|Mon Mar 28 2011 17:44:51|
GSI Gives eBay Access to Big Brands and New Services
By: Ina Steiner
eBay agreed to acquire GSI Commerce for $2.4 billion. GSI provides a full-service ecommerce offering to 180 large retailers and brands, including Calvin Klein, ToysRUs and Dick's Sporting Goods. The acquisition will help eBay to expand large merchant presence on eBay Marketplaces and to extend PayPal and Bill Me Later (BML)'s reach on the GSI Commerce platform, which it pegged at $3.5 billion.
The acquisition follows last year's acquisition of 49% of Magento, an open-source ecommerce software for online sellers that lets eBay reach small and medium sized merchants.
eBay and PayPal already work closely with GSI, and the acquisition fits nicely into eBay's strategy of focusing on large merchants on its Marketplaces and extending PayPal and BML to offline retailers. It also helps eBay fend off threats from Amazon.com and Google.
The Amazon Threat
Amazon.com offers merchants fulfillment and customer service capabilities. eBay can now offer its largest sellers the same through GSI, which operates fulfillment centers and Call Centers. According to its website, GSI operates over 2.6 million square feet of warehouse fulfillment space through the United States, Canada and UK, shipping over 67 million units in 2009.
Several analysts asked eBay if it would launch "Fulfillment by eBay," a reference to Amazon.com's fulfillment service. eBay CEO John Donahoe said eBay would introduce GSI's fulfillment service to some of eBay's largest sellers, and called it an incremental opportunity. eBay will retain seven of GSI's 9 warehouses after the acquisition.
Interestingly, eBay will now have access to precious merchant data such as sales and pricing data on Amazon and other marketplaces, venues and CSEs.
The Google Threat
The GSI acquisition also helps eBay counter the Google threat. Google offers retailers advertising, merchandising, enterprise search, and payment processing services, and offers both mobile and local solutions. eBay and GSI together can help merchants drive demand to merchants through their marketing assets, including eBay's Triton keyword ad-buying program, Milo local inventory search product, mobile development capabilities and GSI's email marketing, FetchBack retargeting service and mobile SMS platform.
Large Merchants versus Small Sellers
eBay has been aggressively courting large retailers and brands, including Jockey, Pfaltzgraff, Tommy Hilfiger Calvin Klein, Timberland and Brooks Brothers. eBay offers them not only an on-ramp to list products, but also offers marketing and advertising opportunities including targeted emails, such as its campaign for Barnes & Noble in which it sent 20 million emails to eBay buyers advertising B&N's Nook ebook reader on Thanksgiving Day.
In a conference call with Wall Street analysts, John said PayPal President Scott Thompson is often told by large merchants that they need help growing their businesses, with mobile commerce, and help figuring out social commerce. John said eBay determined that GSI was the company that was helping merchants with those tasks, and said he sees that as the biggest core opportunity in the acquisition.
eBay itself has changed the way it looks at the offline world; last year, it showed holiday shoppers on eBay.com inventory that was available at local retailers' brick-and-mortar stores. At the time, eBay's Christopher Payne said of the Gifts Nearby portal, "As online and offline commerce continue to blur, we continue to introduce innovative ways to help shoppers get the best deals available anytime, anywhere, any way they want them."
Slide 7 in eBay's presentation shows why eBay is focused on large merchants and helps explain why small, longtime eBay sellers are feeling less loved by eBay these days. eBay pegs the market opportunity of sole proprietors at $12 billion; small and medium size businesses at $36 billion; and large merchants at $160 billion.
Rue La La and ShopRunner
As part of the transaction, eBay will divest 100 percent of GSI's licensed sports merchandise business and 70 percent of ShopRunner and Rue La La, which will be sold to a newly formed holding company, led by GSI founder and CEO Michael Rubin. eBay CFO Bob Swan told analysts if eBay tried to realize RueLaLa and ShopRunner's opportunity, "we'd probably screw it up."
Under the terms of the merger agreement, GSI Commerce may solicit acquisition proposals from third parties for a 40-day "go-shop" period continuing through May 6, 2011. See details of the acquisition in the eBay press release.
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