eBay Inc. (NASDAQ: EBAY) reported strong results for the second quarter of 2020 with an 18% increase in revenue and a 63% growth in adjusted EPS, which were better than its expectations. The positive trends seen during the quarter allowed the company to raise its guidance for the full year.
The company also witnessed some important developments during the quarter such as the sale of its Classifieds business and the rollout of managed payments which provide opportunities to drive growth going forward.
eBay admitted that the neglect of its core expertise and its focus on unprofitable areas has led to loss of market share in the past. The company also acknowledged that its failure to adapt to the fast-changing needs of customers also hindered its growth. eBay believes there is massive potential to be taken advantage of in the near future.
COVID-19 impact
While the coronavirus pandemic disrupted the operations of several businesses, it has benefited e-commerce companies by pushing more people to online shopping due to shelter-at-home orders and other restrictions. This shift in consumer behavior benefited eBay during the second quarter by fueling growth in volume and new buyers.
The company saw strong volume growth across most of its major markets leading to an increase of 26% in gross merchandise volume (GMV) while the number of active buyers rose to 182 million. The Marketplaces business saw a huge pickup in traffic, buyers, conversion, GMV and revenue as the company benefited from the shift to online from offline.
“It’s clear that stay-at-home mandates and a more restrictive offline shopping environment drove more buyers online. While it’s extremely early in the life cycle of these newly acquired buyers, in the second quarter, we saw increasing engagement. Repurchase rate, frequency, multi-category shopping and migration to the app are all significantly higher than previous cohorts. And our retained buyer base is purchasing with a higher frequency compared to pre-pandemic levels.” – Andy Cring, Interim CFO
The 5% year-over-year growth in active buyers was driven by both new and reactivated buyers and the company witnessed high levels of engagement on its platform during the quarter. eBay stated on its quarterly conference call that the current strength and demand is providing an opportunity to attract and retain new buyers and sellers and that the company is making investments to position itself for long-term sustainable growth.
Managed payments
During the second quarter, eBay’s managed payments initiative reached a new milestone as the operating agreement with PayPal (NYSE: PYPL) ended. Despite the expiration of the agreement, PayPal will continue to be a payment option for buyers on the eBay platform.
eBay can now scale managed payments globally, giving more choice in payment options to buyers and simplifying operations for sellers and the company has started migrating sellers in the UK, Australia and Canada on payments. eBay expects to transition the majority of its sellers over the next 18 months and remains on track to realize revenue of $2 billion in 2022.
Outlook
eBay is seeing varied trends in its business performance across geographies, with countries like Germany and Italy witnessing a moderation in GMV growth after reaching peak levels in April. Meanwhile, the US has seen steady growth through July.
The company expects to see growth moderate across the major part of its portfolio throughout the third quarter depending on the improvement of consumer mobility. eBay also expects to see revenue growth in managed payments.
Click here to read the full transcript of eBay Q2 2020 earnings conference call