eBay Accounting Change Highlights Shipping Profits

eBay is making a change that will see it report higher revenue – and higher costs – due to the structure of its new international shipping program.

eBay’s Chief Financial Officer (CFO) Steve Priest explained the change during a presentation on Monday at the Morgan Stanley Technology Media and Telecom conference taking place this week.

Referring to the new international program, he said, “eBay was traditionally the agent, now we’re the principal with these shippers, which means historically we’d recognize revenue “net,”” he said – meaning the revenue would be offset by the costs associated with running the program.

“With us being the principal, we both recognize the revenue and we recognize the costs,” he explained.

Sellers have long suspected marketplaces like eBay use shipping as a profit center by not passing along the full shipping-carrier discounts to sellers and some have in the past pushed for eBay to disclose whether that was the case.

In Monday’s presentation to Wall Street investors, Priest said the change was the result of the new eBay International Shipping program, known as EIS. eBay is phasing out the Global Shipping Program (GSP).

The CFO said eBay’s international shipping program “gives us an opportunity to take our 1.7 billion listings and make them more applicable to cross border trade.” He said about 20% of eBay’s overall GMV (Gross Merchandise Volume, or sales) come through cross-border transactions.

“We’ve leaned into that at eBay and are really excited about EIS – eBay’s International Shipping – is going to open the door to more sellers to sort of drive their sales across the planet, which is really, really, important.”

Priest said the new program was great for eBay’s business and great for shareholders, “but in the short term, because of the dynamic of revenue and costs, it will put some pressure on margins.”

EcommerceBytes has yet to hear much sentiment about the new program compared to the old one as eBay continues to transition more sellers from GSP to EIS.

The move to how eBay reports shipping revenue is reminiscent of a change eBay made in late 2021 in how it reported GMV. At the time, eBay said, “Previously, eBay reported GMV regardless of whether the buyer and seller actually consummated the transaction” – a practice eBay said it was stopping. But at the same time, eBay began including shipping and taxes in its GMV figure.

eBay CEO Jamie Iannone also spoke during Monday morning’s Morgan Stanley presentation, and he told attendees that his “Tech Led Reimagination” was working.

“For folks who are new to eBay, essentially eBay for a long time had been a one-size-fits-all platform,” Iannone said. “And starting with the tech-led reimagination 3 years ago, we started investing category by category to really build the experience we needed for that category; how do we drive customer-leading CSAT; and how do we drive marketing to really bring enthusiast buyers into that category.” (CSAT presumably refers to customer satisfaction.)

“And that strategy has been working phenomenally well,” he said.

CSAT has increased by double-digits in Focus categories, and GMV has changed trajectory “pretty significantly” with the intended impact eBay wanted to see, Iannone said.

Ina Steiner

Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). She is a member of the Online News Association (Sep 2005 - present) and Investigative Reporters and Editors (Mar 2006 - present). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com. See disclosure at EcommerceBytes.com/disclosure/.