The biggest advantage to the online shopping stores over brick and mortar stores is that they do not face any barriers when targeting customers in any part of the world. They are just one click away from their target customer. However, the business heavily depends on an effective delivery system.
The big names in this industry, like eBay Inc (NASDAQ:EBAY), Amazon.com, Inc. (NASDAQ:AMZN), Wal-Mart Stores, Inc. (NYSE:WMT), are nearing saturation in the U.S. market. The key to their successful survival for these big players lies in their ability to increase their international presence.
eBay Inc (NASDAQ:EBAY) is taking steps to increase its international market share
Source: eBay – Financial Releases
In the light of continued transition from print classifieds to online classifieds, eBay Inc (NASDAQ:EBAY) is leveraging the shift in market dynamics by adopting an aggressive growth strategy. Classifieds are now becoming the preferred e-commerce format worldwide and hence, represent an attractive market.
Recently, the e-commerce giant bought two leading Belgium online classified websites, 2dehands.be and 2ememain.be, as the company continues to pursue its international growth through acquisition under its Marketplace segment. The company has also restated regarding its international expansion strategy that it plans to follow it, which it has done so with its previous investments in India and now in Germany.
eBay Inc (NASDAQ:EBAY)’s motives behind the acquisition of these sites is to increase its presence in the European markets. Even at present, a major chunk of eBay Inc (NASDAQ:EBAY)’s sales turnover comes from the international market. Also, it makes the company less dependent on the U.S. market for generating its sales, should the U.S. economy be hit by financial crisis in the future.
The two relatively popular websites will form part of the Classifieds group, and attract traffic of 5.5 million unique visitors on a monthly basis. This accounts for approximately 50% of the population of Belgium.
eBay Inc (NASDAQ:EBAY) Classifieds Group further plans to spend more on the development of the local Belgian business, developing the platforms to deliver a faster pace and be more intuitive for the active users. In addition, it is a complement to the eBay’s existing expertise in creating leading mobile platforms. In the light of the huge upside for mobile growth for 2dehands.be and 2ememain.be, the development of novel mobile technologies will be the target of the company in the future as well.
Last month, eBay secured a multi-year contract from SCA for fulfilment, order management, freight and customer care solutions in the U.S. and Canada. This contract is likely to result in higher revenues for eBay in the coming years.
The company generated a price return of 32% in the last year, reflecting the confidence that investors place in eBay to register higher earnings from the strategies they are pursuing.
Earlier this year, Amazon.com, Inc. (NASDAQ:AMZN) also took further steps to expand its global presence. The company expanded its global application distribution to nearly 200 countries which include Australia, Brazil, Canada, Mexico, India, South Africa, and South Korea. Now, the registered developers who want international distribution will have their apps automatically made available for download.
Developers around the world are earning huge amounts and continue to experience strong user engagement through Amazon Appstore. The success is primarily driven by Amazon’s large customer base and industry leading e-commerce features such as one-click purchasing, Amazon.com, Inc. (NASDAQ:AMZN)’s APIs for In-App Purchasing (IAP), A/B Testing, and GameCircle. A recent survey disclosed that GameCircle-enabled mobile games earned 83 percent more average revenue per user, or ARPU, than non-GameCircle games.
Although the significance of international business expansion is growing, Wal-Mart Stores, Inc. (NYSE:WMT)’s U.S. business still makes up for more than 75% of its operating income. In late 2012, Wal-Mart Stores, Inc. (NYSE:WMT) announced its three year plan to open up 100 stores in China, out of which 30 stores will be opened in 2013. Wal-Mart also plans to spend approximately 500 million RMB to remodel 50 existing stores in order to present a better shopping experience for customers.
The company will also invest in building more distribution center networks. A new distribution center in Wuhan will enhance the network capability. Furthermore, improvements to cold storage warehouses in Shenzhen and Guangzhou will improve customer services, enhance food safety and quality and help reduce costs.
Final picture
Keeping in view the international business expansion that eBay has embarked on; in my opinion the company will be able to increase its customer traffic throughout the world – the driving factor for its sales turnover. Hence, shares of eBay should be purchased.
However, the return will take the form of price appreciation, as eBay does not have a history of paying out dividends.
With the domestic business of Wal-Mart nearing its maturity, the company increasing focus on undertaking expansion in China can be quite fruitful in the coming years. This can help boost its revenues and decrease its dependence on U.S. China is a huge economy and one of the fastest growing as well. Wal-Mart’s focus on China is likely to provide positive higher return to the investors. Also, the company expects to increase its dividend by 18% in 2013. Hence, I would recommend buying shares of Wal-Mart.
Awais Iqbal has no position in any stocks mentioned. The Motley Fool recommends Amazon.com and eBay. The Motley Fool owns shares of Amazon.com and eBay. Awais is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article Is eBay Exploiting this Shift in Industry Dynamics? originally appeared on Fool.com is written by Awais Iqbal.
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