eBay GMV down in Q1 2019 – But should sellers be concerned?

In eBay’s latest quarterly results we saw eBay GMV down on the marketplace but revenue (fees paid by eBay sellers) was up. Today we’re going to dig into this a little deeper and dissect what’s going on.

There are a number of drivers impacting eBay including reduction in marketing spend, buyer growth, taxation issues, and variations between countries.

Reduction in marketing sees eBay GMV Down

Seeing eBay GMV down may not be a bad thing for all sellers – eBay reduced their marketing by a significant amount where their cash was being used to effectively subsidise the sales of high value items. Put simply, eBay have been buying sales and now they’ve stopped and this has seen a reduction in high ticket items being sold in comparison to sales of lower value items.

This is where a chunk of GMV has vanished and it’s likely that many of these sales were to some of the biggest sellers on eBay. If you weren’t a beneficiary of eBay’s largesse then your sales won’t have been impacted and in fact overall sold items have grown – just lower value items.

“As we mentioned last quarter, 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.”
– Devin Wenig, CEO and President, eBay

Country focus – eBay GMV down but not everywhere

In the US GMV was down 7%, way more than eBay globally and it’s hard to put this in terms other than calling it an awful performance. International GMV grew 3%, which was a deceleration of about 2 points versus Q4, driven by what eBay describe as increased competitive couponing in Korea and the UK macroeconomic pressures (Brexit) which continued to have a negative impact on consumer spending.

We believe the UK is once again eBay’s second biggest territory (it was Korea for a time) so the UK led by Rob Hattrell is critical to eBay success. eBay UK is by all accounts doing really well, but Brexit and now the increased uncertainty with a delayed EU exit date in October isn’t encouraging consumer spending and that’s having an impact. We’ve got Germany pegged as the fourth largest eBay territory with France in fifth place.

GMV correlates to buyers in the long term

In the first quarter of 2019, eBay increased total active buyer base by 1 million to a total of 180 million, up 4%. This is great news but there is a lag between when buyers join eBay and when GMV catches up so whilst seeing new buyers is great the pay off with them translating into increased GMV is a benefit yet to be seen but expected over the next few months and quarters.

“We said a year ago when GMV was above buyers that we were trying to get the buyer number up, and ultimately GMV came down to meet that buyer number. Now GMV is below that buyer number. But, if we keep growing the buyer number, we have confidence that the ecosystem is healthy and the financial metrics do follow that. So, that’s the reason ultimately that we keep growing the customer base is that we think almost the best correlate to where ultimately GMV and then revenue and the other metrics that flow from that want to be is the buyer number over time. It doesn’t have to be quarter-to-quarter. But that’s why we are focused on continuing to grow that customer base.”
– Devin Wenig, CEO and President, eBay

eBay GMV down due to Internet Sales Tax

eBay have seen an impact from the adoption of internet sales tax in the US, as well as value-added tax in international markets. They point out that a number of jurisdictions have enacted legislation requiring marketplace collection of tax. Without a small business exemption, eBay suggest that this trend will increasingly impact small domestic sellers, making it harder for them to compete in an increasingly global and large merchant dominated world.

On eBay platform in Q1 2019 the impact was approximately one point of impact on U.S. GMV and less than a point internationally. Internationally it might be fair to guess that Chinese sellers have been impacted by EU governments including the UK focussing heavily on VAT avoidance.

Revenue continues to outpace GMV growth

eBay are currently no longer in the business of buying sales of high ticket items with no profit for them which has helped grow revenue, even with eBay GMV down in Q1 2019, another driver of revenue is eBay Promoted Listings.

“While our GMV is down slightly year-on-year, our revenue is growing, and the gap between GMV and revenue will likely continue. This growth was partly driven by Promoted Listings, where more sellers are opting to invest to grow their business. 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%.

As we’ve mentioned previously, as this business scales, we’re reducing third party ads, which are not accretive to our ecosystem. We’re very pleased with our progress and remain on track towards a $1 billion advertising revenue opportunity.”
– Devin Wenig, CEO and President, eBay

With research in partnership with David Brackin of Stuff U Sell, we are confident in saying that using eBay Prmoted Listings will drive sales… but at a cost. However there is no need to pay at or above eBay suggested rates – even a small bid price will increase sales. What is more important is fully optimising your titles, keywords, product data (Item Specifics) as then, whilst you may be outbid on generic keywords, the more specific a buyers keywords are and the more they refine search with item specifics, the more likely your competitors listings will be eliminated from the specific search and that your listing is promoted.