eBay faces threat from start-ups as it shuts in Dundalk
The long reign of eBay and Craigslist is under assault from several start-ups offering mobile apps to ease the process of buying and selling used items over the internet. The upstarts, with backing from venture capitalists, are moving aggressively and threatening to squeeze the leaders' profit margins.
The threat comes as eBay announced it is shutting down its operation in Dundalk, Co Louth, with 150 Irish jobs put in peril.
Letgo, an e-commerce startup with offices in Barcelona and New York, said it is on track to reach $13.2bn in gross merchandise value this year. The figure, which refers to the total value of goods sold through the service, is not a perfect proxy for the health of a business, but it shows Letgo is approaching more mature and well-known brands.
Since introducing the app in May 2015, Letgo said it has racked up 30 million downloads. The service allows users to buy and sell their personal items, with a focus on local transactions. Buyers can use their phones to browse categories from cars to stove cooktops, chat directly with sellers through the app and locate a neighbourhood pick-up spot on Google Maps.
Within the last year, Letgo has raised some $200m and gobbled up another firm, Wallapop, in pursuit of growth. The full bank account has afforded Letgo the luxury of not having to worry about making money yet. The service is free for both buyers and sellers, and VCs are footing the bill.
"There is a revenue model; it's just that at the beginning stages of a marketplace, you tend to focus on liquidity rather than on revenue," said Deven Parekh, managing director at Insight Venture Partners, which backs Letgo. "Not only will these mobile-first platforms take market share, but the more important thing is that they'll expand the market, meaning I think there'll be more people who are willing to both buy and sell products because of how easy it is to do it now."
Each month, about 17.4 million people use the app on Android or iOS.
Letgo's gross merchandise value is similar to that of OfferUp, a secondhand marketplace app founded in 2011, according to a recent Internet Trends report by Mary Meeker, a partner at VC firm Kleiner Perkins Caufield and Byers. And it far exceeds online shopping site Jet.com, which said it was on track for $1bn this year when Wal-Mart Stores agreed to buy it for about $3.3bn.
Sunday Indo Business