eBay Donning Fashion Garb - Analyst Blog

eBay Inc. (EBAY) looks serious about building its position in the fashion industry. And why not? – the industry is set to grow in leaps and bounds. The online apparel segment (a $27 billion market in 2009, according to Forrester Research) is expected to be particularly hot, having grown 17% in 2009, in an environment where consumer purchasing was conservative.

Last year, in an attempt to shed off its low-cost used-goods image, eBay started a fashion website – fashion.ebay.com, featuring various popular brands (Boss, Aldo). It also offered consumers a much better experience using a new and improved search engine and much better choice.

The result was a $5 billion global business and an estimated 10 million patrons in the U.S. This was followed by the eBay fashion app for Apple Inc's (AAPL) iPhone, which enabled even better shopping experience through virtual trials and fitting, this time even on the move. Numerous other fashion initiatives have also been implemented.

Therefore, the two new announcements come as no surprise. eBay closed the acquisition of Germany-based brands4friends, which is the largest online fashion shopping club in Germany selling fashion articles at reasonable prices to members. The company spent around $200 million to pick up the community of 3.5 million registered members in Germany. The club also has operations in Austria, the U.S. and Japan.

eBay has also appointed Andrea Linett as creative director of eBay Fashion. The choice is significant because Linett has spent the last two decades in the fashion publishing industry and is the co-founder and former Creative Director of the award-winning shopping and style magazine, Lucky.

We may expect Ms. Linett to play a key role in building eBay's image in the fashion industry, since she will be in charge of creative direction and design of eBay Fashion, particularly with respect to themes, photography and merchandising of content on fashion.ebay.com.

Of course, the potential in the market is not lost on competitors, such as Amazon.com (AMZN), which has historically provided better navigation and better user experience that eBay. Amazon has also been active in the fashion market, with its acquisitions of Zappos.com and BuyVIP.com. The recently formed Denim Store and Outdoor Recreation Store are other steps to achievement of this goal. Merchandise has been in focus, with Amazon signing up many leading brands.

More recent and less expected competition appears to be coming from Google Inc. (GOOG), which recently introduced Boutiques.com, comprising tools for consumers to run their own boutiques with support from celebrity endorsements.

eBay, Amazon.com and Apple have Zacks #3 Ranks, implying a short-term Hold recommendation. Google has a Zacks Rank of #2, indicating a short-term Buy recommendation.

 
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