Thursday, October 11, 2012

eBay Inc (NASDAQ:EBAY) Steps into Online Deals Category, Groupon Inc(NASDAQ:GRPN) Under Pressure

eBay Inc (NASDAQ:EBAY) has ventured into what was previously Groupon Inc(NASDAQ:GRPN)’s territory – it has revamped its website and turned it into an online platform for lucrative deals on local services. eBay’s latest offering is known as eBay Lifestyle Deals and has offers like $12 for a one-hour dog-walking service worth $25, $180 for six private gym sessions worth $360, and $50 for a month of Yoga classes worth $110.

The transition from product to service is quite a big one for the e-commerce company, but David Wenig, president of eBay Marketplaces states that since they enjoy a loyal user base, it is only fair to try out new ventures and offer a wider range of services along with the basic ones.

eBay has come up with the new section in collaboration with start-up Signpost. The latter is responsible for the deals with local merchants and putting them up on the Lifestyle Deals Section. There will be more daily deal providers on the website if customer reaction is as per expectations. BIA/Kelsey, an agency that tracks the local media industry, reports that consumers in the US will spend $5.5 billion on online deals by 2016. Groupon Chief Executive Andrew Mason has valued the entire local-commerce market at $3 trillion.

It was Groupon that came up with the daily deal hype back in 2008 and its rise was swift with a whopping revenue of $1 billion annually. Google, Amazon, and Facebook eagerly jumped made their way into this territory but it had a negative impact as customers were not too happy with uncountable deals from so many providers and the growth rate declined. Groupon shares plummeted and Facebook shut down their online deals section, while Google and Amazon are still operating.

eBay Lifestyle Deals is somewhat modeled slightly on Facebook, with a feed that suggests products according to customer preferences by accessing their earlier shopping records. Feeds are customizable so that users can enable the feed to automatically add products. There is a “follow” button that sends relevant notifications to users' News Feeds. This service will soon be available beyond the U.S. as well. Meanwhile, eBay has made other improvements such as making the checkout process more robust and faster by linking a user’s eBay and PayPal accounts and having bigger photos.

Shares of EBAY rose 1.17% to $46.76, while GRPN slumped 4.17% to $5.05.

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