EBay’s Purchase of GSI: E-Commerce’s Final CutMarch 30, 2011 – 5:30 pm |
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In news that was a surprise for the timing, eBay moves further into their transition into a traditional fixed-price e-commerce merchant. On Monday, the online auction giant purchased GSI Commerce, Inc. for $2.4 billion in cash and debt. My initial thoughts on the deal were a Bronx clap. eBay had been trying too hard to reach into new technologies like VoIP and found it to be a poor fit for their business model (Skype). The inherent nature of online auction markets looks like a problem to the casual observer. Lawsuits from merchants over copyright infringement is what hurt their bottom line. The recession also affected their revenue stream on one level, as customers grew weary of the small fees. They also grew weary of broken transactions by untrustworthy sellers. Credibility is job one for consumers still struggling with a tight dollar.
That being said, the move did take a long time. But it’s smart for eBay to solicit more merchants in light of their past legal struggles. This proposal for GSI advances their model to compete with Amazon in the fixed price e-commerce sector. PayPal’s emergence as a revenue stream also bodes well for interested merchants. They have a portal to encrypt secure transactions if independent costs are prohibitive. Their outreach will also bring in new consumers to eBay who were put off by the notion of bidding. The deal cannot be completed until the third quarter of this year. An investor hurdle has popped up. Some investors also think that eBay could lose for winning, questioning their capability to invest new capital. This bid is still on the clock.

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