eBay SWOT Analysis

Yosef Cohen is a Junior Financial Analyst at I Know First.

eBay SWOT Analysis

  • eBay’s second quarter earnings beat expectations
  • Revenue has increased year over yearebay logo
  • SWOT Analysis
  • I Know First is bullish on EBAY

eBay (EBAY) is the number one auction site in the world. eBay’s second quarter earnings have surpassed predictions causing its stock price to rise to the highest it has been since eBay and PayPal split.

eBay reported revenue of 2.23 billion dollars for the quarter. This is a 7% increase year over year. That is also 43 cents per share which beat analysts’ expectations of 42 cents. These earnings shows how eBay performed well and will likely continue to do so in the future.

Here is the eBay SWOT analysis:

Strengths

  1. Brand Recognition: eBay is known as the best auction site in the world and it is instilled within people that if they want to sell something they should use eBay.
  2. Customer Base: There are over 162 million users on eBay. This creates vast advertisements for sellers and small businesses which snowballs into attracting more users to the site.
  3. No Competition with Merchants: eBay doesn’t directly compete with merchants. It just takes a fee from each sale which makes it invulnerable to most competition.
  4. Global Shipping: eBay now has global shipping which connects buyers from different countries. This allows almost any buyer to buy from any seller and creates a larger web of commerce.
  5. Acquisitions: Recent acquisitions such as Ticketbis and SalesPredict expand eBay’s markets and reduce competition.
  6. Feedback: Feedback on eBay allows for more trust between buyers and sellers and prevents fraud. It is a subconscious decision in each purchase whether or not one can trust this name on a screen and feedback placates that fear.
  7. Eclectic Selling Options: Sellers can choose how they’d like to sell their goods. Whether they choose an auction, set buying price, accepting offers, etc., is entirely up to them. This attracts more sellers to the site as the method of selling is entirely up to them.

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Weaknesses

  1. Counterfeits: There is a massive problem with fake products being sold on eBay. Luis Vuitton sued eBay for 61 million dollars as 90% of its products on eBay were fakes. No matter how hard eBay tries to crackdown on counterfeits there will always be more and buyers fear this.
  2. Hackers: There are also people who probe eBay to swindle account and credit card information out of unsuspecting buyers. This also harms the brand along with counterfeits.
  3. Shutdowns: Once in a while eBay crashes which causes a large loss in revenue while the site is down. As technology advances this happens less often.
  4. Online Sale Issues: The product’s quality can’t be controlled. Buyers can receive faulty products and this reflects negatively on eBay. There’s also no hands on buying experience which adversely affects trust and leads to less sales. Waiting for delivery also stops buyers.
  5. Bidding Process: eBay bidding always follows a similar pattern. Barely anybody bids on a product until the last 5 minutes when it will be too late for others to bid. This causes frustration to those who bid earlier in the auction and thought they would’ve won. It also causes the price to not be driven up enough if everybody is waiting for the last few seconds to bid.

Opportunities  

  1. Further Acquisitions: eBay has acquired many smaller companies in the past, so it will likely continue to do so to gain market share of online sales and expanding its customer base.
  2. Expanding Markets: Both India and China are seeing an increase in wealth. This allows for more customers in foreign countries which is what eBay is working on. eBay is also working on further market penetration in the US and Western Europe. This is all aided by the eBay mobile app which allows more convenient use.
  3. Amazon Prime: As Amazon Prime membership prices increase, eBay will see more consumers switch over to the fee-free services eBay offers.
  4. Stores Moving to eBay: Stores are starting to utilize eBay’s advertising capabilities to reach customers they could have never reached before. Yearly, the amount of stores that put their products on eBay increase.
  5. Lowering Small Item Fees: eBay charges up to 11% of revenue made on small items. If eBay were to lower their fee, more sellers will put up smaller items which will lead to more sales.

Threats

  1. Low entry barriers in the industry: Companies like Etzy and Bonanza offer the same services for eBay with a smaller fee to the seller. This drives down the number of sellers using eBay. Other companies are stronger in other countries as well which hurts eBay.
  2. Foreign Charges to Sellers and Buyers: eBay can’t control fees charged for shipping and using credit cards on their site. eBay doesn’t earn any of this money but it does deter buyers and sellers.
  3. Amazon Growth: Amazon is constantly expanding their products being offered. It also guarantees quality goods unlike eBay. More consumers could move to Amazon to buy better goods but for a more expensive price.
  4. Seasonality: eBay sees a large increase in use during the holidays which create weaker months in revenue.
  5. Illegal Activities: As long as fraud and hackers live on eBay, there will be some doubt in customers’ minds whether they should buy from eBay. As technology and security advance, so does the ability to steal information and make more convincing counterfeit products.

ebay vs. amazon

Forecast:

I Know First is a FinTech company that created an advanced state of the art algorithm based on artificial intelligence and machine learning to foresee market performance for more than 3,000 markets including stock forecasts, world indices, commodities, interest rates, ETFs, and currencies. In essence, the algorithm generates a signal and a predictability indicator. The signal is the number at the center of the box. The predictability is the figure at the bottom of the box. At the top, a particular asset is identified. This format is standardized across all forecasts the results of these predictions are shown on a daily basis on the I Know First website.

I Know First has a bullish forecast on EBAY for the 1-month, 3-month and 1-year forecast.

In this stock forecast, we can observe that EBAY has a signal of 66.33 and a relatively strong predictability of 0.21 for the month-long prediction. For the 3-month period, the algorithm gave a signal of 88.96 and ratio of 0.23. For the year-long forecast, EBAY has a signal strength of 229.52 and predictability ratio of 0.29. These all predict bullish growth for EBAY in this time period.

Past EBAY Predictions

I Know First has accurately predicted EBAY’s movement in the past. On June 27th, 2016, the I Know First algorithm gave EBAY a bullish signal of 22.15 and a high predictability indicator of 0.24. 1 month later EBAY returned 35.37% as the algorithm predicted.

eBay SWOT Analysis

Conclusion:

Based on the above SWOT analysis, eBay’s strong earnings, and the I Know First algorithm, we recommend investing in EBAY for significant returns. I Know First’s algorithmic analysis EBAY shows a bullish future.  The indicators throughout this article suggest that EBAY will increase to levels that haven’t been seen since it separated with PayPal.


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