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EcommerceBytes-NewsFlash, Number 1962 - January 23, 2009 - ISSN 1539-5065    4 of 4

ChannelAdvisor Gets Profitable, Lays off 19% of Workforce

By Ina Steiner
January 23, 2009

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ChannelAdvisor announced a second round of layoffs and said it had reached operating profitability in the fourth quarter of 2008. It said the restructuring would further streamline its business and better position it for an uncertain economic downturn.

The company provides ecommerce and marketing services to online sellers across multiple channels including eBay, Amazon.com, Overstock.com and comparison-search engines. The news came one day after eBay announced fourth quarter earnings that revealed a 16 percent year-over-year decline in revenue in its Marketplaces business.

ChannelAdvisor's customer Gross Merchandise Value (GMV) for 2008 increased 34 percent over the previous year to $2.6 billion. Revenue was up 44 percent in 2008 to over $35 million. The average ChannelAdvisor customer's sales grew at 7 percent in 2008.

Contributing to profitability in the fourth quarter was the reduction in headcount in September, the "very substantial" reduction in non-headcount costs, and revenue growth, according to ChannelAdvisor President Scot Wingo.

In September, the company had laid off 20 percent of its 350 employees. On Thursday, ChannelAdvisor laid off another 19 percent, a 35 percent reduction in total from its pre-September level. This week's cuts were made in departments across-the-board, with half occurring in the US and half in the UK and Australian offices.

Even with an additional $20 million in funding raised in September, Wingo said the second round of layoffs were necessary because "2009 is very hard to figure out what's going to happen."

Customers were not notified of the layoffs ahead of time. Would they feel the effects of a 35 percent reduction in staff in 4 months? Wingo said ChannelAdvisor would grow its support team 25 percent in 2009. "We are at 23 folks on the team and adding 6-plus through a hybrid of internal and external hiring." In addition, he said the company is investing in its online support center.

All channels showed revenue growth for ChannelAdvisor in 2008, according to Wingo. Amazon.com grew 200 percent year-over-year; paid search grew 60 percent; comparison-shopping grew 30 percent; and eBay grew between 20 - 25 percent. But, he noted, there was a 7 percent decline in same-store sales for eBay and said growth was only up at eBay overall because ChannelAdvisor added a lot of customers. He attributed the decline to existing sellers paying less attention to the eBay channel and focusing on other channels, particularly on their own websites.

Wingo said the company would invest in product development at varying levels across the channels. ChannelAdvisor will not invest in product innovation on eBay because, "I don't think it make sense for anyone to try and innovate on a platform that's decreasing the way eBay is. Now, on Amazon, we are going to shift a lot of resources to Amazon and we are coming out with lots of innovative things there."

Link to ChannelAdvisor

Note: Former ChannelAdvisor Jeff Buechler broke the story about the pending layoffs on his blog on Wednesday and posted an update on Thursday.

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About the author:

Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com.

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