ChannelAdvisor CEO David Spitz believes that the changes the e-commerce technology company made last year will form the building blocks to future success.
“Last year was a year of transition,” Spitz said. “The theme this year is executing on that strategic goal of acquiring larger customers, moving upmarket and investing to continue to grow ... as rapidly as possible.”
ChannelAdvisor was caught somewhat flat-footed last year when its rate of growth slowed as consumers shifted to larger online retailers, which get a volume discount from the company. It responded by overhauling its pricing and payment policies and realigning its sales and marketing efforts to focus on larger customers.
“I think it was the right thing to do because ... selling to these smaller customers ultimately is not profitable for us,” Spitz said in an interview at the company’s headquarters in Morrisville.
The company also instituted layoffs as a cost-cutting move – which Spitz said affected less than 10 percent of its workforce – and revamped its management team. The changes in the executive suite included promoting Spitz from president and chief operating officer to CEO. Spitz succeeded co-founder Scot Wingo, who became executive chairman.
ChannelAdvisor’s cloud-based software enables retailers to integrate and manage online sales across a multitude of sales channels. Retailers also use its software to automatically advertise products on search engines such as Google and Yahoo and to promote products on Facebook.
Last year ChannelAdvisor processed $6.8 billion in transactions for its customers. Those customers pay anywhere from $10,000 to more than $500,000 a year, based on volume. The average customer paid $34,513 last year, up from $31,400 in 2014, which Spitz points to as proof that the company’s focus on larger customers is gaining traction.
“I think the business can, over time, grow faster than e-commerce,” Spitz said. “We actually did in the fourth quarter – we grew 24 percent.”
However, for all of 2016 ChannelAdvisor anticipates that revenue will expand 10 percent to 12 percent, with revenue growth slowing early in the year and then re-accelerating as it shifts away from smaller customers.
One of the ways ChannelAdvisor is accomplishing that is by requiring small customers to pay for one year in advance.
“What we found is that companies that don’t have the financial capacity to pay a year upfront may not have the financial capacity to scale their business” by, for example, hiring additional workers or leasing extra warehouse space.
“If you think about what we help customers do, we help them grow,” Spitz said.
In contrast to last year’s job cutbacks, ChannelAdvisor, which ended last year with 601 employees, is once again expanding its workforce. Spitz said he expects the company to hire dozens of employees this year, many of them locally.
ChannelAdvisor’s website currently lists 36 open positions, 16 of them in Morrisville.
The company moved its headquarters into three floors of a building in Perimeter Park last fall that has twice as much space as its former headquarters, which it had outgrown.
“We actually have a fair amount of room for expansion,” said Spitz.
The new space is designed to foster collaboration and includes 100 conference rooms, some of which accommodate just a few people. Each room is named after one of the state’s 100 counties.
Investors haven’t been jumping onto the ChannelAdvisor bandwagon.
ChannelAdvisor shares have fallen 24 percent this year. And just three of the eight analysts who follow the stock rate it the equivalent of a buy, according to Bloomberg News.
Shares closed Thursday at $10.48, up six cents.