EBay Expands Merchandise Mix With Shopping.com Deal

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Online auction platform eBay Inc.'s planned $620 million all-cash purchase of comparison-shopping service Shopping.com Inc. is intended to expand its buyer base as well as its merchandise offerings from the old and offbeat to the new and in-season.


Once cleared in the third quarter by shareholders and regulators, the deal will let eBay customers buy via auction, fixed-price and find-compare-purchase methods.


"They're trying to extend their leadership role as being the primary way in which online buyers and sellers connect," said James Lamberti, vice president of comScore Marketing Solutions, San Francisco.


The June 1 announcement comes six months after eBay paid $415 million in stock and cash for Rent.com, a Santa Monica, CA, real estate firm. Shopping.com, Brisbane, CA, will retain its name and staff as an independent unit within eBay.


EBay has 147 million registered users worldwide, half in the United States. Its purchase of Shopping.com will upset strategy at shopping portals like Amazon, Yahoo, AOL and MSN as well as other comparison-shopping services like Shopzilla, NexTag and PriceGrabber.


The new audience was a key consideration in the acquisition. EBay sellers will be able to tap a fresh set of buyers on Shopping.com, particularly those dealing with in-season products.


"EBay's sweet spot is the far end of the bell curve of a product's lifecycle, so people go to eBay to look for things that are used, vintage, out of stock or items that are hard to find or high demand," said eBay spokesman Hani Durzy in San Jose, CA. "But it's the new, in-season products where people turn to comparison-shopping engines like Shopping.com. We believe that this acquisition will be especially interesting for eBay sellers who are beginning to experiment with their new in-season products."


Another appeal of the deal is the access to consumer-generated opinions via Epinions, a Shopping.com sibling service. More than 400,000 reviewers have produced about 2 million reviews to help consumers make purchasing decisions based on their experiences.


The eBay/Shopping.com combination is a double-edged sword for sellers, said Scot Wingo, president/CEO of ChannelAdvisor Corp., a provider of auction and marketplace management software and services. His Morrisville, NC-based company's clients include IBM Corp., Sears, Roebuck and Co., Dell Inc., Motorola, The Sharper Image and several small to midsize business sellers on eBay.


"For smaller sellers that have no need to diversify their revenues, this opens a new channel for them with minimal additional effort," Wingo said. "For larger sellers who have started with a channel diversification strategy, this means there is one fewer different channel for them."


An estimated 13.8 million consumers visited both eBay and the Shopping.com sites in April, according to comScore Media Metrix. Twenty-two percent of eBay visitors also went to Shopping.com sites in that month while 61 percent of Shopping.com sites' visitors visited eBay in April.


EBay attracted 63.82 million unique visitors in April, a 6 percent increase from 60.1 million in the year-ago period, according to comScore Media Metrix data. The Shopping.com sites in April received 22.63 million unique visitors, up 15 percent from 19.64 million. Both eBay and the Shopping.com sites reached 71 million consumers in April.


The world's No. 1 auction site, eBay last year posted net income of $778.22 million on revenue of $3.27 billion. This was up from 2003 net income of $441 million on revenue of $2.16 billion. Shopping.com last year recorded a net loss of $5.5 million on revenue of $99 million, which was up 48 percent from 2003. The loss was attributed to a non-cash dividend.


The acquisition of Shopping.com takes the No. 1-trafficked comparison-shopping brand off the stock market. Shopzilla.com sites, including BizRate.com, are in second place at 13.97 million unique visitors, based on April data.


Yahoo Shopping, NexTag.com, Shop.com, Google Inc.'s Froogle and PriceGrabber are third through seventh. Their unique visitor numbers for April, respectively, were 11.54 million, 8.65 million, 5.98 million, 5.84 million and 4.72 million.


Data from comScore Media Metrix show that the comparison-shopping category drew 50.36 million unique visitors in April. They include U.S. consumers at home, work, college and university locations. This means that a little less than one-third of the estimated 164.96 million U.S. consumers online are comparing products and prices before ordering products.


The message is clear: Retailers wishing to remain relevant in e-commerce must acquiesce in the many ways that the picky and price-sensitive shop today. As eBay realizes, a new marketplace and a fresh audience are a must as Internet penetration reaches ubiquity nationwide.


"We think this acquisition will help us meet the evolving needs of our community of sellers by providing access to a new channel for selling and a new set of buyers," Durzy said.


Mickey Alam Khan covers Internet marketing campaigns and e-commerce, agency news as well as circulation for DM News and DMNews.com. To keep up with the latest developments in these areas, subscribe to our daily and weekly e-mail newsletters by visiting www.dmnews.com/newsletters


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