Thursday, 31 March 2011

The Giant that buys Giants- Is eBay about to change the eCommerce market again

Founder and Chief Executive Officer, GSI Commerce – Michael G Rubin

Yesterday eBay rocked the online shopping world by announcing the acquisition of eCommerce company, GSI commerce, for the staggering amount of $2.4 Billion. The acquisition is expected to close in the third quarter of 2011. / By Arie Shpanya, CEO, imOnline

So who is GSI Commerce- and how come we haven’t heard of them before?

GSI has been successfully operating bellow the radar of most of us, but is a veteran player of the eCommerce industry with solid operations in product and service.
Founded in 1995 by Michael Rubin, GSI provides a high end ecommerce software platform, and maintains various other solutions that include: customer care, fulfillment, inventory management, and IT management for top tier retailers. Most of GSI’s 180 clients rank within the Internet Retailer Top 500 (Among them you’ll find: American Eagle Outfitters Inc., Bath & Body Works and Godiva Chocolatier, Zales, iRobot, Timberland, Ace Hardware, Sports Authority, Dick’s Sporting Goods, RadioShack, and Toys “R” Us).

GSI also holds and operates its own websites, including Rue la la, which was acquired by GSI on Oct 2009, at a value of $350m. The deal includes the website

Other sites include ShopRunner (a direct competitor to Amazon’s Prime), and GSI also runs its own affiliate marketing network called pepperjam

What’s in it for eBay? Hint: Gain back its leadership status from Amazon

So the 2.4 billion dollar question is what’s in it for eBay. It’s important to note that in recent years eBay’s been on a serious shopping spree: On

December 2, 2010 eBay announced the purchase of the Local shopping engine Milo for $75 Million. Another recent investment: $22.5M (by its subsidiary company Paypal) in open source eCommerce software Magento. The investment was revealed last month (March 2011) in which eBay gained a 49% stake hold of Magento ownership.

During all of these acquisitions Amazon hasn’t exactly been sitting on the fence either. Amazon purchased leading shoe retailer Zappos for $1.2 B back in November of 2009. The following year, in November of 2010, it shelled out $545 million for and

Most importantly, Amazon’s own growth rate is ,3 times higher than that of ecommerce growth as a whole, and Amazon is beating eBay’s growth by 6 times . In just one year Amazon’s purchasing frequency increased by 25%, and its unit growth by 43%. With 130 million active buyers in its arsenal, Amazon revenues totaled over $34.2 billion.

Additionally, on a global front Amazon saw 11-15% of its sales come from the UK, Germany, and Japan, and another 5% from China.

eBay, on the other hand, has suffered as a result of losing SMB merchants while Amazon gained on the 3rd party marketplace (30% of amazon) and through staggering international growth.

So could it be that eBay is realigning its SMB merchants against Amazon and compensating for its pitfalls via mass acquisition?

Amazon figures in the last 3 years were 6 times higher than eBay (Amazon grew by 3 Times when compared to the average commerce growth- 36% annual growth, while eBay only had a 5% growth rate, which highlights its struggle to grow).

Arie Shpanya, is CEO of imOnline, a leading eCommerce solutions provider for SMB’s retailer.

The main challenge SMB’s face when selling online, is the number of organizations, tools and solutions they need to partner with to make it happen. imOnline’s complete solution covers all the functions from Information Technology to marketing including branding, SEO, PPC, supply chain management, inventory management whilst minimizing the cost.

imOnline’s client portfolio includes EZAIR and -417 cosmetics  and various clients in the US, UK and Europe with international eCommerce activity. You can click on those links to see their case studies. As a performance-based eCommerce agency, they seek to bring each merchant from 0 to online in the shortest time possible.

Arie also acts as a consultant to numerous Capital investment firms (such as: Foxhill Capital Partners, Shumway Capital Partners, Farallon Capital Management) and is additionally an official consultant on eBay, Amazon and eCommmerce trends to Coleman Research Group (Coleman Research Group is an expert network that connects top institutions with leading industry experts).

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