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How Etsy Is Producing Revenue Growth

How Etsy Is Producing Revenue Growth | How To Make Money Online | Scoop.it
In this segment from MarketFoolery, host Chris Hill and Motley Fool Asset Management's Bill Barker consider the second-quarter report from online marketplace Etsy (NASDAQ: ETSY), which continued its pattern of strong revenue expansion, even though earnings remain thin. But this is a common route for internet businesses, and though profitability is low, it is rising rapidly. Notably, the company recently boosted its transaction fee from 3.5% to 5%, which should have significant impact on the bottom line. Shares are now up 200% over the past year. Elsewhere, is Zillow Group (NASDAQ: ZG) (NASDAQ: Z) still a good buy for investors? Or perhaps for an acquirer? Bill Barker is an employee of Motley Fool Asset Management, a separate, sister company of The Motley Fool, LLC. The views of Bill Barker and Motley Fool Asset Management are not the views of The Motley Fool, LLC and should not be taken as such. A full transcript follows the video. More From The Motley Fool This video was recorded on Aug. 7, 2018. Chris Hill: Let's move on to Etsy. Etsy's second quarter revenue came in 30% higher than a year ago. The stock is up about 11% today. This clearly is the opposite of Zillow, not just because they're in a different business. When you look at shares of Etsy, not just up today, but over the past year, up 200%, this really seems like we're buying this thing for the growth, profits be damned. Bill Barker: And the growth is there. That's the good news. Profits are the kind of thing that investors have been trained over the years to be patient in waiting for from high-growth internet companies. I'll give you some insight on what the growth looks like over the last quarter: 20% on the gross merchandise sales; 30% rise in Etsy's cut, the revenue; 55% up on services revenue; 118% increase in adjusted EBITDA. The profitability is small but growing fast. One of the data points that's particularly helpful is, they've increased their transaction fee to 5%, up from 3.5%, which is easy to see, given the popularity of their site, is going to translate to significantly increased revenue. Hill: No retailer is completely Amazon-proof, but if you're going Etsy, you're absolutely finding things that you're just not going to find on Amazon. Barker: Yeah. That's its charm, I guess. I've never been there. I'm not as much into arts and crafts as I'm sure you are. But, I think they've established a good name for themselves in a business which is more difficult for Amazon to pursue and crush than other big businesses. Hill: When you look at Etsy's market cap, about $5.5 billion right now, do you think someone makes a bid for them? Not that they're necessarily looking to sell their business, but, they've had this great run up, and still, in the grand scheme of things, it's not an enormous company. Barker: No, there would need to be some synergies there because you're not going to get it cheap. For somebody to be interested in acquiring it, it would have to fit into their portfolio, rather than any sort of private equity type of transaction. The company doesn't need to sell itself. It's awfully strong. The market is reacting very positively today. It's being priced generously based on a very interesting-looking future. I don't see who the acquirer is, unless they see making the future even more interesting by virtue of their being associated with it. Hill: I don't know. Zillow is in a buying mood, maybe they'll make a bid for them. Barker: I've just argued that Zillow's acquisitions at least seem to make sense. You are arguing that Zillow should stop making sense. Hill: I and others are making the case that Zillow needs to take a breath. Zillow needs to calm down, stop buying things. To this point, they're not getting the benefit of the doubt. I should say, they haven't earned the benefit of the doubt at this point. Barker: I think they've accomplished quite a lot -- Hill: I think they have, too. I'm just saying, in terms of non-core acquisitions, they need to put that aside for a moment. Barker: I think the asset-lite point is important. The market tends to like asset-lite business more than asset-heavy businesses. Especially when things go wrong, you don't want to have a lot of homes on your inventory and be carrying all that. It's not always the case that going from asset-lite to, in part, heavier on your assets is a mistake, but it's very rare that it's well-received in the short-term. So, I would express more confidence in the path that Zillow is going down than the market seems to today. Story Continues That said, the guidance on the revenue going forward was a rather dramatic lowering. That had to do with the revenue recognition on this home-flipping and some of that stuff. It was presented as an accounting-type issue, but I don't know. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Bill Barker has no position in any of the stocks mentioned. Chris Hill owns shares of AMZN. The Motley Fool owns shares of and recommends AMZN, Zillow Group (A shares), and Zillow Group (C shares). The Motley Fool recommends Etsy. The Motley Fool has a disclosure policy.

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China’s Alibaba On Road To Deliver $100 Million To XpressBees

China’s Alibaba On Road To Deliver $100 Million To XpressBees | How To Make Money Online | Scoop.it

BENGALURU: China’s online commerce giant Alibaba Group Holdings is in advanced talks to pick up a significant minority stake in logistics company XpressBees by making an investment of up to $100 million, said three persons with knowledge of the matter. The transaction, which is in the final stages of negotiations, will be Alibaba’s sixth investment in the Indian market as it builds a string of assets to take on homegrown market leader Flipkart and global rival Amazon.


 “The deal is likely to close in the next two-three weeks,” said one of the persons mentioned above. The exact stake Alibaba is picking up in XpressBees could not be determined. Alibaba and XpressBees didn’t respond to queries.


 XpressBees is the logistics business spun out of baby and maternity products retailer FirstCry, known for its acquisition of Mahindra’s Babyoye in 2016. The company competes with other online retail-focused logistics services providers like Delhivery and Ecom Express.


 Talks between XpressBees and Alibaba have been on for about 18 months. 


 ET had reported in June 2016 that Alibaba was looking to buy, or invest in, an Indian logistics company specialising in deliveries for online retailers, and toward this end had held talks with Delhivery and XpressBees Logistics. 


 If the XpressBees investment goes through, it will help Alibaba build what founder Jack Ma calls the “iron triangle” of businesses in ecommerce (Paytm Mall, Bigbasket), payments (Paytm) and logistics, which can feed off each other. 


 In China, the Alibaba Group has online retail businesses called Tmall (B2C, focusing on brands) and Taobao (C2C) and a payments business under affiliate Ant Financial, popularly known as Alipay. 


 In September, it increased its stake to a majority in one of China’s largest techenabled logistics companies, Cainiao, which is valued at close to $20 billion. At the time, Alibaba had said it plans to invest over $15 billion in the next five years to develop its global logistics network.


 “Alibaba wants to make Xpress-Bees the Cainiao of India, and over time logistics operations for all companies like Paytm Mall and Bigbasket may get consolidated under it giving it a larger captive customer base,” said the second person mentioned above.


 The impending deals in Bigbasket and XpressBees will take total investments in India by Alibaba along with its payments affiliate Ant Financial to about Rs 11,000 crore, or $1.7 billion, out of which over two-thirds is invested in Paytm. In addition, Ant Financial is also said to be in talks to invest up to $200 million in restaurant discovery and food delivery platform Zomato. 


 SHIFTING KARUNDIA As the portfolio in India grows, Alibaba Group is also likely to move one of its key executives from Hong Kong, senior director Kshitij Karundia, to the country to work more closely with the businesses and look for more investments, said the third person familiar with matter. 


 FirstCry entered logistics in 2012 when it decided to start express deliveries of its products and began third-party logistics (3PL) at the beginning of 2015. The company was spun off as Busybees in September 2015 and has ramped up orders significantly since then.


 The business has been built by FirstCry founders Supam Maheshwari and Amitava Saha. After the demerger, Saha has been leading the logistics business as CEO while Maheshwari has been heading First-Cry. XpressBees investors include SAIF Partners, IDG Ventures India, NEA, Vertex Ventures and Valiant Capital, some of which may sell a part of their stake in this deal.


 The company saw revenue go up by 121% in FY17 to Rs 185.42 crore while losses grew 61% to Rs 57.71crore, according to filings with Ministry of Corporate Affairs (MCA).  


Owned by Busybees Logistics Solutions, XpressBees has built the business on about Rs120 crore of capital till now, which is in contrast with competitors Delhivery which has raised Rs 1,600 crore, and Ecom Express, which has racked up around Rs1,000 crore in capital.


 With capital coming in from Alibaba, experts said an XpressBees deal could trigger consolidation. While industry sources pegged Delhivery as the market leader with around 300,000 shipments a day, XpressBees is currently logging 170,000-200,000 while Ecom Express has 120,000-130,000. Large players like Flipkart and Amazon India have also built their own logistics operations, which handle most of their shipments. 


 The market for logistics-technology businesses, which include delivery startups, truck aggregators and warehousing firms, is expected to surge to $9.6 billion by 2020 from $1.4 billion in 2015, according to a report by investment bank Avendus Capital. Online retail logistics startups will dominate this space with a market size of $6.6 billion by then.


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