EBay builds muscle with GSI purchase

EBay chief executive John Donahoe is stepping up an effort to woo big retailers and challenge Amazon.com through the US$2.4 billion ($3.1 billion) acquisition of GSI Commerce, his largest takeover yet.

The buy will give EBay, owner of the biggest e-commerce marketplace, the chance to add brands such as Levi Strauss and Toys R Us, which are among the 180 retailers whose websites and inventory are managed by GSI.

"It wasn't until 18 months ago that EBay even contemplated calling on larger companies or big brands," Donahoe said from King of Prussia, Pennsylvania, where GSI is based.

"Retailers of all sizes are looking for help about how they can compete in what is increasingly a multichannel world."

Donahoe is working to reverse slumping sales growth and win back customers lost to Amazon by positioning EBay as the go-to partner for retailers wanting to streamline their online, mobile and traditional businesses.

The challenge will be setting EBay apart from rivals on the technology side, such as Oracle - owned Art Technology Group - and warehousing services from Amazon, says Jordan Rohan, an analyst at Stifel Nicolaus.

"This is a business of great complexity," Rohan said. "It's one EBay may or may not have their arms around in terms of understanding the competitive dynamics."

EBay plans to sell GSI's licensed sports-merchandise business, and 70 per cent of online-retail sites ShopRunner and Rue La La, because they aren't central to its growth strategy.

GSI hosts retailers' websites from its data centres, offers marketing services to customers, and stores and ships inventory on behalf of clients.

Donahoe said EBay's acquisition of GSI created a full-service company for retailers that would not also compete with them - a reference to Seattle-based Amazon, which lets merchants sell goods through its site, next to its own rival offerings.

Many retailers have stopped selling on Amazon. In the past five years, Target, Borders Group, Toys R Us and Circuit City Stores yanked their products from Amazon.com as it expanded its own line of goods.

"If you look at what Amazon has been has been doing, this can create a platform that can compete in terms of the services that they offer to sellers," said Ken Sena, an analyst at Evercore Partners, referring to EBay's GSI buy.

The acquisition is the largest for a United States online-services provider in the past five years, according to Bloomberg data.

- Bloomberg