According to eMarketer’s recent report, in 2012 online business to consumer (B2C) sales passed the $1 trillion milestone, reporting growth of 21% over the year. North America remained the largest e-commerce market, with sales growing 14% to $364.66 billion. The Asia Pacific market is catching on. Last year, e-commerce sales in the region grew 33% to $332.46 billion, driven by the strong adoption of the channel in China. As more and more people become connected to the web, e-commerce retail market will continue to exhibit such strong growth. eMarketer projects 2013 e-commerce retail sales to grow 18% to $1.3 trillion.
To help retailers successfully venture into the e-commerce space, companies like ChannelAdvisor offer help on inventory, channel and budget management. Morrisville, North Carolina–based ChannelAdvisor was founded in 2001 by Aris Buinevicius and serial entrepreneur Scot Wingo. Initially, the company launched a selling application that helped small business and individual sellers on eBay sell their goods. Soon, ChannelAdvisor realized that the market lay in targeting bigger enterprises who wanted to sell their products on eBay-like sites as these organizations had the cash necessary to support their app. Their initial customer was Sun Microsystems, which was selling servers on eBay using their original app. Soon ChannelAdvisor re-engineered their offering to focus on demands of an enterprise customer that offered features such as inventory management, order fulfillment, and the cost–benefit analysis of selling online. Thereafter, they signed up players like IBM and Nokia as their customers.
Today, ChannelAdvisor is a leading provider of SaaS solutions that help both retailers and manufacturers to integrate, manage, and optimize sales across multiple online channels such as e-commerce market places like eBay and Amazon, comparison shopping websites like Google and Yahoo, and upcoming sales channels such as Facebook and Groupon. Their platform is accessible over the web and is a simple integrated tool that customers can use to manage product listings, inventory, and pricing and also benefit from analytic tools that help optimize search results across channels.
Last year, their platform was used to process sales worth more than $3.5 billion in gross merchandise value and helped managed more than 100 million stock-keeping units. They have more than 1,900 customers worldwide, including names like Ann Taylor, eBags.com, and Dell to name a few.
ChannelAdvisor earns revenues by charging a subscription fees for access to their cloud-based solutions. The subscription fee includes a fixed component and a variable one that is dependent on the sales made by their customers online. When I spoke with Wingo in 2010, they were charging a fixed fee of $500 a month from their customers, with an additional variable component of 1-3% of sales.
The increasing adoption of e-commerce has seen strong growth in revenues for ChannelAdvisor. Revenues grew 21% annually from $36.7 million in 2010 to $53.6 million in 2012. Despite the revenue increase, they have yet to turn profitable even though net loss dropped from $0.30 per share in 2010 to $0.26 last year. ChannelAdvisor believes that they may continue to report losses in the foreseeable future as they increase sales and marketing and product development efforts.
ChannelAdvisor has been venture funded by Kodiak Venture Partners, Southern Capitol Ventures, eBay, and Advanced Technology Ventures who have invested $75 million in their operations. Recently, though, ChannelAdvisor filed their S-1 to raise another $86.25 million through an IPO this year. They plan to list at the NYSE under the ticker ECOM.
ChannelAdvisor is present in a strong growth market. Gartner believes that the market for services that enable e-commerce will grow annually 13% to $9 billion in 2016 from $4.8 billion in 2011. Surely, there is big market opportunity for the company.