Edior’s note: This story is part of a special series about the impact of COVID-19 on retail and ecommerce.
RALEIGH – ChannelAdvisor is one of the Triangle’s big success stories, and it only keeps getting bigger – even in a pandemic.
“It’s been like a holiday season in the middle of spring,” ChannelAdvisor CEO David Spitz said in a recent video interview. “Our peak volumes were up 56 percent in April. We did more transaction volume in April than we did in December, and December is usually our peak because of the holiday season.”
Founded in 2001 by Scot Wingo and Aris Buinevicius, the company provides cloud-based e-commerce solutions to companies and brands looking to increase sales on marketplaces like Amazon, Walmart, eBay, Google, Facebook. The COVID-19 pandemic triggered a surge in sales by clients using his firm. That, in turn, meant more dollars for its services.
“In retrospect, it’s probably easy to say, it’s kind of obvious, people are stuck at home and the stores are closed,” said Spitz, who has been with he company since 2006 and had lived through other downturns. “But as this thing was forming, none of those things were really clear.”
WRAL TechWire’s Chantal Allam recently had the chance to chat with him via Zoom call. The interview was edited and adapted to fit this space. Here’s what he had to say:
- So are the majority of your workers still working from home?
We have about 670 employees around the world in a number of different countries, and we implemented work from home pretty early in early March, just based on obviously the news. Also, we wanted to make sure we’re helping our communities stay safe. The transition has actually gone really smoothly. I think benefited from employees already had laptops, our back offices already in the cloud, of course our software is in the cloud, and we actually implemented Zoom in January. It was fortunate timing.
In fact, we just completed a survey 92 percent of our employees said they’re as productive or more productive as they were in the office. This will change how we view the whole work-from-home policy, for sure.
- Any plans for going back yet?
We were early in moving to work from home, and we’re going to be behind the curve in going back. Number one, it’s working really well for us. Number two, there’s plenty of uncertainty so there’s really no reason to rush back to the office. We just announced that the earliest possible reopening would be in early August, and we’ll evaluate at that point as to whether we want to further extend.
There’s a lot of consideration that you have to think about, like personal protective equipment, sanitation, social distancing, and like I said it’s working really well for us the way the way we’re operating right now. We feel like we can do it as long as, as, as we need to, so we’re not we’re not racing to go back.
- And it looks like you’re enjoying it as well?
Obviously, it’s a tough situation for a lot of families and my heart goes out to first responders and people working in the restaurant industry and healthcare workers. For us personally, we have kids that are in college and, of course, they’ve come home because colleges have shut down. So we’ve had the sort of unexpected reunion in the spring, with our kids and it’s actually been really nice getting to spend some time with them. Once they go off to college and become independent, you don’t always get that opportunity. We’ve been we’ve been pretty thankful for how it’s worked out.
- So let’s talk about this surge in e commerce. ChannelAdvisor’s co-founder Scott Wingo recently said anyone that was kind of in the e-commerce space is actually having a surge time, oddly enough, which is kind of weird during a pandemic. He seemed kind of surprised that there was this surge.
I would say in the middle of March when things really kind of accelerated in terms of the pandemic, I don’t think anybody knew what to expect. We certainly didn’t know what to expect and, and everybody kind of tightened up a little bit and got ready for a rough period. I’ve been with the company for a long time and I remember the financial crisis 12 years ago, and it sort of felt like another time like that, although happening much faster. That was a hurricane; this was a tornado. It just kind of came out of nowhere and moved really quickly.
If I went back to mid March, we saw a number of customers who were having to shut up their own operations — for example, retail store outlets, or maybe even fulfillment centers if they had people in the warehouse test positive for COVID-19 so.
For a while there, it looked like this was really going to be disruptive to everybody. There was still a lack of clarity and a lot of confusion. It sort of felt like we were looking over the cliff; and you couldn’t see the bottom and know how bad things might be, and. At that point, it was kind of anybody’s guess what what might happen. But as we got through March and certainly into April, we just saw a massive shift online. In retrospect, it’s probably easy to say, it’s kind of obvious, people are stuck at home and the stores are closed. But as this thing was forming, none of those things were really clear how that was going to play out and I think things like federal stimulus have helped kind of soften the blow and, and maybe giving consumers some level of confidence that they can actually spend a little bit of money online.
But what we started seeing as we got towards the end of March was an uptick in e commerce volumes. Then we got into April and it was just a flood. We did more transaction volume in April than we did in December, and December is usually our peak because of the holiday season. Our peak volumes were up 56 percent in April; we saw a spike, for example, on stimulus day — when people got their stimulus checks on April 15. We saw a spike a spike in toilet paper sales, and cleaning supplies, which is probably not a surprise. But then we saw office furniture as people were starting to get ready for a longer work from home period, a spike in things like jigsaw puzzles and toys, so it kind of makes sense when you think about it.
But yes, it’s been it’s been like a holiday season in the middle of spring, obviously a surprise. Amazon had to work really hard and had to hire close to 200,000 people just to manage the volume in their warehouses. The question is, how much of it is going to stick? As stores reopen and as people are able to leave their homes. My sense is that it’ll come down a bit from what we’ve seen, but probably won’t go all the way back to where we were before. I think there’s probably some permanent share gains by e-commerce through all this.
Now the macroeconomic backdrop is still pretty tough. I’ve seen estimates of maybe 25 percent unemployment, which is Great Depression-type, type levels. So the back half of the year is a little bit uncertain. We’re prepared to continue to help customers move online; we just don’t know how long these kinds of levels are going to to be where they are.
To be honest, it’s hard to forecast June of this year, let alone June of next year. We’re just driving with more limited visibility right now. We have as our business model as a subscription model so normally it’s a pretty predictable thing. But as I said, there’s a there’s a piece of our business that’s based on the volumes that we’re seeing, and that’s the part that’s hard to forecast. On the one hand, a lot of demand has shifted online; on the other hand, we are looking at a macroeconomic backdrop that’s maybe comparable to the Great Depression. So does the shift of consumer demand online outweigh or offset that macro economic or does the macro economic offset the shift online? That’s really hard to say.
We’re obviously watching super closely. I keep our dashboards up every day, looking for signs of increase or decrease, and that’s part of why we’re publishing our data every week as well to help our customers understand what are we seeing. Last year, we did over $10 billion worth of the commerce across our different channels for our customers. We see a lot we see a lot of data and a lot of trends. We’re always trying to help our customers understand that. But it’s really hard to say right now given what the rest of the year looks like, let alone a year out.
As a business, we have a really strong balance sheet. We’ve been cashflow positive for some time now and profitable. From a financial perspective, we feel really good about how we are positioned. In fact, I issued a shareholder letter on March 23 pointing out the strength of our balance sheet the fact that we have no debt. The fact that we’re profitable, we feel like we are really well positioned for a variety of scenarios, which is good. It gives me comfort that you know we can we can sort of face whatever comes, but again we increasingly feel confident that this environment is net positive for ChannelAdvisor. At this point, we’re incrementally bullish and therefore looking for different ways we can lean into how we help our customers.
- And what does that mean for ChannelAdvisor and your bottom line?
We’re in the business of connecting and optimizing e-commerce right. We help brands and retailers sell products on marketplaces like Amazon Walmart eBay, Google, Facebook. From our perspective, we think this is our time. Imagine if you’re a brand, and you’ve had kind of a five-year plan to move online. All of a sudden, your retail distribution partners have been shut for a couple of months. I’ve been talking to a lot of brands who are significantly accelerating plans because they know digital is the future already, but this has been a catalyst for them to say, ‘Wow I really have to do this quickly.’ So we’re, I would say, bullish in our ability to help customers make that digital transformation.
- You had a strong fourth quarter; you were already in a strong position.
Part of our business model is based on transaction volumes. So to the extent that those volumes remain elevated, it should benefit us. But the second thing is, historically, when we’re talking to potential customers, they have a certain timeline that they want to operate on, which makes sense. Maybe we’re speaking to a global apparel brand, and maybe 90 percent of their revenue is through traditional retail channels and they’re thinking about going direct to consumer. It’s really that direct-to-consumer piece that is accelerating, because I think there’s an expectation that some of this e-commerce shift is going to be permanent. People have gotten used to not just buying online, but doing things like grocery shopping online or buy online and pick up in store. A lot of those habits are probably going to stick. So if you’re a brand and you’re trying to make sure that you’re on top of that and going where your consumers are, I just think it’s created a new urgency for a lot of these people in the market to figure out how to do this faster, and that’s what we can help with.
- Have you changed course or pivoted at all to meet this demand?
No, this has been our strategy all along. Obviously not the pandemic, but helping brands and retailers move online so it’s very much in line with our strategy. We’ve always been built for scale so we were able to handle these loads without having to change anything. We’re a software platform, which is nice. We’re not handling the individual packages or anything like that. Unlike Amazon, we didn’t have to go out and hire a lot of people to fulfill packages. We just let our software do its thing and it scales up really nicely. I would say if anything, we’re just leaning into this right now. We know this is our moment in time.
We’ve been doing a lot of work to help our customers navigate through this. Some of them entered the pandemic really uncertain about how they would do. We help them identify new opportunities, where they could sell their products, and how they could extend their product lines. So it’s the same strategy, just accelerated.
- In terms of scaling at this accelerated rate, what are you going to have to put in place? Will you be hiring any more people? Or expanding operations here? What will that expansion look like?
A lot of it hinges on how permanent some of these changes are, and how strong the volumes are that we’re seeing. I would say right now, we feel really good about how we’re positioned and we’ll certainly be evaluating our needs to expand. As I said, we’re leaning into this and that may mean that we need to grow as well as a company.
- So no plans yet that you can share in terms of growth?
Well, we certainly have our hiring plans for the year. Absolutely. At this point, I think we’re well positioned to handle what we need to do for the year. We don’t disclose [the numbers], but we certainly have plans to hire for the for the rest of the year.
- What does this mean for the small business owner?
Facebook now has Facebook shops, and I really think that is an acknowledgement that digital is the future, ecommerce is the future. What Facebook is trying to do is make it a lot easier for smaller businesses to easily get online. We’ve been a longtime partner of Facebook and have worked with them on a number of different initiatives and they have been a great partner for years. We’re really excited to expand the partnership with them, so we are part of the set of launch partners with Facebook on their shops initiative. Our name is ChannelAdvisor and we help people sell across different channels and Facebook is one of those channels. So we just see this as a step in the right direction to make Facebook yet another place where people can find and purchase products and have a commerce experience. In terms of helping our customers, this is exactly the kind of thing we love to see. It’s another place where we can help our customers drive demand and generate revenue and help those businesses grow. A lot of small businesses have really been hit hard by the pandemic, and to the extent that we and others can help smaller businesses move online or emphasize online more, that’s only a good thing.