By Michael Northcott Thursday, 17 January 2013

Stocking fillers bonanza as eBay sales leap 18%

Christmas 2012 really was a big one for online retail, and now internet marketplace eBay has joined the throng. Sales are up by almost a fifth for the period.

Even more of us than usual leant on eBay for Christmas present ideas in 2012, it would seem, as eBay’s Q4 sales rose 18% to $3.99bn (£2.5bn) compared with the same period the previous year. 

The firm puts most of the growth down to an increase in the use of smartphones to buy and sell on the site. Chief executive John Donahoe said: ‘Mobile continues to rewrite the commerce playbook.’ 

Profits at the group fell 62% to $757m, but this is mainly because the firm’s 2011 figures were massively plumped up by the sale of Skype video-calling service to Microsoft. 

In a statement, eBay explained that PayPal, its online payments handling business, was the best performing division. Q4 revenues from the service reached $1.54bn, an increase of almost a quarter compared with the same period the previous year.

In a sense, it is no surprise that PayPal was a big grower. It is ubiquitous on the internet, and with ever increasing numbers of people gaining access to the internet globally as well as an explosion of smartphone users in the West, the trickle of cash into PayPal’s pockets is turning into a river.

Remember, eBay hasn’t always owned PayPal – it was a clever piece of strategy to acquire it. Not only does PayPal sweep up commission on every single purchase made through it across the web, but it is also the main payment method throughout eBay. So eBay collects a fee for every item sold through it, and a fee for every PayPal payment made on there, too. 

eBay has extremely ambitious plans for the PayPal business. Talks with in-store payment hardware companies and some retailers are in progress for creating a way for consumers to pay on their smartphone through a PayPal app for restaurant takeaways and in-store pickups. 

Donahoe said: ‘If we get one per cent of offline retail, it doubles the size of PayPal.’ Investors are obviously rather chuffed with the idea – shares were up 1% in after hours trading today. 

MT’s recommendation? Hold.

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