EBay vs. Amazon: A duel to be the plumbing of e-commerce

Summary:EBay's $2.4 billion acquisition of GSI Commerce puts it squarely in the fulfillment business and gives it the retail partnerships to more effectively compete with Amazon.

EBay's $2.4 billion acquisition of GSI Commerce puts it squarely in the fulfillment business and gives it the retail partnerships to more effectively compete with Amazon.

Amazon has been a big headache to eBay with its marketplace and fulfillment services that bring more sellers to its platform. Now that eBay just bought GSI Commerce---one of the biggest competitors to Amazon you probably haven't heard of---the online auctioneer can do four things:

  • Become a partner with massive multichannel retailers.
  • Ultimately extend fulfillment services to eBay sellers.
  • Weave PayPal as a payment option at large retailers via GSI's partnerships.
  • And scale GSI's business in a way that wasn't possible before.

Also: eBay acquires GSI Commerce for $2.4 billion

The GSI purchase---assuming no one swoops in with a better bid---is a no brainer for eBay. The deal could be as smart as the PayPal purchase and put a long line of miscues (like the Skype acquisition) to rest. GSI is the real deal. It operates the back end e-commerce plumbing for Toys R Us---a former Amazon partner---Dick's Sporting Goods, Petsmart, Bed Bath and Beyond and others. The King of Prussia, PA company just off the Pennsylvania Turnpike is down the road from QVC, another massive retailer that's a GSI client. What does GSI have that Amazon doesn't? It's not a competitive threat to retailers and that fact will bring more business to eBay and its units.

"What is common about all of our assets is that we partner with retailers and we do not compete with them, and we believe retailers are looking to partner with someone, not be concerned about competition," said eBay CEO John Donahoe. Indeed, eBay outlined a strategy a few weeks back that revolved around being the glue of e-commerce. In this vision, eBay can sit in the middle of offline, mobile and Internet commerce as an enabler. GSI fits this mold well.

Amazon and Target plan to break up a fulfillment and infrastructure deal for one obvious reason: Amazon will ultimately compete with Target. EBay can go to Target and land some business for its GSI unit. And now GSI can give eBay a conversation starter to offer PayPal at point-of-sale terminals at some of GSI's 180 e-commerce services customers. It's a nice big circle. Simply put, GSI and eBay can open a lot of doors for each other.

It increasingly looks like eBay has a nice strategy as an e-commerce enabler. GSI only adds to its prospects. The eBay renaissance looks increasingly likely as long as the company can execute.

Related:

Topics: E-Commerce, Amazon, Browser

About

Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic. He was most recently Executive Editor of News and Blogs at ZDNet. Prior to that he was executive news editor at eWeek and news editor at Baseline. He also served as the East Coast news editor and finance editor at CN... Full Bio

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