eBay & Magento: consolidation of e-commerce market

Published: July 28, 2011 3 min. read
Svitla Team
By Svitla Team
Web Development E-commerce & Retail
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“All developers from Ukraine, who we know, have the excellent professional level” Yoav Kutner , Co-Founder/CTO at Magento, Inc.

Regarding to the investigation of market-research agencies, such as Forester, the world e-commerce market is formed on present. It grows from year to year in about 10%, and world on-line sales will reach about $249 billion in 2014. In the USA Internet commerce influences to more than half of all retail market – through Internet tools, that helps customers make purchase decisions.

In this situation of stable growing prospective market, the key players of e-commerce unite assets and coordinate strategic policy. Recently the most famous world brand of on-line trading, eBay, informed about acquiring Magento, one of the leading e-commerce platform.

Earlier, in February of this year, eBay announced that had made a $22.5 million investment in Magento.

This deal could seem small, especially in comparison with other eBay purchase this year – GSICommerce, maker of e-commerce and marketing tools, which cost for eBay $2.4 billion. But forSMB e-commerce market deal with Magento can create huge impact.

Magento is very comfortable platform, especially for custom software development company, that develops custom e-commerce applications – it allows to build module solutions with flexible web application development prices.

From its start at 2001 Magento (first name of company was Varien) actually as software outsourcing company –  all development center located in Ukraine. Low cost Magento developers allows the company to keep the high level of profitability.

 

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Uniting PayPal, Magento and its original web application services, eBay plans to accelerate development of their own open source e-commerce platform for retailers of all sizes – X.Commerce. eBay tries to become a strategic commerce partner for all kinds of online merchants and web application developers. Without doubts, Magento, which mission is “to be at the core of ecommerce”, has achieved distinguished results on the way of building e-commerce ecosystem. Magento and its new software-as-a-service (SaaS) solution called Magento Go use tens of thousands e-commerce merchants today and eBay hope using this web developers network to include Magento’s innovation techniques and skills into their strategy.

From other site, in its press-release eBay announced that Magento strategy will not change in the near future, and both brands, Magento and X.Commerce will develop simultaneously. It looks strange and little inconsistently.

It remains a lot of uncertainties in strategy of new X.Commerce platform. Maybe the most important  question is: how it will be able to overcome the biggest challenge in the e-commerce world – converge of online and offline shopping. We hope, the situation will become clearer after X.Commerce Innovate conference on October 12-13 in San Francisco this year.

Written by
Svitla Team
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FAQ

What was the relationship between eBay and Magento, and how did it impact the e-commerce market?

eBay first invested $22.5 million in Magento before acquiring it, a leading e-commerce software. This partnership enabled eBay to use Magento’s technology- highly rated for flexibility and friendliness towards developers- together with its own assets, such as PayPal, to speed up the development of an open-source e-commerce ecosystem known as X.Commerce. The acquisition positioned eBay more strongly as a strategic partner for online merchants and developers, thereby enhancing its penetration into the SMB e-commerce market. It fostered innovation and competition in the e-commerce industry, which ultimately benefits all sizes of retailers.

How did the acquisition of Magento by eBay contribute to the consolidation of the e-commerce platform landscape?

The purchase of Magento by eBay drew the major e-commerce technologies and resources together under one umbrella market, helping to unify and strengthen the market. The flexible, developer-oriented platform offered by Magento, along with an amalgamation of eBay’s payment solutions and global reach, encouraged integrated solution development targeted towards online retailers. It reduced the fragmentation previously witnessed within the e-commerce platform space, therefore setting a friendly environment for standardized, scalable offerings to businesses of all sizes. This led to accelerated innovation and competition among the top e-commerce providers.

What were the key benefits or drawbacks of eBay's ownership for Magento users and developers?

To users and developers of Magento, this meant great advantages, mainly integration with the vast ecosystem of eBay, including PayPal. This enabled the company to rapidly develop the X.Commerce platform with better tools and greater networks for online merchants and developers. More resources and stability injected into Magento from the acquisition also implied more robust and innovative solutions in store. The downside was that there existed an element of doubt regarding immediate plans for Magento since eBay announced that it would be developing Magento simultaneously with X.Commerce. This situation could have led to confusion or perceived inconsistency over the long term.

How has the e-commerce market evolved since eBay's divestiture of Magento?

Since eBay divested Magento, the marketplace has grown more dynamic and competitive, focusing more on open-source solutions and cloud-related services. Innovations from Magento continuously drew merchants and developers to its ecosystem. Consolidation is a trend in this marketplace environment, whereby leading players strive to provide holistic integrated offerings for the whole range of business sizes. Added to that is the fast acceleration of the convergence between offline and online shopping that is fueling new technologies and strategies based on ever-transforming consumer expectations.