eBay Q2 2023 Earnings Call, Excerpts and Analysis for Sellers

eBay seems to be at a crucial juncture following its latest earnings report for the period ending June 30, 2023. The report surpassed Wall Street analysts’ predictions, with revenue reaching $2.54 billion, compared to the expected $2.51 billion.

Additionally, one of the most important statistics for sellers is the number of active buyers on its core marketplace, which remained stable at 131 million over the previous quarter, excluding GittiGidiyor and TCGplayer.

On June 30, 2022, eBay announced the closure of the Turkish marketplace, GittiGidiyor, and later, on October 31, 2022, the company closed on the acquisition of TCGplayer.

By excluding these two entities from the analysis, it provides a clearer picture of how eBay’s core marketplace is performing. Notably, for the first time since the initial Covid-19 surge in 2020, eBay has managed to maintain its active buyers without any decline over the previous quarter.

Furthermore, General Merchandise Volume (GMV) is exhibiting a stabilization trend, another good sign for sellers. In Q2 2023, eBay reported a GMV of $18.2 billion, only slightly lower than the $18.5 billion recorded in the same quarter of the previous year. This represents the smallest decline in GMV observed over several quarters.

When compared to the previous three quarters, eBay experienced quarterly drops in GMV of 5% (Q1 2023), 12% (Q4 2022), and 11% (Q3 2023), resulting in a year-over-year decline of 18% over the past year.

Since the most recent quarter’s 2% drop is quite minimal in comparison, this seems to indicate that the company’s strategy of concentrating on specific categories is proving effective in stabilizing the declining trend in GMV and active buyers.

However, looking ahead, eBay’s revenue guidance for the third quarter fell slightly below expectations. The company projected a revenue range of $2.46 billion to $2.52 billion for the current quarter (Q3), whereas analysts’ average estimates stood at $2.47 billion, which falls towards the lower end of the forecast.

This has caused the stock to slide in after-hours trading, which continued on Thursday.

Ultimately, this may not be a major concern for sellers. But it does suggest that the company’s turnaround strategy might be progressing at a slower pace than anticipated by Wall Street.

Let’s delve into the comments shared by eBay CEO Jamie Iannone and eBay CFO Steven Priest during the earnings call last night.

Key Quotes From eBay Earnings Call

The following are quotes attributed to Jamie Iannone, eBay President and CEO, except where noted otherwise under ‘Key Marketplace Data’ which includes a section of quotes by Steven Priest, CFO at eBay.

On Strategy: “We’ve accelerated innovation to adapt to the changing needs of buyers and developed world-class shopping experiences in our focus categories.”

“The foundational work of our tech-led re-imagination will continue, including our prioritization of non-new products, expansion of focus categories in ads and payments initiatives.

“Through our focus category strategy, we’ve proven that when we build relevant experiences, we can dramatically improve customer satisfaction, which translates into faster GMV growth.

“This includes developing a more relevant, consistent experience for the next generation of online shoppers through a comprehensive overhaul of our user experience and design rolled out in phases over the course of 2023 and beyond.

“This evolution will result in simpler, more personalized browsing experiences that will inspire people to sell, shop and connect with their community on eBay.

“We began rolling out these changes to consumers in recent months, starting with testing a more modern and intuitive view item page, which is the most visited page on eBay.

“The updated page offers a streamlined appearance, larger and higher resolution images, and an optimized information hierarchy. Early tests indicate a measurable uplift in GMV versus our existing design.

“We’re investing in technologies like deep learning and visual similarity to improve ranking and retrieval, reducing queries with low or no results to see if there’s more of our amazing inventory for customers.

“Ads and payments have dramatically enhanced our financial architecture. But now we are widening the scope of scalable solutions on eBay to develop a broader suite of value-added services.

“Over the next few quarters and years, we expect advancements in artificial intelligence, including Generative AI, to impact nearly every aspect of our organization, driving meaningful efficiency and productivity improvements.”

On Key Marketplace Data (Jamie Iannone, CEO at eBay): “eBay has 5 categories that each generate more than $10 billion annually in GMV, making up more than 80% of volume on our marketplace in aggregate.

“[Our] proprietary managed payment solution [is] capable of processing more than $70 billion in annualized volume in less than 2 years.

“…1.9 billion listings on the platform. We have over 500 million in P&A.”

Steven Priest, CFO at eBay, added: “P&A was once again the largest contributor to GMV growth among focused categories, growing in the mid-single digits year-over-year in line…

“eBay Refurbished maintained healthy double-digit growth in Q2 and was the second-largest contributor to focus category outperformance as consumers continue to turn to eBay for value in the current economic climate.

“Enthusiast buyers was stable at 16 million in Q2, as net migration patterns improved slightly quarter-over-quarter. Spend per enthusiast grew modestly year-over-year, averaging roughly $3,000 annually.”

On Advertising Products: “[We build] nearly $1.3 billion advertising business driven by Promoted Listings, which help our sellers drive greater velocity and price realization for their inventory.

“Promoted Listing Standard… continues to be the workhorse of our advertising portfolio, where we’re driving more optimization and more relevance.

“…[O]ur new products (mainly Promoted Listing Advanced)… once again grew 30% quarter-over-quarter.

“Over 2.1 million sellers adopted a single ad product in Q2, while we reached more than 800 million live promoted listings.”

On Active Buyers, Reactivating Buyers, Enthusiast Buyers: “P&A (Vehicle Parts & Accessories) where we’ve been doing full-funnel marketing, really targeting on enthusiasts, there, we’re seeing that new and reactivated buyer growth being double digits faster than the rest of the platform.

“…[W]e just launched Authenticity Guarantee for streetwear, which is a great kind of Gen Z younger consumer category.

“We’re in the middle of sponsoring… Love Island in the UK, which is kind of currently on air right now, sponsored by our eBay UK business, also bringing in a different type of cohort.

“…we feel really good that the strategy is working. We’re bringing in the enthusiast buyers that we want and that we’re seeing a great payoff out of the full funnel marketing approach.”

On Refurbished Products: “…we’re seeing used [items] growing faster than new [products].

“…we’re really leaning into what we’re doing on a C2C (Consumer to Consumer) standpoint, including the new Magical Listing rollout because tougher economic times are an opportunity for us to bring more sellers onto the marketplace.”

On eBay International Shipping (eIS) and Cross-Border Trade: “This program simplifies paperwork, lowers cost for buyers, streamlines returns, and enables sellers to tap into our global demand.

“While this program is still ramping up in the U.S., we are seeing positive proof points in the number of listings migrated…

“…[C]ross-border trade on the platform, it’s really 1 in 5 transactions or 20%. …[O]pening up that inventory, we think, is a unique advantage for eBay and a unique value proposition for our sellers on the marketplace.

“…[W]e’re actually seeing some strength in the cross-border trade of our business. That has to do with supply chain easing up and there being an opportunity for those sellers to export items in.

“…[W]e’ve also been rolling out new capabilities and payments over the past couple of quarters, with buyer and seller FX (Foreign Exchange) to make the payments process [easier].

On Live Commerce: “We’ve now done over 300 live commerce [sessions] and sellers and buyers are getting really engaged in that.”

On Non-Focus Categories: “…[W]e’re doing a lot of work outside of just the work that we’re doing in focus categories. In fact, the majority of our investment is going there. So if you think about the magical listing experience, that’s going to help unlock C2C inventory across every category on the site.

“…[W]e continue to roll out focus categories and as we’re seeing success there, that actually helps lift all… [categories] …across the eBay marketplace.

“The average sneaker buyer comes in and buys sneakers over $100, they’re going to spend $400 on sneakers but then $2,000 on the rest of the platform… And that nature really allows us to help grow the overall marketplace, including our non-focus categories.”

On Generative AI: “…[N]ow sellers can choose to have detailed product information instantly populated by Generative AI based on the product’s title, category and any item aspects that have been input.

“…[W]e ramped this beta feature to more than 50% of iOS and Android users in the U.S. and expect to reach 100% in the coming weeks.

“Approximately 30% of users have tried the feature at least once, and we’ve observed acceptance rates of over 90% for AI-generated descriptions, including those with edits.

“Customer satisfaction is over 80% thus far, which is among the highest CSAT for any new feature launched in recent memory.

“[Soon, Sellers will be able to] utilize their smartphone camera or existing photos to start a listing. And based on our visual understanding of the products, the eBay app can pre-populate the title, category, description, and item specifics wherever possible.

“We have been testing this tool with our employees for several weeks, and we’re incredibly excited to launch in public beta in the coming months.

“The advent of Generative AI has sparked an explosion of creativity at eBay among our product and engineering teams, who have conceptualized new and innovative shopping experiences that can be rapidly deployed onto the site.

“Two compelling examples that launched in July are the Shop by Upgrade and engine code lookup features that went from concept to production in the eBay Motors app in just a few weeks.

“Shop by Upgrade uses Generative AI to help customers discover the most relevant fitment-enabled upgrade options for their vehicles, which are personalized based on a specific user’s preferences.

“Engine code lookup offers specific P&A products available on eBay that can address the root cause of hard-to-decipher error codes, aiding them in identifying and fixing the source of the problem.”

On Certilogo Acquisition: “…[I]t’s a perfect acquisition for eBay. They have great relationships with brands.

“They’re driving this ability to have these unique QR codes to make sure that products are authentic, and it’s leading into a trend that we’re seeing, frankly, two trends. One is the younger Gen Z consumer caring more about sustainability and pre-loved and what happens with garments.

“And frankly, governments and regulators, especially in Europe, making sure that products don’t go into the landfill, but they get a second and third and fourth life…”

Conclusion

When looking at the comments by both Jamie Iannone and Steven Priest, there was no mention of The Vault, and very little discussion about live commerce or eBay Live.

Both of these features had been previously promoted as significant additions to boost GMV. Yet, it appears that their impact may not be as substantial as anticipated, and recently the company reduced the threshold for items that are eligible for The Vault.

There was a lot of discussion about how Generative AI this time around and how it will transform the marketplace. While it may be a buzzword right now, it’s one that sellers need to embrace as the company is releasing seller and customer-facing tools.

AI is not going away at eBay, it will further define every user’s experience on the marketplace.

eBay’s ‘focus category’ characterization continues to raise some confusion because it seems to be used whenever there is a mention of a category that has seen improvement.

For example, the company identifies five primary categories (see 2022 Annual Report – Page 1 – ‘Our Strategy’) in its SEC filings; parts & accessories, collectibles, electronics, fashion, and home & garden, which generate more than $10 billion each annually in GMV, accounting for at least 80% of its total GMV.

It seems the SEC categorization should be the one that defines focus categories. However, eBay has also referred to niches like sneakers, watches, handbags, jewelry, streetwear, and trading cards as ‘focus categories,’ through its significant investment in these areas with its authenticity guarantee program.

Among the ‘SEC focus categories,’ parts & accessories holds the top position, as highlighted during this call. Earlier this year, eBay revealed that Home & Garden also ranked among the top three categories across all of its global marketplaces.

During this call, eBay mentioned that ‘Refurbished Products’ were a significant contributor to the focus category’s performance, although it’s not a ‘focus category’ according to the company’s SEC filings.

The terminology used by eBay to discuss their metrics, particularly ‘focus categories,’ keeps being confusing and warrants more transparency. While the company appears to have five major categories as identified in its SEC filing which are also driving most of its business, they are essentially supported by various niche ‘focus’ categories.

And exactly where does ‘Refurbished’ come in? It seems to be another segment of products, spanning across multiple major categories the company defines in its SEC filings, that has been given the ‘focus’ moniker.

Another transparency concern pertains to the number of active sellers on the platform.

eBay’s disclosure of this metric was last made for the year-end 2021, with 17 million sellers, an 8% year-over-year decrease at that time.

Subsequently, eBay has only stated having “millions of sellers.” This lack of clarity raises questions about the current active seller base (estimated at about 15 million, based on its buyer base decline) and could potentially explain why the company faces challenges in executing its turnaround strategy more swiftly.

Several other metrics support continued headwinds with growth. Cross-border trade (20%), average spending by enthusiast buyers ($3,000), and the number of enthusiast buyers (16 million), all have remained stable over the past six months.

On the positive side, eBay’s authenticity guarantee programs seem to have helped stabilize eBay’s metrics overall, providing growth opportunities in these segments for sellers.

The eBay ship may no longer be sinking, and the big holes have been plugged, but achieving substantial growth still appears to be a gradual process.

Regarding the company’s international shipping ‘relaunch’ (eIS) in the U.S., it is too early to gauge its impact. Results should become evident by the year-end, despite the challenges faced by Europe’s economies, which continue to battle high inflation.

New regulations for shipping products to Europe may affect some cross-border trade, although the eIS program addresses some of these issues, specifically regarding item classifications. However, EU eco- and regulatory packaging rules remain outside eBay’s program’s scope.

Looking ahead to the busy holiday season, eBay’s advertising products are being used more frequently, which may cause concern for some sellers as it entails additional costs. Nevertheless, utilizing these products to drive traffic to listings will be crucial to maintain sales on a more competitive marketplace.

While eBay’s metrics indicate some stagnation and only slow growth, there are also clear signs of progress and opportunities for sellers, particularly in categories where the company has invested resources to attract new buyers to the platform.

Contrary to what some sellers seem to believe, eBay is not imploding, but the marketplace is changing. And if your products are not selling on eBay, you need to look at your listings (compare them to your competitors) or think about switching to products in categories where the company has invested resources.

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