Ebay's Big Move into Brick-and-Mortar Stores

Last Updated Sep 13, 2010 12:53 PM EDT

Stores like American Eagle (AEO) have been trying to get their customers using mobile apps in-store. But eBay (EBAY) may disrupt their plans by making its own move into retail stores by stowing away on shoppers' phones.

Retailers want shoppers on their phones while they browse the store; smartphones can be used to notify users of local promotions, to send favorite items to friends, and to make wish-lists around the holidays. In short, retailers want to combine the online retail experience with real life shopping.

EBay Mobile is after the same scenario, but with a decidedly Web-centric approach. While stores are considering the mobile Web as a tool to facilitate in-store sales, eBay sees things the other way around. "The store will be more like a physical 'check-it-out' kiosk," says Steve Yankovich, eBay Inc's VP of mobile. Brick-and-mortars will be more like "discovery tools" where shoppers can find products -- and then comparison shop and order online using their phones if they don't want to carry an item home.

Ebay's approach is opposite to that of Milo.com, a Web startup that aims to make local store inventories searchable online. Milo CEO Jack Abraham likes to stress the fact that only 5-6% of shopping is done online, which he says indicates that shoppers still like the thrill of buying in-store. Searching Milo.com lets shoppers see if the item they want is in stock at stores nearby.

EBby, by contrast, is assuming that purchases happen the other way around: that the user goes to the store to without a specific item in mind, and only has the urge to comparison shop once they discover something in the store. In reality, both are probably the case. (Ebay's flagship mobile experience so far is eBay Fashion, and clothing shoppers may indeed behave differently than, say, shoppers looking at electronics.)

But eBay also believes its sheer ubiquity will help drive consumer behavior the way it wants. Ebay is the largest e-commerce player on the Web, and generates $1.5 billion in sales annually just with its mobile apps. Earlier this year, it acquired RedLaser, a startup app company that makes it possible to find items on the Web by snapping pictures of their barcodes using the iPhone's camera. With that experience baked into eBay Mobile, Yankovich believes that the eBay app will be top-of-mind for shoppers when they enter a store.

Once shoppers begin snapping pictures of SKUs, Yankovich says, "stores are going to wonder: what's on that screen?" For those stores, partnering with eBay will be a natural next step. "We expect people to sit in brick-and-mortar stores and comparison shop [with eBay Mobile]" says Yankovich, "and we expect to be a partner for those stores." Ebay envisions users snapping away pictures to see prices of the same item on eBay, or inside the online inventory of the store they're in. "It will surface online inventory as well as in-store inventory," says Yankovich.

There are challenges to eBay's ambitions: for one, it hasn't setup any of these partnerships with retail stores (though Yankovich says eBay is talking to a few) and stores often use proprietary or customized inventory systems that would make that data hard to access. Still, he says, it is feasible.

"We're going to embrace the idea of bringing together online and offline shopping," says Yankovich. Whether shoppers are prepared to embrace that combination is unclear. So too are the ramifications of success. Legislators have been considering ways to enforce sales tax online, which could discourage the small sellers that provide many of eBay's best deals for shoppers. If the deals dry up, eBay Mobile could end up bearing more importance as an inventory tool -- a tool that's usefulness (judging by Milo's and eBay's drastically different approaches) isn't fully understood by anyone.

Yankovich says the auction site is discovering other ways to appeal to users. One, he says, is making browsing more alluring. Users may simply want to page through more items that look similar, says Yakovich: the online equivalent of window shopping. "They're using it more like a magazine," he says. Ebay has responded by incorporating an item-like-this image search engine and more of classic e-book feel.

Those changes may come to influence what eBay.com does (and doesn't) do on the desktop. "We're a test-bed," says Yankovich, and much of the "plumbing" that enables new features on the mobile apps are built on the same code that powers eBay.com. As iPhones and Androids find their way into more pockets and pocketbooks, the eBay of the next five years may become a drastically different animal.

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