Can eBay Notch Up Higher Revenue Growth Than Amazon's Retail Arm This Holiday Season?

For the last 15 quarters, Amazon’s retail revenue growth has averaged 26.3% versus eBay’s 6.5% (on a year-on-year basis). However, the last four quarters have seen significant weakness with Amazon’s retail revenue growth averaging 17.8% versus eBay’s 2.6%. Notably, Amazon retail’s Q3 2019 revenue growth came in at 22.2% versus eBay’s flat revenue figure for the period.

While Amazon management had talked about a weakness in Q4 international revenues due to Diwali festival sales in India getting split across Q3 and Q4 as well as due to sales taxes in Japan, eBay’s performance is expected to improve due to the efforts of activist investor Elliott Management. eBay has been building strong traction in its payments business and expects to see an exponential growth going into next year. Additionally, we note that there is a discernible trend of Q3 growth rates influencing Q4 growth rates. Using data since 2015 in our interactive dashboard, we find that  eBay’s revenue growth could inch ahead of Amazon retail’s revenue growth in the coming holiday season (Q4 2019)

Understanding Trends In Revenue For Amazon’s Retail Business vs. eBay

  • Amazon retail’s revenue show a distinct trend, of rising through the year to peak in Q4. This trend has been visible in North America as well as Internationally over the years.
  • eBay’s Revenue have also trended along the same lines as Amazon’s Retail business. The key difference for eBay is that the company is in the process of exiting the exclusivity with PayPal and setting up its own payment gateway.

Details about the trends in quarterly revenues for Amazon’s retain business and eBay since Q1 2015 are available in our interactive dashboard.

Comparing historical y-o-y change

  • After peaking in the first half of 2018, revenue growth rates for both retailers have steadily trended lower on account of the trade war, rate cuts by the Fed as well as the expected impact on consumption.
  • While Amazon reported a recovery in this figure for the last couple of quarters, eBay’s growth fell to 0% in Q3 2019.
  • Interestingly, the difference in growth rates for Amazon Retail vs. eBay has remained above 10% for each of the last 15 quarters.

Comparing Q3 revenue growth vs Q4 revenue growth

  • For Amazon: The trend in Q3 revenue growth over the years appears to be getting reflected in Q4 revenue growth, with Q4 revenue growth moving in tandem with Q3 revenue growth.
  • For eBay: The trend in Q3 revenue growth over the years appears to be less prominent in Q4 revenue growth, with Q4 revenue growth not necessarily moving in tandem with Q3 revenue growth.

Running regression analysis on historical revenues for both companies points to eBay inching ahead of Amazon in the coming holiday season in terms of revenue growth

  • We regress the revenue growth of the two companies with Q3 revenue growth as the independent variable and Q4 revenue growth as the dependent variable.
  • We find that the growth rate in Amazon’s retail revenues could actually be lower than eBay’s revenue growth rate. Our actual revenue growth forecast for Amazon Retail and eBay are available in the interactive dashboard

While this change in fortunes for the two companies may be difficult to accept and looks counter-intuitive, we think eBay could have a better Q4 keeping in mind Amazon’s expected international revenue weakness versus a sharp expected growth in eBay’s payment volume.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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