Ebay SWOT Analysis

E-bay SWOT Analysis

E-bay is an e-commerce company and one of the primary competitors of Amazon. The brand saw a small rise in its net revenue of around 5% in 2016 over 2015. Despite tough competition, fourth quarter of 2016 saw some strong performance driven by holiday season. E-bay is facing some major challenges and despite that it has maintained a strong position in the e-commerce market. There is stiff competition from other global and local e-commerce leaders like Amazon, Alibaba and Flipkart. Digitization is another major challenge before E-bay. In the e-commerce industry, technology matters more than anything else. Amazon has kept scoring better on the basis of customer convenience. Growth in the use of mobile platforms has also brought both additional opportunities and challenges. In the recent years, the retail landscape has seen some great changes happening and to make the best of these changes, E-bay has focused at continuous reinvention. At its heart E-bay is a technology company that is geared towards the creation of a powerful online shopping platform. The brand employs around 12600 people, more than half of which work in US. This SWOT analysis will help you better understand its critical strengths, weaknesses, opportunities and the threats that can affect the e-commerce brand.

(A short analysis of Ebay's financial results before moving on to SWOT Analysis:)

E-bay’s net revenue saw a 3% change in the fourth quarter of 2016 as compared to the same period in 2015. While the net revenue was $2,322 millions, it rose to $2,395 Million in 2016. There was a rise of $73 millions in the revenue for the fourth quarter. For the full year, there was a rise of 5% or $387 million from 2015 to 2016 in net revenue. The net revenue rose from $8,592 million to $8,979 million in 2016. Net income in the fourth quarter of 2016 saw a small jump from 2015. There was a change of just one million and the brand’s net income during this period reached $601 from $600. From $2232 million in 2015, the net income fell to $2156 millions in 2016. There was a 3% decline.

Strengths:

Brand image – over time, E-bay has built a strong brand image and is known as a major competitor of Amazon. In the e-commerce world brand image is an important strength and the trust between the site and the customers decides the level of sales and profits.
Global presence - In the fourth quarter of 2016, the site added 2 million active buyers and the total number of global active buyers at E-bay is now more than 167 million.
Large network of buyers and sellers – The large global network of its buyers and sellers is also an important strength of E-bay. Its e-commerce platform connected millions of buyers and sellers in 2016, leading to a Gross Merchandise Volume of $84 Billion. The active buyer base has grown by 5 million in 2016 and 2 million in the fourth quarter. (E-bay fourth quarter financial report- 2016)
Digital Growth – Fast digital growth is also an important strength of the E-bay platform. The brand uses a combination of proprietary technologies and services as well as technologies and services provided by others. It has developed intuitive user interfaces, buyer and seller tools and transaction processing, database and network applications that help enable its users to reliably and securely complete transactions on the E-bay sites. It uses a pretty advanced technological infrastructure that simplifies the storage and processing of very large amounts of data. Moreover, the brand is investing continuously in technology for improving the buyer and seller experience and for increased efficiency, scalability and security. (Annual report 2016 - E-bay)
Fast growth of stub hub - Stub Hub is one of the world’s largest ticket marketplaces, owned BY Stub Hub. It has seen fast growth during the recent years. StubHub’s International footprint has expanded to 48 countries with the acquisition of Ticketbis. The brand has also acquired TicketUtils to help the sellers improve ticket inventory management. Several advancements across the Stub Hub platform have brought great results. (Annual report 2016, Ebay).
Ebay Valet: E-bay Valet has also made the value proposition of E-bay stronger. More than 100,000 users have experienced the benefits of E-bay Valet. In 2016, E-bay announced a partnership to extend the benefits of E-bay Valet to all the FedEx locations.

Weaknesses:

Weaker position against competition – Despite all the technological innovation, competition has kept growing tough for Ebay. Amazon has been seeing faster growth and other local and international ecommerce brands are also making the situation tough for Ebay. Amazon particularly is a tough contender making the situation difficult across the ecommerce spectrum tough for all the other players.
Technical issues – Technical issues occurring from time to time on the Ebay website are an important weakness that need overcoming.
Weakness in internal control over financial reporting – Some material weaknesses were identified in Ebay’s internal control over financial reporting which can have an adverse effect on its reputation, business or its stock prices.

Opportunities:

Diversification and acquisitions – The brand has made some important acquisitions like Paypal and StubHub. The brand can find further growth through diversification and acquisitions.
Mobile platform – Business across the mobile platform is growing fast and offers new opportunities for Ebay. The number of mobile users throughout the world is growing faster. Designing innovative experiences for the mobile users can provide great new opportunities in terms of sales and marketing.
Investment in marketing - The brand must take a stronger approach to marketing. This will help it find faster growth and new opportunities in the emerging markets. Investing in marketing can also help it penetrate its existing markets deeper and tackling the competitive pressure.

Threats:

Competition – Competition is one of the primary threats facing Ebay. Apart from online and mobile sources, the brand also faces stiff competition from the offline sources. Among its primary competitors are Amazon, Alibaba, Flipkart. However, several of the retail giants like Walmart and Costco have also taken a step towards ecommerce which means additional competitive pressure for the ecommerce brands.
Regulatory framework – The regulatory framework is also an important threat which can add to the operational costs of the ecommerce brands. The regulatory framework has kept growing complex and Ebay’s business is also subject to anti-trust laws. E-bay operates in several countries and it is subject to ecommerce laws in all those markets. Moreover, in several developing companies the privileges offered by local law area not available to E-bay. This leads to both regulatory and competitive pressure. There are several types of regulations that can affect EBay’s business like trade regulations, local labor regulations, important or export regulations. Violating any of these laws whether inside or outside US can result in severe criminal fines. The growing complexity of the regulatory framework has led to increase in compliance costs.
Currency fluctuations - Majority of Ebay’s revenue comes from outside US. The recession has passed and most of the world’s economies are back on track. However, the currency fluctuations and a stronger dollar lead to low revenue or losses. Fluctuation in foreign exchange rates result in financial loss.
Uncertainty due to Brexit: Brexit has given rise to some economic uncertainty. It has also given rise to instability in the market conditions that can have a reverse effect on Ebay’s financial results.

[Check out stats & facts on Ebay - Net Revenues, R&d expenses, marketing expenses]

Conclusion:

Ebay is among the primary competitors of Amazon. However, it is focused on continuous growth through technological innovation and acquisitions of key brands. The brand acquired Paypal and HubStub. Both these brands have seen growth and Hubstub especially had produced great results. E-bay continues to spend on advertising and technology to perfect the shopping experience for its users. Competition is the biggest challenge before it. Another important area requiring focus is the mobile platform. Growth in the number of mobile users means this area has grow more important and E-bay should continue to innovate its mobile experience to find faster growth and reduce the competitive pressure. It also needs to find more growth in the Asian countries where it must focus more on marketing. The economic uncertainty due to ‘Brexit’ and currency fluctuations as well as the rising regulatory pressures, are all making the situation tough for E-bay. However, its financial strength is still a critical factor that can help it overcome major pressures. Use of AI for creating better customer experiences can also help it grow brand equity.

Sources:

https://files.shareholder.com/downloads/ebay/5452775460x0x935618/61DC48DD-11A4-437A-81A7-39F3FE892B68/Final_eBay_2016_Annual_Report.pdf

https://files.shareholder.com/downloads/ebay/5452775460x0x925229/2FD567C5-CB12-41E9-8450-3BBE3343A2C2/EBAY_News_2017_1_25_Earnings.pdf