eBay GMV Mystery

eBay – The GMV Mystery Tour Continues


On Monday, eBay President and CEO Jamie Iannone and CFO Steve Priest presented at the Morgan Stanley Technology, Media & Telecom Conference.

Just like earnings calls after quarterly financial reports, these investor conferences provide additional insight into eBay’s business. While the discussion is targeted at investors, there can be bits of information that trickle out that may be of interest to sellers.

Throughout most of the 30-minute discussion, Iannone and Priest made their case that the strategy of concentrating on enthusiast buyers and focus categories is showing positive momentum for the business.

For the past couple of years, eBay has been focusing its turnaround efforts on higher-priced and higher-volume categories such as premium sneakers, luxury watches, luxury handbags, fine jewelry, refurbished products, trading cards, and vehicle parts and accessories (P&A).

The company believes that these categories bring in new higher spending buyers — they’ve dubbed enthusiast buyers — that will not only make repeat purchases within the targeted categories but also purchase in the other “non” focus categories.

Iannone said that across all eBay marketplaces, which includes all eBay country-specific platforms, focus categories comprise about 25% of the business now. In the top three marketplaces — eBay.com (US), eBay.co.uk (UK), and eBay.de (Germany) — focus categories represent 28% of the business on those three marketplaces combined.

In addition, Iannone noted that eBay’s Customer Satisfaction (CSAT) score in focus categories has been increasing by double digits, which again, should mean more repeat business from buyers.

He added that the company’s long-term goal is to have focus categories make up half of eBay’s overall business. Iannone also revealed that “we have five categories that are over $10 billion” in GMV.

But if focus categories are only about 25% of the GMV globally today, that means 3 or 4 big categories are not focus categories, as the overall GMV for 2022 was $73.9 billion.

His remarks are a bit confusing because if true, why would eBay not make those categories focus categories as well? It’s always easier to grow a category where you already have buyers.

Another interesting factoid Iannone divulged is that 90% of eBay’s traffic comes from organic or free sources, meaning the company only pays for about 10% of its traffic. Estimates from SimilarWeb, a web analytics company, seem to validate this claim.

Despite what some sellers may think, this seems to validate that the brand is just fine and still has the draw to bring in buyers without needing excess marketing dollars to drive traffic.

Enthusiast Buyers

Unfortunately, during the presentation at the conference, Iannone continued to bewilder everyone on what defines an enthusiast buyer.

In the most recent earnings call, I lamented again that eBay seems to shift the definition of enthusiast buyer by cherry-picking certain metrics that make it hard to compare growth from quarter to quarter.

Well, Iannone doubled down on this muddiness during this conference by first saying an enthusiast buyer is one that shops on eBay more than six times per year, spending over $800, and in total, represents 70% of GMV.

And not even a minute later, he stated, “these are people [enthusiast buyers] that spend over $3,000 a year. They shop 30 times on the year, 90% of them shop in a focused category. So, it’s absolutely where we should be focused from a buyer perspective.”

I really would like eBay to stick to one definition because right now, it seems they are playing a shell game. While it’s theoretically possible that both metrics mentioned are right, let’s not call both by the same name of “enthusiast buyer.”

Another interesting comment Iannone made is that trading cards were helped by Covid-19 pandemic-era stimulus payments.

This seems to suggest the category’s growth may have slowed since the government stopped giving away money. He did not further elaborate, but if true, this should give trading card sellers some pause.

eBay Seller Fees

Sellers are always concerned about fees and usually when eBay makes adjustments to their fees, that typically means sellers end up paying more.

It’s been a concern for a while now that eBay seems to be trying to find new ways to raise its revenues by increasing its ‘take rate,’ leaning too much on squeezing out more revenue per sale.

In financial terms, the ‘take rate’ eBay talks about is the percentage of all selling fees collected — including insertion fees, listing options fees, subscription fees, final value fees, advertising fees, etc. — divided by GMV.

At times, eBay may reduce or eliminate certain fees to gain market share, but will raise fees elsewhere to compensate for the loss of revenue.

Iannone confirmed this strategy: “[W]e constantly look at take rate as a way to say, what’s an opportunity to lean in or to grab more take rate.

“And so through take rate changes there, we’re able to actually lean into a category in a specific market because we’ve been leaning into Germany with things like putting Klarna, a specific payment method, launching tire installation first in Germany.”

In Germany, eBay just launched a new program that enables private sellers to sell items on the marketplace for free. The justification for eliminating its basic selling fees is to get more consumer-to-consumer (C2C) activity on the German platform.

Why does this matter, especially if they don’t collect basic selling fees?

According to eBay Germany’s announcement, a private seller (C2C) on eBay is twice as likely to buy more on the marketplace versus a buyer that doesn’t sell.

And that increases the chance significantly that a German C2C seller uses the proceeds from their sale to purchase products from a business seller on eBay, where the company collects fees.

Steve Priest further explained this strategy: “So, if I look back to the fourth quarter, our overall take rate was 13.8%. So pretty significant take rate.

“These investments that we’re making in Germany is around 10 basis points. So, it gives you a real sense of our ability to look at monetization through ads and payments, and other opportunities as we look at it on a global scale.

“And even with these investments we’re making in Germany, we will continue to see and expect take rate expansion as we navigate our way through 2023.”

If successful in Germany, might eBay expand this strategy to other marketplaces? That could have the knock-on effect that it could also raise active seller and buyer numbers as well as GMV.

But as both already said, they are also looking to increase the take rate, so that would mean someone has to pay for this strategy, and that would fall on business sellers.

International Trade

Steve Priest also commented that the new eBay International Shipping (EIS) program changes how eBay will account for shipping revenue and costs in its financials.

On the surface, this seems to be an accounting change, but Priest later effectively admitted it could become a source for increasing net income or the take rate.

“[H]istorically, we used to be an agent, i.e., the revenue will be offset by the costs associated with running that. With us being the principal, we both recognize the revenue and we recognize the cost.

“And so this is a great opportunity for us to drive additional net income, which is obviously great for our business and great for our shareholders.”

Iannone added that about 20% of eBay’s business is cross-border trade, but less than half of listings are “currently available to be exportable. So, the whole point of eBay International Shipping is to unlock the other 800 million listings to cross-border trade.”

What the latter means for sellers is a bit unclear.

Will eBay automatically add listings into EIS or turn on international shipping by default because sellers are shipping domestically to a warehouse from where the package is forwarded to the buyer, or will sellers still control where they are selling?

Frankly, I feel Iannone’s words suggest sellers might be “voluntold” into the EIS program.

Iannone also discussed its new Buyer FX (Buyer Foreign Exchange) platform which drives additional revenue for the company. Buyer FX really was made possible because eBay manages payments now, but even with PayPal, international transactions were more costly.

Of course, now eBay gets that fee and is able to include that in the take rate. For those sellers not accustomed to selling to international buyers, there are additional fees that eBay charges, as outlined here.

The reason I mention this here is that if eBay coerces sellers and listings into EIS, sellers may see higher selling fees from international sales, even though they are shipped to a domestic address that is part of the EIS program.

Artificial Intelligence

AI seems to be the buzzword now with ChatGPT in the news almost daily. Obviously, machine learning or AI has been around for a long time, and some would just say it’s a new fancy word for algorithms.

Anyway, eBay has been using machine learning for years to drive search results. The marketplace was also one of the first ones to introduce image search on an ecommerce site, made possible by “AI.”

Iannone said: “Some of my favorite days of the days I meet with our AI teams because they are just working on some amazing stuff. So, AI isn’t new for eBay. When you think about the scale of eBay, we use AI in almost everything and machine learning in almost everything that we do on the platform.”

With eBay having more than 1.7 billion listings that include over 10 billion images, the company’s newly updated image search can help buyers find exactly what they are looking for, while sellers can use their smartphones to get comps on products.

I liked the image search function from day one. I think this was one area eBay really led the way.

AI today touches almost every part of the business, Iannone concluded, from advertising to search to selling. Let’s see how this “amazing stuff” will change the marketplace and what that could mean for sellers.

Final Thoughts

There weren’t any earth-shattering new revelations during eBay’s presentation at the Morgan Stanley Technology, Media & Telecom Conference.

Iannone and the management team are trying to fix a marketplace that has been in turmoil for a while, and the focus category and enthusiast buyer strategy are fundamentally sound.

I would also expect some “rightsizing” in buyer and seller numbers while the strategy is being executed as the cohort in both groups changes.

Unfortunately, what continues to be unclear to me is how well it is truly working. I haven’t seen any evidence in the overall financials that point to the successes eBay has been claiming.

Just this week, an article titled, “eBay Is Looking Like Dead Money” was published by Seeking Alpha contributor Gary Alexander, who follows tech companies, that seems to suggest investors are equally confused about the direction.

“For any ecommerce platform, GMV is the bread and butter of growth. eBay’s GMV has been declining in the post-pandemic period (though still slightly up versus 2019), as consumers have taken their purchases to other sites,” said Alexander in his article.

I think everyone understands declining GMV last year from macroeconomic factors as most of the world exited the Covid-19 emergency. Let’s face it, Amazon’s retail business is also struggling a bit.

eBay has already warned that GMV will continue to decline in 2023 at a comparable rate to 2022.

Yet, eBay’s management keeps saying that these new enthusiast buyers are driving sales in other categories. But when GMV continues to decline, it’s a bit hard to swallow the positive statements at face value.

I would really like eBay to definitively define an enthusiast buyer and break out more numbers related to these buyers to show the progress of the strategy.

And this is where my primary concern lies, why the lack of transparency?

I think being more forthcoming on some specifics that can be measured from quarter to quarter would help both investors and sellers better understand the progress of their strategy.

Iannone said they are striving to grow focus categories to about half of the business. So, that means they effectively will need to double GMV in the focus categories.

Given that direction, this is where eBay is placing most of its resources. So, it would make the most sense for sellers to focus on those categories as well, as that will be the entry point for new buyers.

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  1. Long Time Seller says:

    I don’t have the transcript handy, and maybe Jamie misspoke , but I believe ebay has two different terms with two different definitions:

    a “high value” buyer is one that shops on eBay more than six times per year, spending over $800, and in total, represents 70% of GMV. (In the past, ebay has also included sellers who buy in this definition, even if they don’t meet those numbers, whether that is still the case or not, I’m not sure) Also, I believe “or” actually applies here: That is, you could meet the requirement if you buy one $801 item, OR buy six times a year, even if your total purchase doesn’t meet the $800 threshold.

    “enthusiast” buyers spend over $3,000 a year. They shop 30 times on the year, 90% of them shop in a focused category. So, it’s absolutely where we should be focused from a buyer perspective.”

    In other words, an “enthusiast buyer” is basically the top tier of the “high value” buyer group….Every enthusiast buyer also qualifies as a high value buyer, but obviously not every high value buyer qualifies as an enthusiast buyer.

    ebay’s marketing is no longer primarily aimed at those who don’t qualify as high value buyers, but ebay has said they make an effort to move low and mid value buyers into the high value buyer level. In other words, ebay recognizes that every buyer has the potential to become a high value buyer.

    I agree that the Focus Category strategy has some merit, but I also agree that if it has been as successful as Jamie implies, we should have been seeing GMV growth. In theory, as ebay expands into new Focus Categories, that could happen. But ebay did not add a single new Focus Category in 2022, and, while ebay has said it will add this year, so far, it hasn’t even hinted at which category or categories it is looking at.

    Instead, the take rate is increasing while the GMV continues to shrink, and the latest change to PLS is a perfect example of increasing take rate with zero benefit for sellers. Frankly, that change implies that ebay itself doesn’t have full confidence in either the Focus Category strategy or in the ability of the PLS program to drive sales velocity.

    1. I rechecked the transcript to ensure I didn’t make a mistake (see the relevant section below). Jamie did refer to both as enthusiast buyers. I believe that both metrics can be correct as I stated in the article, but it’s confusing when eBay seemed to have transitioned to the enthusiast buyer moniker. I’ve noticed that they’ve been using enthusiast buyer for several earnings calls now, and it seems they just transitioned from one name to the other. I just want the definition (metrics and name) to stay the same so that we can compare the data from quarter to quarter.

      The focus category strategy makes a lot of sense. Even with eBay being a bit late to most of those categories where others like StockX or GOAT had a headstart, the company still is much larger than either of them. By focusing on these categories that are not in direct competition with Amazon (except for P&A where they seem to be about at the same level), therefore, it differentiates eBay from Amazon and other larger online retailers.

      But like you, I am also wondering if it is working as well as they thought. GMV needs to stop shrinking, especially when they claim these enthusiast buyers also purchase in non-focus categories. You can get away with that for a few quarters, but it seems we have heard the same now for over a year. That just doesn’t give me confidence.

      I am hopeful, but I am also cautious and it seems to be investors have similar feelings as the company’s stock price has remained flat.


      But what we’re really focused on is the enthusiast buyer. So enthusiast buyers on eBay shop more than six times a year, spend over $800 and they drive 70% of the GMV on the platform.

      So, when you look at that number, even despite in this macro environment that only declined $0.5 million from last quarter, which was the lowest decline. And when it comes down, it actually moves into mid-value less than 1% churn.

      So most of those move into our mid-value just based on the macro environment, which is actually a very heavy level of spend.

      If you think about our enthusiast buyers, these are people that spend over $3,000 a year. They shop 30 times on the year, 90% of them shop in a focused category. So, it’s absolutely where we should be focused from a buyer perspective.

  2. Long Time Seller says:

    I think he misspoke. (wouldn’t be the first time).

    I do think ebay has pulled away from using “high value” buyer in public, probably because it opens them to criticism (“So, everybody else is low value and ebay doesn’t care about them?. ebay only cares about the rich!”….I saw a lot of those statements when ebay first mentioned “high value” buyer. I’ve also noticed ebay rarely talks about “the Verticals” anymore, probably because so many people weren’t sure what ebay meant by that term…so now it’s “Focus Categories” (Although they still talk about Vertical changes (changes to specific focus categories) and horizontal changes (changes effecting most of all)

    I agree….the Focus Category strategy has some merit, but whether ebay can actually implement it successfully remains to be seen, and the GMV numbers , the fact that it has now been more than a year since ebay added a new Focus Category…and that ebay seems to be grabbing at straws when it comes to increasing rate take rather than sales velocity, all that suggests that. however much merit the strategy has in theory, ebay’s implementation is leading to some skepticism.

    The real question for ebay could become: just how patient are investors willing to be? At what point will they insist on seeing numbers that indicate a clear win, rather than the muddy waters we’ve been seeing, and the promises that are beginning to ring a little hollow for some.

    I hope ebay can start to really grow the GMV and improve the site , but we need to see some real positives pretty soon.

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