Ina Steiner EcommerceBytes Blog
News and insight focusing on ecommerce.
by Ina Steiner, Editor of EcommerceBytes.com
Wed Apr 24 2019 00:36:20

eBay Marketing Pullback Causes Q1 Sales Drop

By: Ina Steiner

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Incredibly, eBay's top executives admitted they had expected the sales drop that the eBay Marketplace experienced in the first three months of 2019, saying it was caused by a significant reduction in marketing, primarily in North America. 

And despite the decline in dollar sales for its sellers - even as many paid more for visibility - eBay itself experienced a 4% increase in revenue (on a foreign-currency neutral basis) thanks to seller fees.

Here's how sellers fared in the first quarter in the aggregate:

- US GMV (the value of items sold on its marketplace) dropped 6% in the first quarter, year-over-year.

- Total GMV was down 4% - a decline of 1% taking into account the impact of foreign exchange.

eBay CEO Devin Wenig explained to Wall Street analysts on Tuesday's earnings conference call that its own revenue growth was partly driven by Promoted Listings - sellers were "flocking" to Promoted Listings, he said. 

"In Q1, we had more than $800,000 active sellers promote over 200 million listings. This helped drive over $65 million of revenue this quarter, up nearly a 110%."

While that's a win for eBay, it's the result of sellers having to compete more fiercely for sales, finding themselves having to sacrifice profit margin by paying for visibility through Promoted Listing ads.

Wenig said, "We entered the year with the intention to reduce low-ROI marketing spend while maintaining the focus on driving positive buyer growth with new product experiences and targeted marketing. In Q1, that's exactly what we did. 

"We removed a significant amount of promotional spend that tended to subsidize higher priced items at low ROI. The impact of this change was lower GMV, driven by lower average price, but steady sold-item growth." (ROI is return on investment.)

(Presentation slides show eBay sold-item growth was again 0%, for the fourth consecutive quarter; steady indeed.)

Wenig and his colleague, Chief Financial Officer Scott Schenkel, did not get into the specifics of eBay's marketing strategy during the call with analysts, but one thing jumps out to eBay observers. Throughout 2018, eBay ran sitewide "flash sales," in effect paying shoppers to buy items on eBay. It abandoned that strategy in 2019.

Both Wenig and Schenkel characterized the change in marketing expenditure as a "significant reduction."

For sellers expecting change, brace yourself: Wenig said the "GMV to Revenue gap" would continue. In other words, eBay will make more money from sellers for each dollar of sales. Basic math means that will make eBay increasingly less profitable for sellers. 

eBay didn't mention the new Good Til Cancelled (GTC) mandate, nor did it receive any questions about it during the call. It's not clear if the company had signaled to analysts the topic was off limits, or if analysts don't consider it material to eBay's financial performance. 

eBay did raise the issue of Managed Payments. Wenig said he was "delighted" with eBay's progress in taking over payment processing and announced it is expanding the program to Germany.

He also mentioned that eBay had begun the review of its portfolio as mandated by activist investors unhappy with eBay's performance.

Thankfully the talk of a "turnaround" at eBay finally seems to be put to bed, a holdover from former eBay CEO John Donahoe days. The new metaphor is "train tracks" that eBay has been "laying down."

A new catch-phrase is "aspect coverage." eBay had told sellers with the Early 2019 Seller Update, "You will be able to optimize your listings for product-based shopping by simply providing complete and accurate item specifics when you list," as opposed to having to match their product to eBay's catalog/

Here is Wenig's explanation to analysts:

"We said a couple of quarters ago that what we would do is effectively bifurcate the experience that new users who are getting more of the structured data product-based experience, and existing users were being landed more on the historical experience. That's what we've done. And one of the reasons we've been able to maintain healthy buyer growth is, with this significant reduction of marketing, is that we are seeing great conversion gains for new customers. That gives us a lot of confidence for the future.

"In the Core, we're also seeing the impact now that the evolution of structured data is making; this year we'll be very focused on aspect coverage, meaning knowing the product is important, but knowing the attributes of the product in many ways is even more important. And we'll be encouraging sellers to contribute a great degree of richness to their listings because we know that that richness improves our catalog and drives buyer conversion. 

"So, I kind of hinted at that in my remarks, but you'll see a significant expansion of the coverage and quality of our catalog this year, and the early signs are very positive on conversion, so that's where we're going to focus. 

"But for new users, we've been even more aggressive about product-based experiences, and that continues, and we're real happy with the results there."



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This user has validated their user name. by: The End

Wed Apr 24 02:04:28 2019

That's not why sales are dropping.
The show is over for Ebay.

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by: Silver Ice King This user has validated their user name.

Wed Apr 24 05:26:34 2019

And despite the decline in dollar sales for its sellers - even as many paid more for visibility - eBay itself experienced a 4% increase in revenue (on a foreign-currency neutral basis) thanks to seller fees.


The Sales are dropping but Ebay has conned enough sellers to join the Promoted Listings Program and force others into the 4% FVF increase (which is really a 40% increase in fees) for excessive SNADs, that they are bragging about the fact this other income has caused Ebay to show overall growth.  Wenig is throwing it in the Sellers faces that Ebay has reduced its marketing in North America (basically the USA and Canada) resulting in a drop in sales, which sellers have all agreed is happening, but that Ebay is growing by itself because of the Promoted listings fees and other money grabs into the Sellers pockets.

So they are laughing all the way to the bank thanks to the Sellers who are so desperate that they are willing to pay an additional 4-10% on top of what they are already paying in FVF.  Wenig is absolutely ecstatic that this is happening just as he predicted it would.  Its a  shame that these Sellers that are playing the Promoted Listings game don't see if they didn't do it Ebay would have to make the changes necessary to increase sales.  But now they have proven to their bosses that enough Sellers are so desperate that they will pay all this additional money to Ebay just to have their items finally shown.  

Sellers need to make a stand and start selling on other sites for lower prices and make more from that site than they do from Ebay so that the buyers will follow them, otherwise Ebay will eventually be making double or triple what the seller is making on the sold items.  

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by: sasikat9 This user has validated their user name.

Wed Apr 24 06:41:47 2019

A drop in sales because a drop in marketing. Ebay has never done much marketing at any time. This is just another excuse NOT THE REASON.

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by: notfunanymore This user has validated their user name.

Wed Apr 24 06:53:33 2019

Wow! Spend less on advertising, sell less, make more!  It’s really sad to watch desperate sellers making this happen.. they are simply playing on the stupidity of sellers. They take away your ability to sell your products then tell you if you want your items shown on our site where you pay “insertion fees” you’ll have to pay more, and, we may still not show your items so just keep paying us more money because you are that stupid. We’ll throw you a bone every once in a while to get you going thinking “ok, finally, it’s better, this goes on for a few weeks, then BAM! You’re back to the bottomless pit. You’ll spend more
money in the hopes you’ll get back in good graces, but to no avail. Wake the heck up sellers. You are being played for fools.  

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by: Geetar This user has validated their user name.

Wed Apr 24 08:29:50 2019

Wow. They are running even faster to destroy ebay! This is past the point of stupidity here. It almost seems there is some other reason why they are deciding to make non growth decisions. I mean it cant be any more plainly to see. A 5 year old with a lemonade stand would be able to make better business decisions.

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by: wilburnet This user has validated their user name.

Wed Apr 24 08:30:31 2019

When will Wall Street get tired of Ebay ?

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by: Jairib This user has validated their user name.

Wed Apr 24 09:25:53 2019

This is exactly why I & so many sellers are expanding the platforms we are selling on.  Ebay does not really care about it's sellers other squeezing every dime they can from them.  Ebay needs to realize they are no longer the only game in town.

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This user has validated their user name. by: toolguy

Wed Apr 24 09:34:59 2019

And Wall Street's reaction is:

eBay up $1.50 out of the gate this morning. . . .

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by: pace306 This user has validated their user name.

Wed Apr 24 10:00:42 2019

"Ebay also raised its full-year guidance partly on confidence from its first-quarter results, the company said in a press release" (from thestreet.com)

OK so which is it? Are the 1q results so good that they are RAISING expectations or were they bad and there was a sales DROP?

How much are these Wall Street people being paid to pump n dump eBay stock?

""We delivered a solid first quarter with revenue and EPS," said Devin Wenig" - NO YOU DIDNT.

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This user has validated their user name. by: The End

Wed Apr 24 10:16:43 2019

Let me spell it out :
WE NEED A FRESH NEW (American Friendly) VENUE.
Then, DON'T LET CORPORATE NEAR IT.
It's Lights Out for Ebay.

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This user has validated their user name. by: toolguy

Wed Apr 24 10:34:53 2019

Wall Street's still moving eBay up

Up $1.96 or 5%

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This user has validated their user name. by: RKTOYS

Wed Apr 24 11:05:22 2019

@SilverIceKing
I wish there were alternatives online, I really do, but the only viable outlet I've found has been live collector shows and even that's hit or miss.

Interesting to note the remark about site-wide flash sales being abandoned in 2019.  Many forum people have only been spending during those brief windows and still hold out hope they'll return.  At this point, I'd take the promoted listings hit (and then some) if I were guaranteed to move a hundred items a month (until I was out of stuff to sell).  But I'll be damned if I'll pay that high commission for a trickle.

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by: pace306 This user has validated their user name.

Wed Apr 24 11:34:07 2019

Tool 😀

I’m guessing that like Wall Street you honestly believe that the emperor has new clothes?

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This user has validated their user name. by: toolguy

Wed Apr 24 11:51:48 2019

@pace306

I believe eBay wants as much of my money as they can get.

But as long as they keep bringing me buyers I'll dance with them. . . .

PS: Yes, Devin has new clothes! He can afford them. . .

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by: Silver Ice King This user has validated their user name.

Wed Apr 24 11:52:04 2019

@RK Toys

For what I sell there are other sites and those are starting to really grow as Sellers are getting tired of Ebay.  The really high dollar items are starting to move to Facebook Groups where the listings are only available to those in the group(s) where the items are posted.  Of course the prices are slightly lower, but all that does is account for the Ebay fees that we no longer have to pay.  Many of these groups now have 10-30K members who are only interested in what we are selling which is really boosting things.  I don't know if that would work for what you sell but it is really booming for my category.  This is not using the Facebook Marketplace but just private groups where you must apply and be approved for admission.

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by: Shanna This user has validated their user name.

Wed Apr 24 11:59:20 2019

So ebay's only saving grace was the exorbitant postage increase from the USPS, which ebay takes their cut of in seller fees. Without that increase ebay shows zero growth.  

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by: Snapped This user has validated their user name.

Wed Apr 24 12:22:02 2019

Marketing ''pullback''? Right.

How bright does one have to be to wonder what kind of even less 'spinnable' numbers would have been evident had eBay not done their marketing 'pushes' in the first place?  Which, incidentally, also only benefitted a relative thimblefull of sellers in certain segmented market demographics.  

Wenig talks about the very evident (and herein was predicted due to quality item seller exodus caused by increasing risk of loss beyond fiscal sustainability) declining average sale price.  What he also doesn't mention, naturally, is that when more such items are sold (so called sold item ''growth''), more shipping is involved, which increases eBay revenue by that factor alone.  Also not counted among ''sold growth'' are the unprecedented - and itself exploding - number of revenue generating returns.  Nothing ''solid'' about those sales.

So yay for all those phone cases and false eyelashes and cheap tin ''vintage-like'' coctail ring sales - go fish to the rest of ya - unless you want to believe more (revenue increasing) bribes for 'better visibility' might help to promote your items to buyers who aren't coming to eBay for quality anymore.  There's some ''transformation'' for ya there, yessir.

He also MBA-buzzword-of-the-quarter bloviates about the ''importance'' of product detail, while simultaneously doing everything possible to obfuscate the abiliy to see those detail in listings, or to communicate about them between the ACTUAL inventory owner and THEIR potential customer.  Funny there's no mention of 'mobile' anymore either.  And it seems their 'catalog' efforts might be finally realized as fruitless, though not quite dead yet, still worth 'celebrating' by their myopic shortsighted standards of what constitutes success.

It's enough to make one want to ''bifurcate'' all over their keyboard.

Oh, and Tool?  Thanks for the play-by-play which each and all can easilly see with a few keystrokes for ourselves, and also unsustainable in the long run.  Not unusual considering how many stock values market wide have little to do with attendant company dysfunctions.  But with over 70% of shares owned institutionally in bundled portfolios, those 'investors' are either ignorant of the facts, or choose to remain so, deliberately.  Which are you?

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This user has validated their user name. by: toolguy

Wed Apr 24 16:29:15 2019

@Snapped

The FACT is my eBay is nothing like your eBay!

That's from a sellers or buyers point of view.

I sell used American made tools

I buy American made gun parts

The stuff I'm buying or selling isn't hidden, it doesn't need to be because there's not thousands of them for sale.

Like I said, YOUR eBay is nothing like MINE.

It's probably like trying to compare where you live to where I live. . . .

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by: Snapped This user has validated their user name.

Wed Apr 24 18:25:39 2019

No Tool.  And we get it.  

But the point is - the 'fact' is - 'your' eBay is nothing like THE eBay.  Just like nobody's 'world' can possibly ''be just like'' THE world - which, if you might see beyond 'yours', would seem to already encompass plenty of 'gun parts', and would actually benefit from a ''pullback'' of those too easily available regardless of origin.

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by: pace306 This user has validated their user name.

Wed Apr 24 23:01:28 2019

The FACT is my eBay is nothing like your eBay! - that's the issue - the experience should be the same for all sellers - unless you sell things that are so wacky and odd that no one wants them. When you walk into any major retail store - the experience is the same (Target, Walmart etc). They dont see me or you coming and rush to hide or show specific things.

That's from a sellers or buyers point of view. - see above

I sell used American made tools - fantastic - but thats one of a billion items on eBay. And I'll bet you all the pot in Colorado - that there are more people buying iPhones and tablets then all the American made tools on the planet (and if you dont believe me - look at Amazon ranking numbers).

I buy American made gun parts - Illegal in alot of left wing nanny states like NY, NJ, etc. The buying and selling of guns or gun parts can be and most times is both a State and Local crime, not to mention Federal.

The stuff I'm buying or selling isn't hidden, it doesn't need to be because there's not thousands of them for sale. - And therefore you will NEVER make thousands of sales. Which may be OK for you - you may be happy with 10 sales a week - but people like myself want 10-20 a day - at minimum.

"Like I said, YOUR eBay is nothing like MINE" - and if you do that to specific groups of people (minorities of any kind, people of color, people of differing religions) its a Federal crime - probably Title VI (TITLE VI OF THE CIVIL RIGHTS ACT OF 1964 PROHIBITS DISCRIMINATION BASED ON RACE, COLOR OR NATIONAL ORIGIN) (sorry for the caps - I just cut n pasted it).

Is that what you want for YOUR eBay? I dont.

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