From Sellers To Shoppers: eBay Targets 'Enthusiast Buyers' With Year-End Discounts
As 2024 winds to an end, eBay is desperately trying to goose Q4 numbers with more discounts aimed at driving growth in key performance metrics.
The latest efforts build on the marketing strategy eBay started to deploy in the US in November, offering big discounts to convert casual sellers into "enthusiast buyers" - defined as those who shop on eBay at least 6 times per year, spend at least $800 per year or those who also sell on the site.
The idea was originally cooked up as a way to counter concerns that overall Active Buyer stats had dropped significantly to below Q1 2018 levels.
By designating a subset of the buyer base as "high value enthusiast buyers" and showing growth in that segment due to authentication programs, additional marketing campaigns and other "focus vertical" initiatives, eBay was able to spin the story that there losses were not important because they were mostly those who shopped infrequently or didn't spend much money while the truly "valuable" buyers were sticking around and even increasing.
And that worked, for a while in 2021-2022 when that segment was still growing on eBay with not insignificant help from the larger pandemic ecommerce boom.
But in Q4 2022, the number of "enthusiast buyers" dropped from ~17 Million to ~16 Million - which is where it has stayed since - and that means despite the small amount of buyer growth eBay showed in Q3, the company doesn't appear to be bringing in a lot of new "enthusiasts" to the platform.
eBay was already pulling out the stops to try to "buy" GMV and Active Buyer growth in Q4 by introducing fee-free selling in the UK across most categories in October, sacrificing some revenue in order to get the other stats up.
But CEO Jamie Iannone didn't tell investors on the Q3 call that eBay has also been forced to turn to offering 0% fee promotions through the end of the year in some categories to business sellers as well, in order to try to quell backlash from the C2C initiatives and keep sellers from defecting to Vinted Pro.
Liz Morton
The willingness to give up fee revenue in order to boost GMV and Active Buyers is an interesting strategy - particularly since Iannone had been highly critical of previous CEO Devin Wenig's frequent discounts (paid by eBay) to try to attract more buyers in 2018-2019.
Those 15-20% off flash sales proved to be a double edged sword - once buyers get used to receiving discounts, they'll often wait for a sale before making a purchase, creating "one and done" or only occasional buying patterns.
Wenig's strategy was considered such a failure that Iannone felt the need to explicitly distance himself from it when he took the helm, telling investors in 2021:
We've discontinued legacy tactics that led to low value, infrequent or one and done buyers. Our buyer base is starting to evolve based on this strategy. These high-volume buyers are growing compared to a year-ago and their spend on eBay is growing even faster. This higher-quality mix of buyers increases value for sellers and will lead to improved health of our ecosystem over the long-term...
..This is something that I laid out last July when we talked about the tech-led reimagination as being focused on turning buyers into lifelong enthusiasts on the platform and moving away from the tactics that we had in 2019 what was really just about the number of active buyers even low value buyers or one and done buyers.
However, despite his criticism of those past tactics, it's hard not to see that eBay is increasingly putting themselves back in a similar position with both discounts to buyers and discounted or eliminated fees for some sellers.
Now, eBay is taking it even further, hoping to secure an increase in those critical "enthusiast buyers" by specifically incentivizing new sellers to become buyers too with limited discounts.
In the US, they have been running coupon offers which can only be earned by first selling an item.
But in the UK, it's even easier to pull the "enthusiast buyer" lever since as part of the fee-free selling changes, eBay also forced private sellers into a payment structure which defaults to keeping funds from sales on account where they can be used to pay for future purchases while turning withdrawing to a bank account into a needlessly complex manual process.
Now all they have to do is create a discount offer for the UK which is only available to those paying using their eBay Balance - a balance which can only be obtained via selling items on the platform - and voila, the number of "enthusiast buyers" who also sell on the site magically increases!
According to sellers in the eBay UK community forums, the company has done exactly that on some items with apparently little regard to the fact it may cause confusion for buyers who do not qualify or have a current balance on account.
vintique*violet
Does anyone know why all of a sudden their are discount coupon codes on private sellers listings?
I have not authorised this discount, and just noticed when I listed an item today. Do eBay cover the " shortfall?" Or am I expected to take that hit?...
...Additionally it is showing the below on my listings?
5% off with code BALANCE5
Expires 31 Dec • Max £50.00I have never had this on any listings in all my years with eBay, so why now?
I've noticed this too all week when searching eBay to buy stuff.
I saw 1 item that I liked for £8.00, then saw it said "get this item for £6.50 when you enter BALANCE5 at the checkout"
I thought, Oh go on then !... only when I go to the checkout and entered the code, it said something like "Sorry this offer can only be used with eBay balance"
So this is another gimmick to get people to leave money in their eBay wallets and use this money to buy stuff they like from eBay at a very slight discount providing you checkout and pay with your eBay balance!
I suppose it's eBay's last attempt to try and encourage sales to happen... but this could also cause frustration and disappoint buyers when they get told :- you can only have a discount if you SELL STUFF ON EBAY and leave some money with eBay and pay using your eBay balance...
Just to add, You have to sell on eBay first before you can have money in your eBay balance, so these promo discount codes only work for sellers on eBay not for people who just buy now and again but never sell anything on eBay...
Side note - anyone else think it's interesting that the eBay UK forum will not allow users to include Wenig's name in a relevant discussion while not similarly blocking mention of Iannone? I bet I can guess why.
Several sellers on that community thread wondered why eBay would choose an exclusionary tactic like this rather than a coupon that could be used by all buyers - and the answer is likely as simple as because it benefits eBay to do so.
If the goal is to increase the number of "enthusiast buyers" in Q4, driving repeat purchases within such a short period of time is the most difficult of the three criteria - people who have only bought once or twice through the whole year are going to need a big push to get them to buy four or five more times in a few months, even if that is slightly helped by the holiday gift giving season.
Increasing the amount spent is a little easier, but more likely to be targeted at new consumer goods items or electronics refurbished by authorized sellers - and in the US at least I've seen eBay working in conjunction with those kinds of sellers to offer discounts based on pricing tiers that are definitely geared toward getting people to make higher dollar purchases to "save" more.
But that is a double edged sword as investors are also sensitive to heavy discounting due to the previously mentioned legacy tactics that ultimately hurt the platform more than it helped.
That leaves "buyers who also sell" as the easiest and fastest way to goose the "enthusiast buyer" metric, though it will still come at a cost to eBay since they are funding the discounts and in the UK at least, not collecting Final Value Fees on those sales.
While gaining more "enthusiast buyers" who also sell on the site is a worthy goal for the company (and may even be worth allocating additional marketing or discount dollars), as always the devil is in the details and execution.
If Iannone is confident his fee-free strategy for private sellers in the UK, fee waivers or discounts for some business sellers and discounts to incentivize sellers to also buy will create long-term, sustainable GMV and Active Buyer growth without the significant downside risks he criticized his predecessor for taking, then he should have no problem candidly discussing how much any (presumed) growth can be attributed to these initiatives as well as costs and return on investment on the next earnings call.
If instead he and/or CFO Steve Priest try to present any (presumed) growth as a magical Christmas miracle or proof their "strategy is working" while not disclosing any of that crucial context - investors would be wise to dig deeper, demand honesty and transparency, and take a hard look at the near to long-term prospects for the company if eBay remains under current leadership.
