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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

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

Wed Mar 30 15:54:33 2011

Hey flea bite, is that why eBay's revenues dropped 24% last year?

The fact is, the big-name brands are not making up the difference in lost eBay revenue and undoubtedly they will not hang around long while eBay struggles to supply even low single figure percentage sell-through rates.

It is a further fact that under the “eBafia Don” the eBay Marketplace has slowly but ever so surely been going down the toilet. I hope all you shareholders who are poor swimmers have donned your buoyancy vests, as you can be sure that the eBafia’s senior managing executives and directors all have their personal lifeboats well provisioned for eBay’s coming submarine experience.

Investors don't buy eBay stock, only speculators do, and eBay would still be a risky speculative buy even at $10.

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

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

This user has validated their user name. by: permacrisis

Wed Mar 30 17:49:17 2011

The $12 billion figure says it all. In ebay's heyday, all they ever did was brag about how they were doing $60 billion, back when all they had was us 'flea' sellers ...and back before 'best match'.  

They brought this on themselves.

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

by: Ebay's Slow Death

Wed Mar 30 18:00:51 2011

Could someone please explain to this computer dummy exactly what the GSI company does?

If they run web sites for these big brands, and also fulfillment-shipping warehouses, then why would any of these companies need anything that Ebay could offer them?

Where is the advantage to Ebay owning GSI?  Is Ebay now going to require all these companies using GSI to only take PayPal payments, and to list their stock on Ebay, or Ebay will kick them off the GSI platform?

Just curious-

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

Wed Mar 30 18:39:00 2011

Only an incompetent Bain & Co “drop out” could probably try to explain the rationale behind this purchase. I suspect that it probably has more to do with provisioning the personal lifeboats of eBay’s senior managing executives via “finder’s fees” paid to someone for arranging the deal.

The fact is, the big-name brands are not making up the difference in the ever-declining eBay Marketplace revenue and regardless they undoubtedly will not hang around long while eBay struggles to supply even low single figure percentage sell-through rates.

Finally, if the Chief Headless Turkey at eBay is interesting in buying GSI then it must be either a dud or eBay is paying far too much for it.

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

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

by: Publius

Wed Mar 30 22:06:00 2011

This should be a match made in heaven.
Two companies, one as unscrupulous as the other.

Remember the damage control team that went into auction for feedback maintenance when toysrus was crashing and burning in late November 2010.

The GSIC employee below was 2nd in line (John Osborne, famous Yahoo eBay financial board troll and now crashed and burned seller z50com, was # 3)  to post bogus, eBay policy violating (and fraudulent) positive feedback crowing about fast delivery of his purchase moments after actually placing his order.

To wit:

A+++. Great price, reasonable shipping, and it arrived so fast! Thanks TRU!
Member id auctiontdreilly ( Feedback Score Of 36Yellow star icon for feedback score in between 10 to 49)
Nov-24-10 05:17
Disney Toy Story 3 Action Figure Buddy Pack (#180591094706) US $7.99  

auctiontdreilly was traced back to his business card website which contains his boasts of great achievements performed by him at GSIC for soon to be parent company, eBay:
http://tdreilly.businesscard2.com/

These two outfits are a perfect match and I hope both companies have a good optical plan as the execs will likely go blind watching each other.

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

by: Harriet This user has validated their user name.

Wed Mar 30 22:07:40 2011

It looks as if there is an investigation going on concerning the sale price of GSI. The speculation is that it was undervalued which is a problem for the GSI stockholders. That should be interesting.

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

by: Jessy S.

Wed Mar 30 22:54:51 2011

To eBay's Slow Death

Basically this is what GSI does.  It produces retail websites for businesses large and small on one end, and fulfills orders on the other end.  In other words, if you order a Joe Mauer jersey from the MLB, Dick's Sporting Goods, or Sports Authority site, GSI will send you the jersey from its nearest warehouse.  In other words, it is just like Amazon.com or Netflix.  Both have a network of fulfillment centers where the product is shipped from the nearest possible location to your house.  In other words, lets say you live in Bismarck, North Dakota.  If you do order that Mauer jersey from any site mentioned above, it will likely ship from the Minnipolis center while everything ordered from Amazon.com will ship from Grand Forks, North Dakota if possible.  In short, GSI creates a website for the client and then acts as the middleman for that client.  The only difference between Amazon and GSI is that the item is listed with Amazon providing the necessary site while GSI builds custom websites for their clients.

Getting back to the eBay/GSI combo, to answer Ming's question and previous comment, this is a simple takeover of a perfectly good system.  In short, all this $2.4 billion buy does is give eBay a chance to legally fudge the books.  My earliern comment still stands because it is clear that JD's destructive innovation isn't going to end anytime soon, and when you have CEO that owns 70% of the company selling out to eBay, you are going to be worried if you are a minority shareholder.  In effect, it is like giving one person the right to cast 50 million votes for President while everybody else gets one vote, and it might not count.  This is a game changing deal because of what I stated in my last post.  For starters, eBay will most likely make the system unreliable because JD has always intended to creating a fulfullment shopping cart system, but there is a chance that the GSI clients might lose their own website and be lumped into the eBay site.

Second, this deal allows the GSI CEO to retire, but Ming is right because this deal does stink to high heaven.  I don't know how many or the percentage of shares the CEO of GSI really has, but I guess he has 70% while clients have 20% of the shares.  If Ming is right and eBay employees own shares of GSI, this could be insider trading.  The clients want to run their own websites so they don't need eBay to be force-fed into their system, and they don't need shareholders trying to force a deal from the acquiring company.

Finally, this deal represents a risk on eBay's part because John Donahoe will have to prove that he isn't buying GSI just to pad the revenue, and need GSI for their shopping cart.

This leads to Ming's number one rule of law in regards to eBay: "eBay always Lies, always will."

The truth is that eBay doesn't need GSI to provide a shopping cart.  The people in IT have been creating that cart for some time, and it allows users to pay all sellers at once via paypal if you buy more than one item from more than one seller.

Second, Johnny Boy will have to prove that he just isn't trying to pad the revenue.  Clearly Bob Swan will have some very different numbers come next month's Annual Meeting.  Given the realities surrounding the eBay Marketplace, Johnny Boy is in desperation mode.  He told everybody three years ago that he would have a new and improved eBay doing better than it was in 2008 when he took over.  Guess what, if I were a betting man, CFO Bob Swain will be CEO Bob Swain by the end of April and eBay will have to offer reparations up the wazoo just to get back to 2008 levels.  I am sure that shareholders will be paying $2.4 billion to Johnny Boy and his cronies to leave San Jose instead of buying GSI.  This cannot continue and must be stopped or else eBay is dead.

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

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

Wed Mar 30 23:05:03 2011

Now that is a conundrum because I would have thought that if eBay’s Donahoe was buying then it would definitely by overpriced.

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

by: another side of the coin

Wed Mar 30 23:52:18 2011

I thought GSI sounded familiar. Back in March 2010 CBS aired GSI CEO Michael Rubin on the TV show Undercover Boss.

http://www.gsicommerce.com/news_events/news_releases/gsi_
commerce_founder_and_ceo_michael_g_rubin_goes_undercover_in_his_own_com/

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

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

Thu Mar 31 00:05:47 2011

@ Jessy S.

Now I understand. eBay’s Chief Headless Turkey has bought GSI so that he can encourage GSI’s clients to sell on eBay instead of from their own (professional) web sites, thus downgrading their bands and opening themselves up to every selling problem that ever has been experienced by a seller on eBay. Dream on John.

eBay will undoubtedly cease supporting the individual web sites (they don’t know what a decent website looks like anyway), and keep the fulfillment services, the idea being that all these leading brands will then be encouraged to come to terms with eBay. After all, selling on eBay is the way of the future for all national brands. What a brilliant idea; undoubtedly a Bain & Co. idea; no wonder it never entered my mind.

Obviously, the eBafia Don is still nibbling on those magic mushrooms; otherwise this is not a serious purchase; these white collar criminals have probably organized this deal so that they can all very soon retire, from the mess they have created at eBay, on the fat secret commissions / finders fees / success fees that this deal will undoubtedly supply.

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

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

by: Ebay's Slow Death

Thu Mar 31 04:15:29 2011

@Jessy S.

Thank You for your great explanation and information!

@another side of the coin

I saw that ''Undercover Boss'' show, and was wondering if that was GSI. I remember being appalled at how those poor employees had to find the item (which was folded up in a plastic bag), deliver it to the packager, who would then throw it into a box and put a single piece of tape across the top.  Then slap a label on the top and throw it into a bin. They all had to do it so fast, and the boss wasn't able to do it fast enough. He got flustered, and I think the supervisor fired him.

No wonder I can't make any money with my online retailing. I usually spend 15 minutes to half an hour doing a package.

So, the opinion seems to be that JD bought GSI for more smoke and mirrors to throw at the shareholders. He keeps muddying the waters, and saying, ''Look over here, but don't look over there (where the truth lurks).''

JD seems to destroy everything he touches. He is such an incompetent idiot!

Pass the popcorn! JD destroying his new toy is going to be fun to watch!

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

by: nadine

Sun Apr 3 16:06:27 2011

I think JD bought GSI because analysts kept asking him, how come eBay doesn't have anything to match Amazon's FBA? They're doing great with it!

This is his answer. I doubt if he even knows what he wants to do with GSI. Leave it as is? Force all their clients onto eBay? Have them do fulfillment for eBay sellers? which ones? just the big ones, or all of them?

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

by: spot

Sun Apr 3 20:40:00 2011

Michael Rubin gets fired from his own shipping department. He doesn't look like the brightest bulb in the lot.

http://www.youtube.com/watch?v=764pxz0NzN0&feature=related



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by: CPC_Andrew
Web Site

Mon Apr 4 13:33:20 2011

Really interesting blog post, thanks for sharing. No assumptions on this one, but I'll be watching closely from the sidelines.

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

by: paul

Thu Apr 7 09:40:16 2011

I smell a revolution in the making.  The continued squeezing out of small entrepreneurs from the internet marketplace by these corporate clowns will eventually take down what's left of our pathetic economy.  Most of us will aspire to be cheap labor for these large companies if we are lucky.  It is the end of innovation and creative growth in our society.  Ebay will probably start forcing their small sellers to ship crap to their warehouse or they will be threatened with visibility just like Amazon.com is currently doing.

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This user has validated their user name. by: permacrisis
Web Site

Fri Apr 8 09:02:06 2011

"I doubt if he even knows what he wants to do with GSI"

I can picture what he's gonna say when it tanks.

"But, but but... FBA has THREE LETTERS! And, my GSI has three letters two! This was supposed to work! They are EXACTLY the same! Griff ! Get in here! Explain this to me!"

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