eBay today announced that it was purchasing GSI Commerce, an online marketing services company, for $2.4 Billion, a 50% premium over the current share price. According to CNN Money: “GSI’s core business is providing e-commerce infrastructure — e-store technology, payment processing, fulfillment, marketing and customer service — for retailers. Its client roster includes major brands such as RadioShack, Dick’s Sporting Goods, Toys ‘R’ Us and Zales.”
Except for the fulfillment and customer service functions, eBay and its PayPal affilliate already have the capabilities that would be offered by GSI Commerce. As the New York Times explains,
With GSI, analysts say, eBay will be able to create a more robust marketplace for its third-party sellers, who have previously relied on competitors, like Amazon, to manage their orders and online marketing efforts.
“EBay can now cross-sell the services that GSI provides to the thousands of power sellers on eBay,” said Jordan Rohan, an analyst with Stifel Nicolaus. “They are paying a reasonable price to be more competitive with Amazon.”
While GSI had a good-size roster of large companies it served, the low-end fulfillment market (i.e., helping smaller companies ship products to customers) is owned by Amazon. eBay’s bread and butter is the small shipper – we can expect that eBay will use GSI capabilities to serve these customers and offer a real alternative to Amazon. I love the marketplace at work.