Our eBay SWOT analysis highlights the company’s strengths and weaknesses, as well as its potential opportunities and threats.
eBay, Inc. operates as a commerce company that provides platforms for buyers and sellers online and on mobile devices. Founded in 1995 by Pierre Omidyar, it is currently headquartered in San Jose, California, and has 13,300 employees.
Below is an eBay SWOT analysis highlighting the company’s strengths and weaknesses, as well as its potential opportunities and threats.
eBay's Current Status
At the close of December 2020, eBay reported that its net revenue of $10.27 billion is up 19% from $8.63 billion in 2019. The company’s income also grew from $1.52 billion in 2019 to $2.54 billion in 2020.
eBay is currently ranked 295 in Fortune 500 rankings, maintaining its position from 2019. Significant increases in net revenue in 2020 came from its global marketplaces, generated from the fees paid by eBay's sellers. This is an increase of 27.7% where the company grew from $2.24 billion to $2.86 billion in the fourth quarter of 2019.
eBay's Strengths
Active buyer growth. eBay added 11 million new customers by the close of 2020, totaling 185 million active buyers. This was a key contributor to eBay's highest annual sales growth seen since at least 2013.
Gross merchandise volume increase. eBay's U.S. marketplace saw a growth of 22.1% ($37.53 billion) in 2020. This turned its growth trajectory around significantly, particularly compared to its U.S. GMV plunge of 18.1% in 2019 year over year. Meanwhile, eBay's global GMV is up 16.9%, reaching $100 billion in 2020 from $85.51 billion in 2019. This includes GMV in both U.S. and international marketplaces. The incremental GMV growth in 2020 was more than the marketplace's GMV growth in the previous seven years combined.
COVID-generated shopping. eBay's 2020 growth peaked in the second quarter, the height of pandemic-related lockdowns. This added 8 million new customers, the biggest growth in active buyers in 2020 for eBay. In the second half of 2020, eBay acquired 3 million new shoppers.
Growth in international transactions. eBay's sales results show strong growth in its international transaction volumes. CEO Jamie Iannone reported in an earnings call that in the U.S., one in 10 online shoppers purchased something on eBay. In Germany, that number was one in seven, while in the U.K., it was one in four.
eBay's Weaknesses
Strong competition. Surveys show that eBay ranks third among all retailers in cross-border purchases. AliExpress, the Alibaba Group marketplace that enables mainly Chinese retailers to sell their goods globally, was number two among all retailers in cross-border purchases. Meanwhile, its main competitor Amazon placed first in the rankings.
Online scamming. eBay has experienced various mishaps with scammers operating as fake sellers on the website. Another common incident is when scammers pretend to be eBay representatives to steal personal and credit card information through email. With how easy it is to hide personal identity online, finding the culprits is difficult, particularly on eBay where the website is perhaps not as moderated as it should be.
eBay's Opportunities
Niche marketplace strategy. eBay is taking steps to differentiate itself from Amazon and other major competitors when it comes to general merchandise. In 2020, it refocused on previously popular categories, including sneakers, luxury watches, refurbished or used products, as well as its consumer-to-consumer business. This may also stem from the growth in niche marketplaces that are now competing directly with eBay.
Mobile app growth. Nearly half of eBay's global GMV was a result of transactions in its online app. It was downloaded 50 million times in 2020, with app purchases continuing to grow even faster than overall GMV. In addition to this, eBay sellers with store pages increased visits to their storefronts by an average of 20% in the app.
Promising customer retention. Leading experts believe that eBay's turnaround may last even after the pandemic, observing that buying behavior is similar to pre-COVID-19 new buyer behavior. eBay executives also opine that new customers will be permanent buyers on eBay. The company can sustain the gains it is seeing from COVID-19. Even as panic buying slows and stores open once more, their customers are shopping for more than just pandemic essentials.
eBay's Threats
Portfolio trim. eBay has been divesting parts of its portfolio under pressure from activist investors. In 2020, it sold StubHub, its event tickets marketplace, to Viagogo for $4.05 billion. Its classifieds business went to Norway's Adevinta ASA in a cash-and-stock deal valued at $9.2 billion, leaving eBay with a 44.4% stake in the company. Currently, eBay is exploring the sale of their online marketplace in Korea which generates more than 10% of its revenue.
Price gouging lawsuits. eBay faced allegations in 2020 concerning the price gouging of high-demand products during the pandemic, which included PPE equipment. A class action filed against eBay claimed that it continued to encourage price gouging by charging a "final value fee" based on the price of the product sold. In December 2020, the case was voluntarily dismissed after the parties reached an undisclosed settlement agreement.
eBay SWOT Analysis Conclusion
The 2021 outlook for eBay is very promising, given the organic growth the company achieved last year. With its robust sales growth, rising profitability, and strong cashflow, eBay ended the year on a particularly high note in 2020.
eBay's tech-led efforts to drive sales in niche marketplaces and through mobile transactions were a significant sales and revenue driver last year. Another key factor that plays into this is the e-commerce boom that resulted from the pandemic. With its strong performance, its stock price quickly outpaced the broader market.
The eBay executive team will have a high bar to meet in 2021 with the company's impressive results from last year. However, it also gives eBay momentum in the quickly growing industry, particularly now that preferences have begun shifting toward online shopping and virtual interaction. These successes are essential to eBay holding on to its positive momentum as competition on the market continues to grow and retail and commerce shift toward the online and digital space.
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