Sales, marketing and administrative expenses are major operating costs for eBay , accounting for close to 40% of its total operating expenses in 2015. Considering eBay has to compete against behemoth Amazon in the e-commerce space, its marketing costs were expected to increase but its top line growth has not been commensurate with the increasing investments and advertisements. We see below that eBay’s sales, marketing, general and administrative costs as a percentage of revenues increased an average of 1.4 percentage points per year from 2013 to 2015. However, its operating margin declined at an average of about 2.1 percentage points per year from 29.7% in 2013 to 25.6% in 2015.
Considering how eBay’s sales, marketing, general and administrative costs impact its operating margins, it is important to understand whether eBay is moving towards operational efficiency in light of the rising dominance of Amazon. In the first quarter this year, eBay’s operating margin improved 310 basis points over the prior year quarter, owing to a 4.9% decline in sales, marketing, general and administrative costs as a percentage of revenues.
|