ChannelAdvisor Catalyst Conference

To Our Valued Clients,

I had the opportunity to attend the ChannelAdvisor Catalyst conference earlier this week in Las Vegas.  For those of you who are not familiar with ChannelAdvisor, it is a cloud-based e-Commerce solution that enables retailers and manufacturers to integrate, manage and optimize their merchandise sales across hundreds of online channels including Amazon, Google, eBay, Rakuten, Newegg, Sears, Face book, Tmall, MercadoLivre and more.  The software provides users with a single, integrated user interface to manage product listings, stock availability, pricing optimization, search terms, data analytics and other critical e-commerce functions across hundreds of online channels.  The company recently went public (Nasdaq: ECOM) and has been a very successful IPO.  SP Express purchased the ChannelAdvisor software and offers the service to clients so that they may easily expand their sales channels and online presence.

The Catalyst conference was very interesting and insightful and I wanted to share some of my observations from the various presentations and meetings.  The conference featured “fireside chats” with senior executives from Google, Amazon and eBay.  The term “customer experience” was used over 30 times during the presentations.  The large marketplaces have teams of professionals looking at ways to reduce the friction in transactions and make it easier for customers to do business with marketplaces.  All agreed that the bar in terms of customer expectations is being raised daily.

What do marketplaces offer customers?  Four foundational elements:  Selection, value, convenience and confidence. We all know how Amazon offers a large selection of items and have made it quick and easy to complete a purchase.  Confidence on Amazon comes through product and customer reviews and maintaining strict operating guidelines for merchants selling products on the Amazon marketplace.  Amazon Prime has been a big success for Amazon.  While Amazon does not publicly disclose Prime membership numbers, several presenters at the conference estimated Prime membership in the range of 22 to 25 million members.  Prime members enjoy free 2 day shipping on product purchases as well as other benefits such as streaming video.  Prime members are heavy users and account for a very large percentage of overall transactions on Amazon.  Amazon has been subsidizing shipping costs and earlier this week announced an increase in the Prime annual membership fee from $79 to $99.  On the confidence element, eBay announced at the conference that they were changing their seller rating system.  “Stock outs” on eBay have become a significant issue (on Amazon, merchants must have products in stock such that 97.5% of the transactions are successfully fulfilled—thereby providing a good customer experience).  In general, eBay is implementing more objective measures of sellers as opposed to subjective standards (the infamous buyer feedback on eBay).  eBay has estimated that 33% of eBay sellers will be impacted by the new ratings system.

One of the dominant themes at the conference was cross border trade.  At the conference, ChannelAdvisor announced that they had recently integrated their platform to Tmall, the largest online marketplace in China.  Scot Wingo, the CEO of ChannelAdvisor, pointed out that 90% of the ecommerce transactions in China are through marketplaces like Tmall with only 33% of the ecommerce transactions in the U.S. being through marketplaces.  The view by many at the conference was that many new marketplaces are emerging globally and growing and that they will capture an even greater market share going forward.  Surprising for me was to find out that Russia is a large and growing ecommerce market.  Several presenters singled out Russia as an attractive and emerging market.  Several merchants made the point that online customer acquisition costs are high and increasing and that it was easier to rely on marketplaces to drive traffic and shoppers.  Furthermore, through a platform such as ChannelAdvisor, they could quickly and efficiently upload and market their products in many marketplaces around the world.

There is a big innovation push at eBay as well.  Two areas of focus for their innovation push, mobile and localization.  On mobile, it is phones and tablets and huge growth in the mobile side of the business.  Customers purchase differently on mobile devices.  Generally quick transactions and the opportunity for merchants to send very focused product solicitations to customers on their mobile devices.  With big data these days, it is relatively easy to identify a prospective customer’s interests and needs and to search marketplace offerings to find product promotions and opportunities that match the needs and interests of a prospective customer.  A quick text or email to a mobile device with a link to the offer.  On localization, eBay recently introduced their Global Shipping Program whereby they help merchants list, sell and deliver their products to buyers in over 40 countries around the world.  For example, an item listed on eBay.com may also be listed on eBay’s localized marketplace site in Russia.  The listing will be translated into the local language and the transaction will be converted into local currency.  The product will be fulfilled from the home market of the merchant.  In the case of a U.S. based merchant, the only obligation of the merchant is to ship the order to eBay’s Global Shipping Program warehouse in Kentucky.  eBay handles the delivery of the product to the customer and remits payment to the U.S. merchant.

Interesting times in the online market.  As we all have seen, traditional offline retailers such as RadioShack and Best Buy continue to struggle and are closing stores and trying to adjust their business models.  Online marketplaces will continue to grow, mobile will capture an ever greater percentage of ecommerce transactions and global marketplaces will emerge and open up to merchants.  I hope some of the insights from the conference are helpful to you.  Please feel free to contact me as well with your insights and perspectives on trends you are seeing in the online and offline markets.  I always welcome the opportunity to learn more.  The game is changing and the world is becoming a smaller place!

Kind regards,

Mich Bayley

President and CEO