eBay To Compete With Amazon With GSI Commerce Acquisition

I had always wondered when someone would buy GSI Commerce (GSIC). eBay made the announcement today that they have decided to purchase them in a very interesting move. Like many people, you may be wondering who is GSI Commerce? Well, they are one of the biggest ecommerce powerhouses that you have never heard of. Their client list is enough of an explanation. Now, this is not your typical list of clients they have simply created a marketing campaign or some short term engagement. GSI Commerce hosts ecommerce sites, including the development of the sites themselves. They have big name brands like Polo, Adidas and Timberland, almost every major sporting goods site and one of the most popular ecommerce sites in the world, Toys R Us.

Why is this such a big deal? Part of the answer is in the eBay announcement itself:

Combined with eBay Marketplaces and PayPal, we believe GSI will enhance our position as the leading strategic global commerce partner of choice for retailers and brands of all sizes.

This is the easiest way for eBay to get into ecommerce for larger brands without affecting their auction business. They get a known name in ecommerce and an excellent client list. In addition, they also get the warehouses and distribution facilities that GSI  manages for some of their clients. Yes, they have warehouses which contain either merchandise for their clients or merchandise that they own and sell through their clients stores.

This combination of things could make a huge business for eBay. In order to see why this is a good idea, you have to think of the possibilities. There is the obvious ability to start hosting major ecommerce brands. However, the other parts of the deal really make it interesting. eBay has its own auction site. Match auctions with “discount” items from the merchandise their clients sell and warehouses to distribute from. Very quickly, eBay could become an even larger player in the discount and used merchandise niche because they would own some of the product. Or they could enable the client stores to hook into the eBay auctions so that they can have their own outlet store and auctions.

There is another route that eBay could take as well. They could start moving into hosting smaller stores for small businesses. Granted, the GSI Commerce platform is built to host Toys R Us, but the same technology could be slimmed down to start hosting small business ecommerce sites. This gives eBay a very nice premium option that could put them in even greater competition with Amazon.

Based on the information in the press release, it also looks like the marketing and consulting services companies are also part of the deal. The companies involved are eDialog and TrueAction. These companies really round out the abilities of an ecommerce provider by offering various internet marketing services and a full service agency complete with a photo studio. Yes, there are a lot of pieces to GSI Commerce and eBay will soon own most of them.

Overall, this looks like an excellent deal for eBay as long as they take advantage of the assets they are buying.


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