Friday, May 24, 2024

Hot and cold: ChannelAdvisor

Part 1:ChannelAdvisor

Update: ChannelAdvisor announced in early May that Scot Wingo was stepping down as CEO. He is now executive chairman. President David Spitz was named CEO.
A year after its May 2013 IPO, ChannelAdvisor was a darling of e-commerce, viewed as agile and innovative as it connected retailers with online marketplaces created by the likes of Amazon and Yahoo. Chief executive Scot Wingo had grown the company from a fledgling effort helping manufacturers such as IBM Corp. sell products on eBay to an e-commerce powerhouse. Shares soared 32% in the first day of trading, and the company was valued at more than $1 billion in March 2014.
Two years after its public debut, Channel-Advisor is looking vulnerable. It stumbled during late 2014, when revenue dropped as online consumers shopped differently than expected during the holidays. Wingo told analysts during a conference in February the performance was not up to the company’s expectations. As of April 15, ChannelAdvisor’s stock price was about $11, down from its IPO price of $14 and its high of around $48 in March 2014. Two of 10 analysts rate it as a buy, according to Thomson Reuters Corp.
Wingo, a native of Aiken, S.C., co-founded and sold two Triangle tech companies before starting ChannelAdvisor in 2001. He says he’s focused on creating value over the next three to five years, rather than seeking Wall Street popularity. “It’s like the weather, it’s out of our control,” he said of investors’ perception of the company. “At the end of the day, there’s not much we can do about stuff out of our control. We just put our heads down and move forward.”
ChannelAdvisor sits amid a piping-hot  business trend, with global e-commerce sales expected to nearly double to about $2.5 trillion over the next three years. E-commerce makes up about 7% of U.S. retail sales but is growing much faster than sales from traditional stores, according to the U.S. Census Bureau.
ChannelAdvisor has helped companies with at least $1 million in online sales reach more customers. Its software is designed to help e-commerce retailers list, manage and sell their goods via websites created by companies including Seattle-based Inc. and China-based Alibaba Group. ChannelAdvisor earns a percentage of sales generated by its retail customers. Larger retailers that sell more items pay a lower rate to ChannelAdvisor than smaller ones, a discount that can blunt the company’s profits.
“We are seeing this explosion of new ways of buying and selling online,” Wingo says. “We’re creating a new category of shopping. In a way, we’re like explorers trying to figure it out. Like explorers, unexpected things will happen. You just have to correct course, iterate and find a way to success.”
The world of e-commerce moves extraordinarily fast. While large companies might consider 18 months a typical turnaround time for issuing software updates, Wingo says, ChannelAdvisor offers improvements every month or two. After Facebook Inc. said it was adding product ads to its website, engineering and product teams at ChannelAdvisor started work on adaptations. Within 45 days, its 3,000 customers were using enhanced software to promote their products on the social network.
Rapid change can also lead to costly problems. Consumers changed shopping habits last year and bought more from larger online merchants than from ChannelAdvisor’s smaller e-commerce retailers, surprising the company. About a third of its customers are large retailers, including Charlotte-based Belk Inc., and KitchenAid, a subsidiary of Benton Harbor, Mich.-based Whirpool Corp. The remainder includes lesser-known companies. ChannelAdvisor reported fourth quarter 2014 revenue of $23.8 million, a 16% increase that President David Spitz described as disappointing in a call with analysts. “We just had a lot more volume go through those customers where we have a little volume pricing,” Wingo says.
Shifting consumer buying patterns and combined losses of $60 million over the last three years have some analysts questioning ChannelAdvisor’s approach. “ChannelAdvisor does not have an efficient business model,” Brian Nichols, a columnist for The Motley Fool personal-finance website, wrote in January. “The best hope for any investors in the stock is there may be an acquisition,” according to a January report by Boston-based SoundView Technology Group, posted on the Seeking Alpha website. The company has “a flawed business strategy and a confused management team.” Concerns about ChannnelAdvisor’s strategies are unfounded, with the company moving toward profitability, Wingo says. He declines to discuss a potential sale.
In Morrisville, about 450 employees work in a 70,000-square-foot space with few private offices and lots of open space. Wingo is known for bringing his border collie, Kit, who plays fetch in the halls. The future, Wingo says, is about supporting its more than 40 e-commerce marketplaces.

“A lot of things are going our way. People are finding interesting areas and niches they can fill and build a pretty nice business. The Internet is the new Main Street. It’s a lot less expensive, you’re not paying rents and you have the whole world at your fingertips.”

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