eBay Reports Solid Q3 2022 Earnings – But Buyers Continue To Flee the Online Marketplace

On Wednesday, eBay reported financial results for its third quarter ending September 30, 2022, topping earnings and revenue estimates.

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But while the company beat Wall Street estimates, a glaring problem persists. eBay keeps losing active buyers; this quarter alone, the company shed 2 million buyers, down to 133 million globally.

Year-over-Year (YoY), eBay lost 10% of active buyers as the company reported 148 million active buyers at the end of September 2021.

These active buyers statistics exclude GittiGidiyor, the Turkish marketplace the company is shutting down and is costing the company an additional 4 million buyers (based on September 2021 reported numbers).

The bottom line is that eBay’s core marketplace continues to shrink, resulting in a loss of 15 million active buyers over a twelve-month period.

During last night’s earnings call discussing the company’s results, eBay CFO Steve Priest said, “[e]nthusiast buyers accounted for approximately 17 million of our active buyers in Q3.”

In simple terms, this means out of 133 million active buyers, only 12.7% are enthusiast buyers (high-value buyers), the type of buyer eBay claims it is focusing on as they represent the majority of Gross Merchandise Volume (GMV).

In 2021, eBay executive management started to promote this high-value or enthusiast buyer strategy as the key to growing the marketplace.

eBay CEO Jamie Iannone explained in 2021 that an enthusiast buyer typically buys at least six times a year, spends more than $800, or sells on eBay as well.

Furthermore, Iannone claimed that 20% of all buyers fall into this category and were responsible for 75% of GMV on eBay.

So, how does this compare now with this year? Well, eBay keeps moving the goalpost to make comparisons very difficult.

During last night’s earnings call, eBay said that an enthusiast buyer now spends on average $3,000 per year, while last year, the company said the annual spent was at least $800.

But this quarter, eBay didn’t quantify how much of GMV the 17 million enthusiast active buyers are responsible for.

We could do a bit of simple math here to get a rough idea:

• Estimated Enthusiast Buyer GMV: 17 million X $3,000 = $51 billion GMV
• Total GMV (Q4 2021, Q1 2022, Q2 2022, and Q3 2022): $76.4 billion
• Estimated Enthusiast Buyer GMV Share: 66.8%

So how does this compare to last year’s definition?

Unfortunately, this is very difficult to do as eBay moves the definition of the active buyer and doesn’t provide enough data to make a good comparison.

In theory, in 2021, about 31 million buyers were considered enthusiast buyers representing 75% of GMV, while now the company says 17 million buyers are responsible for about 67%.

Considering how the definition of an enthusiast buyer has changed from one that spends at least $800 in 2021 to an average of $3,000 in 2022; it’s very plausible there has been growth in this buyers segment as the company claims.

But why change the definition if it looks like there is actual positive progress?

eBay President and CEO, Jamie Iannone acknowledged stagnation and possible downturn to come during yesterday’s earnings call.

He said, “on enthusiast buyers, in Q3, we had 17 million enthusiast buyers, which was relatively flat to Q2.”

Furthermore, Iannone explained, “we do expect some pressure on that count in the coming quarters as a result of the current macro-environment. But when we look at it, the vast majority of enthusiasts remain active buyers.”

In other words, enthusiast buyers are currently not growing in actual numbers. While these buyers may continue to buy on eBay, they may also be reducing their spending over the next year due to economic realities.

eBay Needs Another Refocus

I continue to feel baffled by eBay’s shell game with active buyer numbers.

It seems the company keeps explaining away overall declining numbers by highlighting sweet spots in specific focus categories where there has been growth.

But eBay is more than just focus categories.

It’s a general marketplace with millions of listings from new to pre-owned products. Recommerce, the sale of used products, is expanding globally, especially among younger generations.

Yet, it seems during financial presentations, there is very little discussion about recommerce on what should be a natural growth opportunity for eBay and one that should bring new buyers.

As long as buyers keep leaving, that seems to suggest shoppers are not finding the items they are looking for or are not happy with eBay’s platform.

Maybe it’s time for eBay to invest in understanding why buyers are leaving and what changes need to be made to the platform to bring shoppers back.

With the self-acknowledged stagnation of enthusiast buyers, it’s time to refocus on fixing the fundamentals to bring general shoppers back.

Resource: eBay Q3 2022, financial results.

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