EBay Inc. announced today that it is spinning off its payments arm, PayPal Inc. next year and the two firms will become independent publicly traded companies in 2015. Some global sellers say the move is a sweeter deal for PayPal than eBay. PayPal, they say, is a stronger brand and others add that with the separation, more merchants will feel comfortable accepting PayPal now that it is a separate brand from eBay, which is viewed as a rival to many international e-marketplaces and e-retailers.
“It’s a step they needed to take in order for us to not see them as a competitor,” says Diego Fernandez, a Latin America e-commerce veteran with more than a decade of experience in the region. Fernandez, who has spent his career helping U.S. web merchants reach Latin America consumers, in November is launching his own Latin America online marketplace called Iguama that will deliver Western brands to shoppers in the region. The site will accept PayPal, but he likes that PayPal will no longer be a part of eBay as he sees eBay as a rival to his soon-to-launch business.
“It will allow PayPal to grow faster in the region,” he says. With the two combined, he says there is more of a threat of them using their deep pockets and resources against his marketplace and other online retailers. “They could use their marketing against you and the consumer ends up being an eBay customer,” he says.
Ricardo Flores, marketing director for Wine.com.br, which sells wine and beer online in Brazil agrees. “I believe that it is a relief for many e-commerce startups in Latin America because it is a natural concern to have their transactions received through a system that is owned by a potential competitor,” Flores says. Wine.com.br, No. 46 in the Internet Retailer Latin America 500, dosen’t accept PayPal and grew its web sales 100% in 2013 to reach $58.4 million.
While retailers may know different, in Mexico, at least, many consumers see eBay and PayPal as separate companies already, says Roberto Rodarte, chief operating officer of Mexico-based fashion retailer Gaudena.com, which accepts PayPal among other payment methods including paying at convenience stores and with cash on delivery. About 15% of Gaudena.com orders are paid for with PayPal, Rodarte says.
“As for the customers I don’t think that many Internet shoppers in Mexico know that PayPal was owned by eBay,” Rodarte says. “PayPal is a strong brand among e-commerce businesses in Mexico. It did a good job of building the brand without mentioning that they were part of eBay. I think this initiative is going to help PayPal to grow faster as an independent company.”
EBay has particularly been focused on Latin America in recent months. In May, it launched localized sites in Latin America enabling consumers in 18 countries throughout the region to shop eBay’s online and mobile marketplaces in Spanish and Portuguese using local currencies. The company also in May launched a Portuguese version of its main mobile app, following its launch of its Portuguese-language fashion-only mobile app called eBay Moda 2013. This new site and mobile app enable consumers to access eBay’s entire inventory. EBay’s mobile app now comes in seven languages, including Russian.
In July, eBay followed that push with an Amazon Prime-like shipping program in Latin America. For a $49 annual fee, online shoppers in Colombia, Chile and Mexico can get free shipping for a year on purchases from eBay merchants in the U.S.
At the end of 2013, more than 2 million Latin American shoppers purchased items off the English-language eBay.com using U.S. dollars, eBay says. With the new localization efforts, that number has grown 40% to 50% so far for 2014, eBay says. It adds that the number of items purchased from Mexico is up 30% in the first half of 2014 compared with a year earlier, and 25% of purchases on eBay by a Latin America shopper are made via a mobile device.
However, as with many of its global initiatives, eBay’s marketing efforts in Latin America are closely intertwined with PayPal. Consumers shopping on eBay’s localized sites in Latin America can only pay with PayPal for purchases. The same goes foreign customers wishing to shop eBay.com in the U.S. via eBay’s Global Shipping Program, which lets shoppers in about 60 countries, including China and Russia, buy from eBay sellers on eBay.com. U.S. Stateside sellers ship the goods to a warehouse in Kentucky, where eBay takes care of getting parcels to the foreign shopper. That close-knit relation could make global initiatives complex for both companies when they separate.
Charlie Hollander, owner of Gemstoneking.net, a U.S.-based online jewelry retailer that sells mainly to international shoppers via marketplaces including eBay and Amazon, says PayPal being a part of eBay builds trust with global shoppers coming to the marketplace. “The PayPal name gives a lot of confidence to eBay buyers so this might become a problem in the future,” he says. “My first reaction is that it is a good thing for PayPal and for e-commerce in general. I am not sure that it is good for eBay. In the future this could have a negative impact on the sales on eBay.”
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