Ebay returns to its roots as Paypal spins off and Enterprise is sold

Along with eBay’s recent quarterly earnings announcement of revenues up 7%, came word that its Paypal division will be reporting separately (effective July 20) and its Enterprise group had been sold for $925m. As a result, eBay will return to its pre-2002 core business – eBay Marketplaces – which noted a 3% decline in revenue for the most recent quarter.

While much has been written about the Paypal spinoff, the Enterprise group has remained quietly in the background. This group, which handles warehousing and logistics for third-party sellers, was formed in 2012 around a $2.4bn acquisition of GSI Commerce. According it its website, clients include such retailers as Sports Authority, TigerDirect, GNC, Bath & Body Works and eBay. The group is the smallest of eBay’s units with $1.24bn in 2014 revenue, a 6% increase from the prior year, represents about 7% of eBay’s total 2014 sales of $17.9bn.

The company has struggled as more retailers have found it more efficient to run their own online operations versus outsource. In fact, according to publications, the unit suffered a recent blow when Toys R Us, one of its largest customers, ended a near decade-long contract to launch its own US online platform to improve customer experience. However, the company noted it would continue to use eBay Enterprise services in Europe and Canada.

The new owners of eBay Enterprise are a consortium led by Permira and Sterling Partners. Permira, based in London, has investments in several retailers while Sterling Partners acquired Atlanta-based Innotrac in 2014. Innotrac provides fulfilment solutions for e-commerce businesses with clients such as Target, Ann Taylor and Charming Charlie and has warehousing facilities in the US and Europe.

What does the future of the now former eBay Enterprise look like? It could possibly be integrated into Sterling’s Innotrac business to form a larger fulfilment company perhaps reminiscent of a Genco, handling fulfilment, returns management and value-added services. It will compete against quite a few other similar companies such as UK-based Clipper Logistics. It’s a labour-intensive business and automation will be important to keep costs down and remain competitive.

Meanwhile eBay’s Marketplace faces intense competition from Amazon, as well as niche sites like Etsy. According to CNBC, in 2014 the global e-commerce market grew 22%. However, eBay’s marketplace only grew 6.4%. Will this e-commerce pioneer survive today’s e-commerce?