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Mon Mar 28 2011 17:44:51

GSI Gives eBay Access to Big Brands and New Services

By: Ina Steiner

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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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Perminate Link for GSI Gives eBay Access to Big Brands and New Services   GSI Gives eBay Access to Big Brands and New Services

by: oy

Tue Mar 29 07:21:32 2011

not against anyone making money but adding a pig to the buffet does not ensure a satisfactory meal

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This user has validated their user name. by: Anonymous Annie

Tue Mar 29 07:40:17 2011

I find the announcement of this acquisition to be disturbing and unsettling.

I know exactly what it means to ME as a small seller of OOAK items (you know the ''flea market'' and ''garage sale'' and ''artsy-craftsy'' stuff that eBay hates)... and I think that the other larger retailers are about to be in for a surprise.

eBay is certainly NOT what it used to be, and it will NEVER become what they're trying to transform it in to.

It's too late now, but their best course of action (then) should have been to keep the ''Classic eBay'' on the side, and do all their ''disruption'' in a new eBay-branded venue. --- Or, they could have reversed it and ''spun-off'' the classic eBay into its own separate venue, and disrupted the ''new'' eBay.

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This user has validated their user name. by: Philip Cohen

Tue Mar 29 08:22:03 2011

Hey Ron, I think that you said it all in a couple of earlier posts: “arrogance and ignorance” is the quality of the managing executives at eBay; you also said:

“If you’re selling large volumes of similar product, why would anyone sell on eBay for any length of time?

“All that eBay does for this type of seller is add cost and diminish customer loyalty and brand recognition for that particular seller.”

You had it right there; little else needs to be said. As far as this exorbitant 2.4 billion dollar deal is concerned, I’d be looking for the secret commissions involved.

Enron / eBay / PayPal / Donahoe: Dead Men Walking.

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by: HereAgain

Tue Mar 29 08:38:27 2011

Just another step to renaming eBay to "Little Amazon".  But I expect that "eBazon" will continue to be plagued with the same problems it has had over recent years that will prevent it from ever being a real threat to Amazon or Google.

2.4 Billion for another risky venture.  We'll wait and see how the "New Diamonds" react to eBazon.  I predict it will be similar to the Diamonds on the eBay site.

In the mean time, there continues to be shrinking reasons for small sellers to bother with eBay.  If you can manage to pull off some sales from eBay's Diamond customers, fine, but it's not a long-term business plan.  You can still try to mine eBay for new customers however.

I predict that small sellers will continue to branch out beyond eBay.  I'm trying to with mixed results.  But I don't see any real long-term business opportunity to putting all (or even most) of one's eggs in the eBazon basket.  And this new acquisition does nothing to change that opinion.

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by: Average Bowler

Tue Mar 29 09:43:39 2011

HereAgain says: ''You can still try to mine eBay for new customers however.''

Yes indeed! That's is my ONLY reason for remaining at eBay! And to a large extent it's working for me. (Although there's always room for improvement in overall sales.)

I have MANY repeat customers, but 95% of my repeat sales take place at my own website! ~ From time to time, I'll encounter a repeat customer who prefers to pay more on eBay...and for whatever reason, that's fine. I'm not losing anything. Those customers are simply paying more to cover eBay fees.

However, I'm very pleased (and honored) when the customers that I originally meet on eBay decide to buy from me again on my web site.

And interestingly, for the most part, it's very easy to get them to come on over. I simply let them know that I have a web site, that I offer more items on my web site, and that my web site prices are less than on eBay. ~~~ I don't badger them or pester them into submission. I don't offer coupons or sales. I don't even have to offer ''free shipping''.

As eBay continues alienate and turn away from small sellers like myself, those sellers will continue to abandon eBay. At one time I was fiercely loyal to eBay. Now, I have no loyalty to eBay at all!

eBay's new direction and focus does not include me, so I'll just hang on and USE eBay for as long as the ride will last. ~~~ I'm still angry and disappointed at how we small sellers have been treated. A couple of years ago, I saw the writing on the wall, and I was almost paralyzed with panic and fear. But now, I've come to the point where I realize that I don't NEED eBay anymore. It's nice to be able to continue to siphon-off customers from eBay, but I'm not 100% dependent on it.

It's a shame that the money eBay uses for acquisitions like this are not instead used to shore up the eBay's own foundation.

This BIG purchase is just another one of JD's momentary infatuations. A new ''toy'' for him to play with (and break?) before he gets bored, and loses interest, and moves on to the next bit of disruption.

My ''noise'' is no longer directed at eBay (they don't care)... instead the purpose and message of my ''noise'' is aimed at small sellers who now find themselves in the fear-and-panic stage, and it's to encourage them to branch out and grow their business in other directions... away from eBay's abuse, and away from eBay's neglect, and to eliminate the risk eBay poses to your business.

I can be done. It just takes planning and dedication and patience. ~~~ My original goal was to LEAVE eBay as quickly as possible, but that's changed. I've reached an equilibrium were eBay is simply ''there'' and it serves my purpose. It's not the SOLE REASON for my the existence of my business. What remains of eBay now works FOR ME, not the other way around.

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by: Sarah Notherway

Tue Mar 29 10:41:07 2011

HELLOOOOO  GOOGLE AUCTIONS !
Yes, it's the next Natural progression. I can't WAIT to jump into the fray ! Google Checkout is a Dream, and Checks and Money Order are So Welcomed ! It'll be the Good Ole Days all over again. Get up, Stand up and prepare to PROSPER ! ! !  

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by: nadine

Tue Mar 29 12:13:22 2011

"It's too late now, but their best course of action (then) should have been to keep the ''Classic eBay'' on the side, and do all their ''disruption'' in a new eBay-branded venue"

@Annie, they tried, sort of. Remember "eBay Express"? They just made a dog's breakfast of the implementation so it bombed. Instead of trying again, they decided the secret sauce was in the name "eBay.com" so they had to force all the new stuff onto the eBay site.

This is what happens when an arrogant management thinks they can guess how people use their product, instead of really understanding how.

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by: Tom Terrific

Tue Mar 29 13:04:27 2011

You ever notice how often Donahoe uses the buzz word, "Grow"?

He's always "growing" this and "growing" and the only thing that ever "grows" is the pile of spin horse$hit that constantly spews from ePain central which seems to be that San Jose crowd's real stock in trade?

Maybe, like Pinocchio, it's Donahoe's nose that's really doing the growing.

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by: James

Tue Mar 29 13:28:58 2011

Donahoe's ''growing'' is similar to Sheens ''winning''.

They both need professional help.

The thing is that Sheen doesn't hurt anyone but those very close to him while Donahoe has hurt millions and doesn't care.

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by: stillunaware

Tue Mar 29 13:33:17 2011

I can't figure out what the heck eBay wants to do with small sellers and buyers of antiques, collectibles and one of a kind items... they should decide if they want their business or not. If they do, then they should create a different portal and shopping experience for small sellers of these items and nurture it the way that it should be to make the experience positive for all involved. If they don't want to be involved in in, why don't they spin off this business and sell it off to someone who will run it right?

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by: HereAgain

Tue Mar 29 14:06:41 2011

@stillunaware-

"I can't figure out what the heck eBay wants to do with small sellers and buyers of antiques, collectibles and one of a kind items..."

Actually, I think most small sellers believe eBay knows just what eBay wants from them ... their money!  Small sellers are simply a revenue source for eBay.  A rather gullible source at that.  No more, no less.  And we continue to feed eBay's coffers despite increased costs and decreased service.  eBay couldn't care less about small sellers as long as there is money to be taken from them.  The decision to include shipping in the fee base is nothing more than a fee increase hidden behind a bunch of wordy smoke and mirrors.

Small sellers fees help eBay accumulate funds to make these kinds of purchases.  And history has shown that eBay has dropped the ball repeatedly with such purchases.

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by: Tennessee Tuxedo

Tue Mar 29 16:00:31 2011

@ Tom Terrific

You're right. eBay's Spin Department works 24/7 putting lipstick on their pig.

If the top dog at Amazon announced that he had AIDS, the eBay Spin Department would issue an immediate press release and schedule a conference call announcing how their top dog didn't have it yet but was working feverishly to catch a case in some "green" manner.

eBay management = Ivy League Pud Knocker Central

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by: Digby

Tue Mar 29 16:19:47 2011

There are 3 or 4 alt sites that do appreciate small sellers. Collectibles and OOAK.

The best thing small ebay sellers is move over to them now and start to get established.


Better still stop listing on a place that does not want you anymore.




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by: aj

Tue Mar 29 18:18:39 2011

Well I guess we'll see an increase in our eBay fees later this year to help pay for the GSI acquisition.

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by: Digby

Tue Mar 29 20:26:33 2011

Gee, I otice that GSI had 180 big customers.

I wonder why ebay did not employ a couple of good salesmen and get that many big customers themselves?

That would have saved a couple of billion!


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by: bite mees

Tue Mar 29 23:18:28 2011

You guys still don't get it. Ebay is a public corporation so their main goal is to please shareholders. Share price is based in large part on growth prospects. The market for auctions and small pro sellers (like you guys, who often dont have good prices) isn't bringing the growth that shareholders want. The auction market is mature and most buyers want buy it now for cheap (go read the wsj comment section). They need to diversify away from you guys. However, I don't think they'll be good at it.

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by: Smitty This user has validated their user name.

Wed Mar 30 03:43:08 2011

''eBay CFO Bob Swan told analysts if eBay tried to realize RueLaLa and ShopRunner's opportunity, ''we'd probably screw it up.''

It's a rare rare day when a ebay exec tells the truth.

As the head number cruncher, Chief Financial Officer Bob Swan knows more about donut's screw ups than anyone else.

Smitty

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by: Harriet This user has validated their user name.

Wed Mar 30 10:33:49 2011

I've been thinking about this for a couple of days, and I am wondering if any of the stockholders are concerned about the enormous burden this places on eBay's infrastructure, a very vulnerable area for them and one they have a hard time trying to keep from glitches. Instead of a building in small increments, this is a HUGE increment which is plain to see from their own chart above.

It is often the case when businesses try to "grow" too large and too fast, that they fail and implode on themselves. Of course this will take a while to fail, if it does, and as long as JD can run ahead of the failures and divert attention away from failing core business, he will probably survive until it catches up with him, or he leaves for greener pastures, knowing he can't keep up.

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by: Bob Schvantz

Wed Mar 30 12:09:18 2011

Thanks for the vote of confidence, Smitty!
Check you PayPal account for your commission!!

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by: Sayonara eBay

Wed Mar 30 13:23:42 2011

This new business is going to be run by the same management that is or is not a venue depending on their culpability.

By the same management that has never BOUGHT OR SOLD anything.

By the same management that has never SHIPPED OR RECEIVED anything.

By the same management that has never PACKAGED anything.

By the same management that does not have a valid customer service viewpoint, but thrives on punishing sellers for minor infractions.

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