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Toronto, Canada 28 th March, 2011
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Mr. Shinsato Masao Chief Economist
Woori BMO Group Says Ebay Shifts To Major Retail With GSI Deal 28 TH MARCH, 2011 /WOORI BMO GROUP/ Woori BMO Group wealth management executives, have today said that eBay, synonymous with second-hand products, is pursuing a brand new image in retail.
“Through an attempt to push itself into the industry of making orders for major retailers, eBay has agreed to purchase GSI Commerce, the online logistics provider, for $2.4 billion,” said Andrew Williams, Director of Institutional Equity at Woori BMO Group. The takeover, reported on Monday, reveals how the 16-year-old eBay takes on competitors like Amazon.com while trying to counter upstarts like Groupon.
With GSI, eBay will grow into communicating with major retailers outside its network of small power sellers. Among other items, GSI helps handle the websites and internet marketing strategies for Toys “R “Us, Aéropostale, and Kenneth Cole, and its services include payment collection, order control, and customer support.
For example, GSI’s seven warehouses will store products from a retailer, and ship and track product. Managing orders for big retailers will be a significant departure for eBay, which has long avoided the complications of product packaging, delivery and handling returns.
Instead, retailers on its namesake website had to deal with the job on their own or turn to rivals like Amazon. The transaction, eBay’s biggest since its $2.6 billion acquisition of Skype in 2005, said John Donahoe, the company’s chief executive, is a response to the changing market environment.
“What we see today is that globalization is quickly evolving,” he said Monday, in a phone interview. “The gap between offline and online shopping is breaking down at a remarkable pace,” he said, creating a “multichannel climate” that transforms the way merchants conduct business and how they meet their consumers.
eBay has a mixed record of acquisitions — while PayPal was a hit, in 2009, the firm sold Skype after it struggled to achieve a lot of momentum among eBay customers. The firm is selling a cash share of $29.25, a premium of 51 per cent over the trading price of the stock of GSI on Friday.
“It’s certainly a strike across Amazon’s bow,” said Scott Kessler, an analyst with Standard & Poor’s. “Sadly, for eBay, they will still be dogged by the Skype experience to some degree.” Jordan Rohan, an analyst with Stifel Nicolaus, said eBay could compete with Amazon, which also provides delivery services to small companies, by combining GSI’s offerings with the eBay PayPal payment process and its Bill Me Later electronic credit program.
Throughout recent months, the rivalry between eBay and Amazon has intensified as they compete for market share in the United States. Amazon’s gross revenue increased 40% last year to $34.2 billion, while eBay revenues fell 5% to $9.2 billion. In 2010, GSI reported sales of $1.4 billion.
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