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ChannelAdvisor, which helps merchants determine where to sell their wares across marketplaces, search engines and shopping sites, is the largest providers of seller tools to eBay's biggest sellers. Some 20% to 30% of the largest merchants using its service. It's a SaaS (software as a service) startup that's raised some $80 million since it began earlier this decade. EBay has been a fairly consistent investor in ChannelAdvisor throughout the years as well. Given that Erik Stuart's job as director of corporate strategy at eBay is to understand which companies for eBay to partner with or acquire, we asked him to be our guest host of this Vator Box segment.
Here are a few observations made in the show by Stuart, Ezra Roizen (Vator Box regular and digital media investment banker), and me.
- ChannelAdvisor CEO Scot Wingo gave one of the better pitches we've seen on Vator. It was precise, to the point, and comprehensive. Wingo clearly knew his business and value propostion. Be sure to catch it.
- As a dominant seller tool, it is a really important part of the e-commerce ecosystem and Wingo understands this category well. Over the years, he's built ChannelAdvisor into a "real" company, generating millions of dollars annually.
- The service is not one of high-margins. ChannelAdvisor is considering providing professinal services, which won't help to expand margins and is tough to scale.
- Given the tough economic environment, a portion of ChannelAdvisor's business model, which is to take a transaction fee, may be a challenge to extract from sellers. As Stuart puts it: "Squeezing a take rate is never an easy prospect."
- ChannelAdvisor has raised a significant chunk of money that it's created a big exit hurdle for itself.
- ChannelAdvisor tends to serve the larger merchants. But there are a number of other players offering their services for free, like Auctiva.
- Seller services are a good part of the eBay value chain, but it's unclear whether eBay needs to own rather than to partner with a third-party seller service. One way to leverage third-party services is through eBay's Project Echo, a site for developers to integrate with eBay's sellers tools.
Channel Advisor has not been very successful at driving sales to ebay. They've been laying off their staff. Obviously they are not doing very well in this economy, because large retailers are not doing well in this economy. All retailers are reducing their employee payrolls. On the other hand, the thrift store chains are growing at an alarming pace! That's an interesting model, isn't it?
The recession-proof part of ebay was it's smaller sellers(similar to the thrift store model). No backup contingencies in developing that part of the ebay core had ever been thought out, or established.. there must have been a plan to allow that sector to just get buried in the large retailer's catalogs of listings and then finally disappear.
Many of those folks felt the pressure to get out, and they are scattered amongst many new startups. The new philosophy in the "used and thrifty sector", is build on the strengths of communication. Develop the technology to support that. And build on the successful core rather than hunting down some ridiculous company to invest in.
I don't have a P.H.D. or experience in this field,(heck I'm just an R.N.) and I'm not even tech savvy, in the least! But this is just plain common sense.
Something that seems to have disappeared in the ebay corporate structure. Try calming down a little, be more patient, and listen to the longer and more boring pitches behind the presentations. Don't judge a book by it's cover. You might be missing some diamonds in the rough.
just my 2 cents.