ChannelAdvisor plans to use IPO cash to ramp up hiring

dranii@newsobserver.comAugust 16, 2013 

Scot Wingo, CEO of ChannelAdvisor

— ChannelAdvisor’s focus on gaining market share has the newly public company anticipating it will add in the neighborhood of 100 employees over the next 12 months.

About 75 of those new hires would work at the e-commerce technology company’s Morrisville headquarters.

“Like any software business, we are largely people-driven,” co-founder and CEO Scot Wingo, 45, said in an interview this week.

ChannelAdvisor’s hiring outlook – aggressive for a company that had 432 employees at the end of March, including more than 300 in Morrisville – reflects its invest-now-and-make-money-later game plan. The business, which provides technology that enables retailers to integrate and manager their online sales across a multitude of sales channels, isn’t profitable today and isn’t expected to be any time soon.

The company can afford its long-term approach after raising about $80 million with its initial public offering of stock in May. And Wingo is bullish on ChannelAdvisor’s prospects for growth, expecting its revenue to grow significantly faster than the overall e-commerce market.

The company’s “sweet spot” in the market, Wingo said, is businesses that rack up $1 million or more in online sales each month. It currently has 2,135 of those customers, including manufacturers and retailers such as Dell, Lenovo, Sony, Ann Taylor, eBags.com, J&R Electronics and Jos. A. Bank Clothiers. But the company estimates that there are more than 100,000 companies worldwide that fall into that category.

“What is holding us back is finding those other 98,000 retailers” and selling them on the advantages of ChannelAdvisor’s software, Wingo said.

That’s why many of the company’s upcoming hires will be additions to its sales and marketing team – even though that team has doubled in size since the beginning of 2012.

Investors have reacted favorably to ChannelAdvisor’s strategy, particularly after it issued better-than-expected second-quarter results last week that included a 29 percent jump in revenue. ChannelAdvisor shares closed Friday at $30.18, up $2.52. Investors who paid $14 a share when the company went public in May have seen the value of their holdings more than double.

“We have no control over the stock price,” Wingo said. “What we do have is control over our results, and the second quarter was really good for us.”

‘One-and-done’ software

Understanding the appeal of ChannelAdvisor’s software requires an appreciation of the complex e-commerce landscape.

What ChannelAdvisor offers, Wingo said during the company’s second-quarter conference call with analysts, “is a cloud-based platform that allows online retailers to easily automate, optimize and expand their online sales across hundreds of third-party channels through a single integrated platform.”

Those channels include marketplaces such as eBay, Amazon, Buy.com and Sears, as well as comparison shopping sites such as Nextag and search engines such as Google, Bing and Yahoo!

A mid-sized online purveyor with $100 million in annual sales might offer its wares through 20 different online sales channels, Wingo said. If it is managing its sales channels in-house and wants to run a back-to-school promotion, it has to interact with 20 different channels – a laborious, time-consuming process.

Moreover, Wingo added, it ties up the tech staff.

ChannelAdvisor’s software eliminates that hassle.

“We like to say one-and-done,” Wingo said. “Integrate with us and you don’t have to worry about those channels. We’ll take care of that for you.”

Big name competitors

Wingo believes that ChannelAdvisor, which competes with companies such as Seattle-based Mercent, is the leader in its category. Still, the company doesn’t tout itself as No. 1.

“We don’t have any third party that has anointed us,” Wingo said.

ChannelAdvisor’s stiffest competition may come from free offerings from the likes of eBay and Amazon. The price can’t be beat, but they’re one-trick ponies.

“Amazon is never going to help you sell on eBay,” Wingo said. “EBay is never going to help you sell on Amazon. ... The fact that we are Switzerland here in the middle is a competitive advantage.”

Although ChannelAdvisor is sacrificing profitability for revenue growth right now, Wingo points out that the company was profitable in 2009 before it decided to step on the growth accelerator.

“We have been profitable before,” he said. “We know how to be profitable.”

As for potential pitfalls, Wingo talked about how the world of e-commerce moves very quickly, with companies like Facebook becoming overnight successes that must be reckoned with.

“I spend a lot of time looking at e-commerce trends,” he said. “Like any wave, you can ride it or be crushed. My job ... is to make sure we ride it.”

Ranii: 919-829-4877

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