Hello,

We noticed you're browsing in private or incognito mode.

To continue reading this article, please exit incognito mode or log in.

Not an Insider? Subscribe now for unlimited access to online articles.

Business Report

How eBay plans to Capture Sales from Brick-and-Mortar Stores

The auction site hopes to expand its market by modeling consumer behavior.

Even though eBay is one of the giants of e-commerce, it’s limited by the fact that online sales make up only about 7 percent of all U.S. retail spending. Now it has its eye on the business that currently goes to brick-and-mortar stores—but it will need to rely on smart modeling methods to capture it.

Shopping for shoppers: Wielding a variety of predictive technologies, eBay hopes to win over consumers who would otherwise buy at physical stores and malls.

First, eBay will need to know you’re about to buy something offline, so it can shoot a message to your smart phone advertising a better deal on its site. Making that possible is a task for 24-year-old Jack Abraham, who joined eBay this fall as its “director of local” after the company acquired his startup, Milo.com, for a reported $75 million.

Milo sits at the confluence of physical-world and online shopping: it’s an inventory search engine that allows you to see what is in stock at stores nearby. (They coöperate so they can see Milo’s data on what people are searching for.) Abraham wanted to bring the transparency of online retail to neighborhood stores, letting shoppers compare prices on the same products.

The idea behind Milo is that some purchases—say, TVs or clothing—are best made in person, yet product research typically begins online. Forrester estimates that 42 percent of sales at brick-and-mortar stores start with tools like this one, and that 53 percent—over $1.4 trillion worth—will do so by 2014, even if that purchase is just a bottle of shampoo or a cheap pair of jeans.

That’s where eBay sees a huge opportunity. When you search Milo, eBay will see that search as an indication that you might be open to a competing offer. As soon as you start clicking through Milo’s search results, eBay’s system can race through the vast number of products available on its site and try to divert you with a coupon, discount or related product. Even if it can’t, that’s all right, says Steve Yankovich, eBay’s vice president for mobile. “We want to be the starting point every time you’re thinking about making a purchase, because if you always start with us, you’re more likely to [buy] with us as well,” he says.

The company has other ways of knowing that you are warming up to a purchase. Its mobile apps, which have 14 million users, also feature RedLaser, a technology that lets you snap photos of product bar codes inside a store and call up more information on a product, including any better prices that might be found online. Like a search on Milo, a RedLaser scan tells eBay that a purchase could be imminent.

But eBay’s system still doesn’t know much about your motivation, so it’s going to need more data before it lobs an offer to your phone. At this point, Yankovich says, the system will dive into its enormous data sets. The company facilitates $60 billion worth of product sales a year and gets two billion unique product searches per month. Now, eBay can sift through that data to look for behavioral correlations that could help it guess why you are showing an interest in a particular brand or item.

For instance, eBay can look at your personal history on its site, trying to figure out whether that fishing pole you’re mulling is a one-off purchase—a gift, perhaps—or the kind of outdoorsy stuff you buy regularly.

Armed with those correlations, and knowledge of your location (if you allow that) and your Milo or RedLaser searches, the system can make some initial assumptions about the kind of offer you’re most likely to respond to. “We can see some totally surprising correlations with this data,” says Yankovich.

If eBay’s plan fails, it wont be the first time an ambitious data-mining project fell short. But Abraham says the vision is so compelling that eBay is likely to stick with it. “If we can create this unbelievable personalization engine,” he says, “we can show people offers that will be so compelling that they’ll change their behavior.”

Cut off? Read unlimited articles today.

Become an Insider
Already an Insider? Log in.

Uh oh–you've read all of your free articles for this month.

Insider Premium
$179.95/yr US PRICE

More from Business Impact
Predictive Modeling

How technology advances are changing the economy and providing new opportunities in many industries.

Want more award-winning journalism? Subscribe and become an Insider.
  • Insider Plus {! insider.prices.plus !}* Best Value

    {! insider.display.menuOptionsLabel !}

    Everything included in Insider Basic, plus the digital magazine, extensive archive, ad-free web experience, and discounts to partner offerings and MIT Technology Review events.

    See details+

    What's Included

    Unlimited 24/7 access to MIT Technology Review’s website

    The Download: our daily newsletter of what's important in technology and innovation

    Bimonthly print magazine (6 issues per year)

    Bimonthly digital/PDF edition

    Access to the magazine PDF archive—thousands of articles going back to 1899 at your fingertips

    Special interest publications

    Discount to MIT Technology Review events

    Special discounts to select partner offerings

    Ad-free web experience

  • Insider Basic {! insider.prices.basic !}*

    {! insider.display.menuOptionsLabel !}

    Six issues of our award winning print magazine, unlimited online access plus The Download with the top tech stories delivered daily to your inbox.

    See details+

    What's Included

    Unlimited 24/7 access to MIT Technology Review’s website

    The Download: our daily newsletter of what's important in technology and innovation

    Bimonthly print magazine (6 issues per year)

  • Insider Online Only {! insider.prices.online !}*

    {! insider.display.menuOptionsLabel !}

    Unlimited online access including articles and video, plus The Download with the top tech stories delivered daily to your inbox.

    See details+

    What's Included

    Unlimited 24/7 access to MIT Technology Review’s website

    The Download: our daily newsletter of what's important in technology and innovation

/
You've read all of your free articles this month. This is your last free article this month. You've read of free articles this month. or  for unlimited online access.