How eBay Will Double Sales in 3 Years

Adam is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

eBay’s (NASDAQ: EBAY) stock has been on a tear since the company’s analyst day last week. With one analyst upgrade and several others updating their price target, investors are chomping at the bit to get a piece of the action.

So what exactly were the magic words that eBay said at its analyst day to make everyone so excited about the company’s future? Well, for starters the company expects to double its sales over the next three years to $300 billion. But what’s more exciting to analysts, or at least to me, is how eBay actually plans to get there.

Here are some key things the company talked about last week that aren’t getting as much press as the numbers.

Mobile

eBay is taking a mobile first approach. Chief Technology Officer Mark Carges explained, “[Customers] buy twice as much stuff when they use multiple devices.” As online shopping migrates toward mobile devices, eBay is looking to improve the user experience and reduce friction that would prevent shoppers from making purchases.

Additionally, the company demonstrated its new customer-to-customer mobile selling app. The app provides many features that make listing items through a smartphone or tablet significantly easier such as pre-filled descriptions and price guidance.

The goal is to convert eBay buyers into sellers. Last year, first-time listing increased 67%. Since the eBay flagship website derives most of its revenue from seller fees, the more users it can turn into sellers, the quicker revenue will grow.

The PayPal division, too, is looking to grow through mobile devices. It plans to continue implementing features on its mobile app to reduce customer friction at signup. Its most recent development is allowing users to take a photo of their credit card to sign up for an account. Analyst Michael Graham of Canaccord Genuity seemed genuinely amazed by how simple the process is and how convenient the PayPal service is.

Local

eBay is also looking to extend its mobile reach to a local level. Aside from continuing to roll out partnerships with brick-and-mortar stores to allow customers to pay for goods using PayPal, it’s taking further steps to make the local shopping experience faster and more convenient.

eBay shoppers in select metropolitan areas will soon be able to use a new service called eBay Now. The service provides same-day (usually 1-hour) shipping for goods sold at local stores like Target and Macy’s for $5. The service uses the GPS on users’ phones to find where to deliver the items, creating even less friction for the customer.

eBay Now faces competition from Google’s (NASDAQ: GOOG) new Shopping Express service, which it’s starting in San Francisco. Google’s and eBay’s valet shipping services have a lot of overlap, but the pricing structure differs. Google plans to charge $79 annually, so unless customers make more than 16 orders per year, eBay Now provides a better value. eBay also sports the first mover advantage, and will soon be available in Chicago and Dallas well before Google.

eBay recognizes that 90% of shopping occurs offline, and 75% happens 15 miles from one’s home. eBay plans to leverage its RedLaser mobile app, which allows users to scan barcodes and browse information about products, to make the in-store and local shopping experience better for its users.

RedLaser could be used to tell users what aisle a product is located on, and if another store has a better price. eBay is simply looking to engage its users. Providing users with helpful information, will also provide eBay with some useful shopping data it can use for its operations.

eBay plans to harness its PayPal platform on mobile to make local shopping better as well. Projects in the works include PayPal check-in -- allowing customers to accrue loyalty rewards -- as well as letting people pay at restaurants without having to wait for the check, and topping up parking meters when they’re about to expire.

International

CEO John Donahoe said near the start of the company’s presentations, “eBay Inc. is no longer just an e-commerce company. We're a global commerce platform.” eBay currently generates 61% of its business internationally, focusing largely on developed markets. This year, the company will begin to tackle the 1 billion users online that eBay doesn’t yet serve, and expects 40% of new users will come from emerging markets.

Its newest international focus is Russia. Last year, Russians bought $400 million of goods on eBay’s English-language site generating about 30,000 orders every day. The company is creating a Russian-language site along with a daily deal app for local Moscow retailers. Next week, eBay will launch a TV ad campaign in the country to promote its new products.

Expanding operations in Russia is the first big step the company is taking in the big four BRIC economies. India and China are likely its next endeavors as the company just recently received a payments license in India and is still awaiting one in China. The company believes India may develop more slowly than Russia, and while it shows strong exports from China, the company will work to increase the number of imports into the country using its platform.

Brazil, however, will likely be the toughest of these markets for eBay. MercadoLibre (NASDAQ: MELI), of which eBay owns 18%, has a stranglehold on the South American e-commerce market. Its websites average over 30 million unique visitors per month in the region. That’s three times as many as its next closest competitor Amazon.com.

The company operates analogously to eBay, including its online payment processing division MercadoPago. I’d be surprised if eBay attempts to claim a stake to the burgeoning Latin American market again. The MercadoLibre brand has only grown stronger since its last attempt.

No matter where eBay decides to expand internationally, the process is the same. It wants to help users bring more global inventory online through local-language websites and helpful mobile apps. It’s working to expand its global shipping platform to make it easier for sellers to reach global users. And it wants to bring a local shopping experience to users as well through partnerships with brick-and-mortar stores.

How to double sales in 3 years

eBay outlined a rock-solid growth plan last week, demonstrating loads of new features, projects, and initiatives. It’s important for me, as an investor, to understand how management plans to reach its goals. (Hint: it should be important to you too.)

I believe that this company’s management, under John Donahoe, has the ability to execute this well thought out growth plan, and that the company’s sales growth expectations are certainly within reach. After all, it made some lofty projections at its analyst day in 2011, and has met or exceeded them so far.


Adam Levy has no position in any stocks mentioned. The Motley Fool recommends eBay, Google, and MercadoLibre. The Motley Fool owns shares of eBay, Google, and MercadoLibre. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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