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eBay Buys GSI Commerce For $2.4 Billion and eBay Sellers Look Around Nervously

Hi Gang,

“Ooohhh, so THAT’S why our fees are so high,” exclaimed eBay’s seller community today after eBay announced that it is acquiring GSI Commerce for $2.4 BILLION in cash and debt.  Hey, I’m an optimist – at least they didn’t buy Skype again!

This is a pretty interesting purchase if you ask me.  A lot of you have never heard of GSI Commerce, so let me edumacate you.  Whereas eBay is a selling and payments platform (Paypal), GSI is just about EVERYTHING else.  GSI is a giant logistics, warehousing, software, marketing, customer service, e-commerce company.  The company is not very old – in 1999 GSI reported revenue of $5.5 MILLION (yep $5.5 million to $2.4 BILLION in 12 years – not bad!).  GSI does not deal with the little fish – they deal with the big fish – companies like the NFL, Ralph Lauren, Adidas, Dick’s Sporting Goods, Mattel, and Levi’s.

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“Kevin, what does it all mean for eBay sellers?” you scream.

Well, Ive got several thoughts on this and what it could mean for eBay and it’s sellers.  Here we go:

1.  eBay just bought a company that does everything that eBay does not do.  So eBay just became a complete end-to-end solution for large businesses.  What this likely means for eBay is that you will now see many, many more large companies begin to sell on the platform.  Let’s face it – eBay and large retailers really don’t get along too well.  eBay’s buyer base expects brand new, in season merchandise at a serious discount to retail. You can guess what big retailers think about that idea.  This move just opened up a whole bunch of doors to retailers that eBay never had before because they just bought the entire platform that these companies use for e-commerce.

Effect for eBay: Positive – larger companies, more in-season new merchandise, direct access to off-season discounted merchandise.

Effect for eBay small sellers: Negative – you’re just getting shoved further to the back of the bus while the new companies will be given substantial competitive advantage over you.

2.  eBay kinda just became Amazon.  What I mean by that is that eBay is now free to purchase, warehouse, and ship goods.  I would not at all be surprised if we don’t begin seeing “Sold By eBay” logos or even eBay id’s.  Personally I’m hoping that, once eBay actually tries to be a seller, they’ll stop attacking the seller community for “faster service, free shipping, more customer service”.  In other words, once they eBay does it themselves, maybe they’ll get how hard it all is.

Effect for eBay:  Positive.  eBay has never purchased, warehoused, or shipped a single good. If eBay were undertaking that task on their own, I would short eBay stock and prepare for glory.  However, GSI appears to be pretty good as these functions, so eBay will come out fine on this idea if they choose to.

Effect for Sellers:  Negative.  If you think eBay gave Buy.com preferential treatment, just wait until you see eBay’s deal with…eBay.

3.  eBay MAY be going after Amazons Fulfillment By Amazon program.  FBA requires sellers who opt in to send their product to an Amazon warehouse and then Amazon ships the goods when they sell.  I can easily picture a scenario where sellers will need to store product at eBay warehouses in order to retain “Top Rated Seller” status.

Effect for eBay:  Neutral.  eBay would certainly charge fees, as Amazon does, to store and fulfill product. However, FBA cannot be an easy thing to control and implement, even for Amazon.

Effect for Sellers:  Neutral.  Many eBay sellers would freak out if eBay required them to store product at eBay for preferred status. As an FBA seller myself, I can say that the burden of warehousing, customer service, and shipping product is a tremendous one for any sized seller, and using FBA allows me to not worry about any of it.

All-in-all, I think every eBay seller needs to keep both eyes on this move by eBay.  I think, in the mid to long term, this move could mean more for the future of eBay than anything they have ever done save for their purchase of Paypal.

Kevin Harmon

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About the Author: Kevin Harmon

Kevin Harmon is a freelance e-commerce business consultant and blogger. He is the former CEO of Inflatable Madness, LLC, one of the largest DVD and CD sellers on eBay and Amazon, and Red Shorts Media, LLC, which operated multiple e-commerce media buyback websites.

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