Jefferies Equity Research analysts Brian Pitz, Brian Fitzgerald and Timothy O’Shea look at the results of the latest ChannelAdvisor report, keying in on same store sales numbers from a few significant companies.
ChannelAdvisor’s latest same store sales (SSS) report shows February trends were affected by the bad weather across the US so we would feel more comfortable with them when we see some continuation into March and subsequent months. Overall, we saw nice acceleration from Amazon and eBay Inc (NASDAQ:EBAY) while Google’s PLAs remained strong. We continue to favor Google Inc (NASDAQ:GOOG) and Amazon.com, Inc. (NASDAQ:AMZN) as top large cap plays in the eCommerce space, as well as small cap SALE, as we head into 1H14.
Google’s PLAs keep gaining traction
Since mid-2012, when Google Inc (NASDAQ:GOOG) transitioned its Google Shopping program to a paid service based on Product Listing Ads (PLAs), clicks to normal paid search “right rail” ads have declined every single month (except Dec’13 when they were flat Y/Y) for ChannelAdvisor clients with the rate of decline re-accelerating in early 2014. While there has been some concern that PLAs are cannibalizing traditional AdWords search ads, our channel checks indicate PLA budgets are actually additive. PLAs generate higher revenue than text ads for Google due to much higher click-thru & conversion rates which more than offset lower CPCs. In fact, conversion rates have improved Y/Y in 8 of the last 12 months by 5.8% on average and in both Jan and Feb ’14 (+15.5% on average). Google Shopping/PLA SSS were up +48% Y/Y in February, +63% Y/Y in January, and +90% Y/Y in December. This remains a key tailwind for Google and bodes well for 1Q14 results (see our latest proprietary PLA report here for more details).
According to ChannelAdvisor, SSS for thirdparty sellers on the Amazon.com, Inc. (NASDAQ:AMZN) platform were up +23% Y/Y in February, +14% Y/Y in January, and +28% Y/Y in December. This compares to n/a, +10% Y/Y, and +14% Y/Y, respectively, for US eCommerce growth (excluding Travel), per comScore. As before, we believe these numbers clearly support our thesis that Amazon continues growing roughly 2x faster than overall eCommerce and 7-8x faster than overall retail. Noticeably affected by the bad weather in early 2014, SSS for the 12 US chains still reporting monthly results grew +1.8% Y/Y in February, +3.1% Y/Y in January, and +3.8% Y/Y in December (excluding drugstores, SSS grew +0.3% Y/Y in February, +3.6% Y/Y in January, and +2.4% Y/Y in December). Longer term we expect Amazon unit growth to reaccelerate on various initiatives including digital, further expansion into new verticals, and improving / optimized fulfillment dynamics.
eBay Marketplaces growth remains solid
With continuing improvements in the user experience, eBay Inc (NASDAQ:EBAY)’s Marketplaces keep attracting new users, evidenced by double-digit growth in active users and items sold (+14% Y/Y and +11% Y/Y, respectively, in 4Q13). According to ChannelAdvisor, SSS for eBay Inc (NASDAQ:EBAY) merchants accelerated to +15% Y/Y in February from +13% Y/Y in January and +11% Y/Y in December. This compares to n/a, +10% Y/Y, and +14% Y/Y, respectively, for US eCommerce growth (excluding Travel), per comScore. Sales growth in eBay’s Fixed-Price format accelerated nicely too (to +16% Y/Y in February from +15% Y/Y in January and +11% Y/Y in December). We believe these results continue to support our thesis that Marketplaces is growing in line to modestly faster than overall eCommerce but we will continue to watch these metrics closely to confirm the trends are stable.