There are 5 intersections here with prime retail space.  Guess what, 2 of the most prime spots were vacant with signs like this, not to mention literally 10's and 100's of smaller "High St" shops that were closed.  Add to that that retail closes at like 8pm and opens at noon, and isn't open on Sunday and you have an offline retail environment that is terrible.

Therefore in the UK, the % of retail that is moving from offline to online is really accelerating.  that sea-change is allowing 

While we've had our share of offline retail failures in the US, it's not nearly at the scale of what they are seeing in the UK, PLUS we have retailers that are actually open with some degree of convenience.

Now let's dig into the micro on a per-channel basis.

Marketplaces - eBay
I published the official view of eBay.co.uk's MD, Mark Lewis in the last posts.  On top of that, I talked to most of the UK's top sellers and have to say they are much more optimistic about 09 than their US counter-parts.  A couple of nuances with eBay.co.uk that you may not be aware of:

  • eBay.co.uk got rid of the store listing type completely - all you have there now is auction or FP30 - period.
  • eBay.co.uk has it's own BM algorithm - they pull different levers than the US and have different fp/auction mixes 
  • Near-free listing - You can buy an anchor store for approx $500/m and then you get all-you-can-eat listings for $.01  Every seller I talked to does this.
So you have a different market there in many ways than the US.  I have no idea if that's helping eBay.co.uk grow faster than the US or if it's largely the macro environment helping them.  I raise these items because frequently we see eBay move things from the UK playbook to the US if they are deemed successful.

While they are more optimistic about growth in 09 than the US, they do share many of the same concerns:

  • DSRs - DSRs are disliked in the UK as well.  Most UK sellers are pan-European and they can suffer as their non-domestic business grows.  Also S+H is more expensive there so they have a hard time getting the S+H (P+P in uk-speak) up to the 4.7+ levels.
  • Free ship -  eBay admitted that UK sellers aren't adopting at the levels they want.  Talking to sellers, it would just be too much of a margin hit on fees and what not to do this.  As I said, eBay hinted/said they are going to force free ship in some categories (I'd guess media is an easy one as Amazon is eating them alive here)
  • Advertising - Our UK friends have been hit with eBay advertising much harder than we have.  At one point in Q4, there were 3 banners on the front page for competing retailers and the sponsored links were ON TOP of the eBay listings in search. 
  • Search -  No, they don't like BestMatch in the UK either.  Folks in the UK are (rightly so) very obsessed with recent-sales scores and really get angry when eBay tweaks stuff around and are frustrated with the 'black box' nature of BM/RS.
  • Auctions - As previously noted the UK is going FP even faster than the US - with the removal of stores listings (SIF in eBay-speak) and near free listing with anchor stores, the site is swimming with fixed-price listings.  Auctions have suffered as they get less exposure via BM and are just outnumbered by FP listings.

I do want to make sure everyone understands that while these are 'top eBay UK seller concerns', eBay seems to be growing and not shrinking, so generally the sellers are happier.

Marketplaces - Amazon
The seller business for Amazon UK is a good 3-4 yrs behind the US, but growing at a pace to catch up in 2yrs or less.  We had a consumer panel and one interesting aspect of that was everyone on the panel still thinks of Amazon as book/music/video, so Amazon has some work to do there.  I suspect, just like the US, once they get the virtual shelves stocked with great third-party product, they will turn that on in an increasingly bigger way.

Search
Search is an easy one.  Google has 80% market share over there and has torqued the large agencies by getting rid of their kick-back program.  Thus more and more retailers from large to small are going direct.  Booyah!

Comparison Shopping Engines
CSE is interesting in the UK.  Based on Comscore data, 40% of the online UK audience visited at LEAST 1 CSE in Feb.  That trend gets into the mid 50's for the Holiday selling season.  Compare this with 34% for the US and 27% for EU - the UK has the highest CSE adoption of those three e-commerce regions.  We see many of our sellers that started on eBay, get aggressive next on CSE and then do Amazon, where in the US the path is interestingly eBay, Amazon, CSE.

Those are the top observations that I had to offer from the trip.  It's great to see a geography out there that seems to be bucking the global recession and is keeping the e-commerce dream alive and kicking.

If any Catalyst UK attendees have more to add or if you have questions about UK e-commerce, feel free to comment!

SeekingAlpha Disclosure - I am long Google and Amazon.

April 02, 2009

Clarification from eBay UK live blogging

Earlier this week I live blogged eBay's comments at our Catalyst UK conference (broader post on the UK ecommerce climate coming later today).  It ended up being in three parts:


  • Part I is here (Intro, recap)
  • Part II is here (09 plans)
  • Part III is here (Q+A)

While it was clear in the live presentation, in my live-blogging haste, it seems I wasn't clear in the timeframe being discussed.  All of the data points that eBay presented were based on Q408 results and of course not some sneak peak into Q1 activity.

For example, in Part I, I had this bullet:
  • sell side.  Sold items are up 15% y/y, which is an acceleration from this time last year. 
That datapoint refers to Q4 results in the UK - according to Mark Lewis, they were up 15% from Q407.  Apologies to the eBay folks and anyone else that I may have confused by not clarifying that all performance data was based on Q408 data.

In Part I, I also mentioned that I would try and get a copy of the interesting eBay.co.uk "Online Business Index".  This is a piece that eBay UK did based on a survey they did of their sellers.  I thought it was pretty interesting and it was well received by attendees.

Our customer (Dangleberry Music), informed me that it's already online in a PDF so I was saved from doing some scanning.  You can download the report here. Even if you don't sell directly in the UK, I've found it to be an interesting market to watch from a macro and micro perspective because frequently trends can be identified that work their way to the US sooner or later.

SeekingAlpha Disclosure - I am long Google and Amazon