Jim Wilson/The New York Times EBay’s headquarters in San Jose, Calif.9:56 p.m. | Updated
EBay, synonymous with second-hand wares, is seeking a new retail identity.
In an effort to propel itself into the business of filling orders for large retailers, eBay has agreed to buy GSI Commerce, an online services company, for $2.4 billion.
The acquisition, announced on Monday, shows how the 16-year-old eBay is taking on rivals like Amazon.com while trying to thwart upstarts like Groupon.
With GSI, eBay can expand beyond its network of small power sellers to connect with large retailers. GSI helps manage the Web sites and online marketing campaigns for Toys “R” Us, Aéropostale and Kenneth Cole, among others, and its services include payment processing, order management and customer service.
GSI’s seven warehouses, for example, can stock a retailer’s merchandise and ship and track product.
Managing orders for large retailers would be a major departure for eBay, which has long avoided the complexities of stocking merchandise, shipping and processing returns.
Instead, sellers on its namesake marketplace have had to handle the job for themselves or turn to competitors like Amazon.
John Donahoe, the company’s chief executive, said the deal, eBay’s largest since its $2.6 billion purchase of Skype in 2005, is a reaction to the shifting retail landscape.
“What we see happening today is that commerce is changing rapidly,” he said in an interview by phone on Monday.
“The boundary between offline and online commerce is coming down at a stunning rate,” he said, creating a “multichannel environment” that is changing the way retailers do business and how they reach their customers.
EBay has had a mixed record in acquisitions — while PayPal has been a success, the company sold Skype in 2009 after it failed to gain much traction with eBay users.
The company is offering $29.25 a share in cash, a 51 percent premium over the closing price of GSI’s shares on Friday.
“There is no doubt that this is a shot across the bow of Amazon,” said Scott Kessler, an analyst with Standard & Poor’s. “Unfortunately, for eBay, they are always going to be dogged by some extent by the Skype experience.”
Jordan Rohan, an analyst with Stifel Nicolaus, said that by integrating GSI’s services with eBay’s PayPal payments service and its Bill Me Later online credit service, eBay can compete with Amazon, which also offers fulfillment services for small businesses.
“EBay can now cross-sell the services that GSI provides to the thousands of power sellers on eBay,” he said, “They are paying a reasonable price to be more competitive with Amazon.”
The tension between eBay and Amazon has escalated in recent months as they battle for United States market share. Last year, Amazon’s total revenue grew 40 percent, to $34.2 billion, while sales for eBay rose 5 percent, to $9.2 billion. GSI had revenue of $1.4 billion in 2010.
Unlike Amazon, which sells a lot of its own inventory, Mr. Donahoe said eBay had defined its mission as connecting buyers and sellers. “We do not compete with our customers,” he added.
Mr. Donahoe said that GSI would be able to take advantage of eBay’s expertise in mobile commerce (a segment that is on track to record $4 billion in gross merchandise sales this year) and that eBay would be able to promote its PayPal service on the sites of retailers that use GSI.
Eventually, eBay’s core marketplace could also serve as an outlet for GSI’s large retailers if they need to get rid of surplus inventory. “Over a period of time, we will also make it easier for GSI to list on eBay; it could be through listings, flash sales or their own stores,” he said.
Local retail markets, Mr. Donahoe added, represent a “huge opportunity” and eBay plans to increase its efforts there as well. Late last year, eBay bought Milo, a local shopping search engine, for $75 million.
Yet with companies like Groupon — which is said to be considering a $25 billion public offering — dominating the intersection between the Web and local merchants, eBay faces challenges on that front as well.
Kerry Rice, an analyst with Wedbush Securities, said eBay might have to make a major acquisition in local online retailing.
“I think it’s hard, I don’t think they have a lot of mind share or market share in the local market,” he said. “They can be successful without local, but it’s going to be a missing piece of the equation.”
Under the deal announced on Monday, eBay also plans to shed some GSI assets.
The company is selling GSI’s entire sports merchandising business and divesting itself of 70 percent of Rue La La and ShopRunner. Rue La La, a flash sales site that GSI acquired through its purchase of Retail Convergence in 2009, has been a drag on GSI’s profits, according to analyst estimates. The site, a rival to Gilt Groupe and HauteLook, is part of GSI’s consumer engagement division, which lost about $9 million last year.
EBay, which called the assets “not core to its long-term growth strategy,” will place ShopRunner, a members-only shopping service, and Rue La La into a new holding company run by GSI’s founder, Michael Rubin, and provide the group with a $467 million loan.
EBay’s decision to shed its majority stake of Rue La La is an interesting one, according to some analysts, even given the company’s struggles. EBay has shown a growing interest in the field, buying a German competitor, Brands4friends, late last year for about $200 million in cash.
Shares of eBay fell 4.3 percent on Monday, while GSI shares surged 50.7 percent.
The deal, which is expected to close in the third quarter of this year, includes a 40-day “go shop” period during which GSI may consider rival bids.
Goldman Sachs and the Peter J. Solomon Company are advising eBay, while Dewey & LeBoeuf is serving as its legal adviser. Morgan Stanley is advising GSI Commerce, while Morgan, Lewis & Bockius is acting as its legal adviser. Davis Polk & Wardwell is acting as legal adviser to a special committee of GSI’s board.
EBay’s Biggest Deals:
Skype Technologies Sept. 11, 2005 $2.6 billion
GSI Commerce March 28, 2011 $2.4 billion
PayPal July 7, 2002 $1.4 billion
Gmarket April 15, 2009 $1.2 billion
Bill Me Later Oct. 3, 2008 $905 million
Shopping.com June 1, 2005 $668 million
An earlier version of this article misstated when eBay bought Milo, a local shopping search engine. It was in December 2010, not earlier this year.