A Serial Entrepreneur’s Playbook: ChannelAdvisor CEO Scot Wingo (Part 5)

SM: In 2001 you were working with a handful of retailers, advising them on various channels. Did you have a product in place?

SW: From 2001 to 2003, the bulk of what we did was helping folks to sell on eBay. It was going well, but we saw some clouds on the horizon. One year eBay would love what we were doing and another year they would hate it.

SM: What was the nature of what you were doing for enterprises to sell on eBay?

SW: They were using our software to manage their eBay selling operations. If you were IBM or Dell and you wanted to sell on eBay, you would need two very important things. First you would need to have your inventory synchronized. If you had 100 widgets and you wanted to sell 20 on eBay, then you need to make sure you don’t sell 150 on eBay. Second, you would need to be able to fulfill the orders.

Typically we have to touch the ERP or warehouse systems of large manufacturers or retailers. We touch their systems to gate off segments of inventory, get it sold on eBay, and get the orders back to the company. That is a big part of what our software does.

Once you decide to sell on eBay, there are about 80 different variables that determine how successful your sale will be. Do you want it to be an auction or a fixed price? What information comes from your system that gets fed to eBay regarding product specifications?

SM: You are not doing the fulfillment yourself. You integrate your software into vendor’s fulfillment systems. Does your software make decisions regarding which channel should get what percentage of the inventory?

SW: It usually comes from the retailer. They use our software to figure it out. We give them analytics and the data they need to make smart decisions.

SM: What kind of factors play into making those decisions?

SW: There are many factors. Margin is a big focus. Which channels drive the best margins? There are two elements of margin. First, what is the top line price you are receiving on each channel? Second, what is the cost of the channel?

Some people tend to favor margins while others favor velocity. It may be mid-March and they may be trying to hit a quarterly number. Different channels work well for different scenarios at different times of the year.

SM: How do you optimize the different parameters that make a channel successful?

SW: One of our biggest strengths is that every channel is very different. If you are a retailer and are on five of these channels, there is not a lot of overlap. You don’t have to manage a lot or understand a lot about each specific channel. Here is an eBay example. One strategy that you can implement in minutes using our software which would otherwise be quite tedious involves perception of scarcity. The key is not to show how much inventory you have. If you are Dell and you have 1,000 laptops that you are liquidating you do not want to say, “I am liquidating 1,000 laptops.” Buyers are smart, and they will wait for the best price. However, if you show two items then buyers are more inclined to make the purchase.

Our software will show two items. If someone buys one our software will check the number remaining in inventory and post another for sell if appropriate. That was an eBay-specific channel, but I can provide a similar example for every channel that we work with.

This segment is part 5 in the series : A Serial Entrepreneur’s Playbook: ChannelAdvisor CEO Scot Wingo
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