Editor’s note: This story is part of a special report focusing on the impact of COVID-19 on retail and ecommerce.
RALEIGH – Back in March, staring down a global pandemic, ChannelAdvisor CEO David Spitz admits it sort of felt like looking over a cliff.
“You couldn’t see the bottom, and know how bad things might be,” he said, now sitting cocooned in his home office on a Zoom call, a few months later. “At that point, it was kind of anybody’s guess what what might happen.”
Lucky for ChannelAdvisor – and anyone with tendrils in the e-commerce world – it’s turned out to be boon times.
Here’s what Internet news site eMarketer is reporting Monday:
“We now expect there to be a 10.5 percemy decline in total US retail sales this year, with a 14 percent drop in brick-and-mortar sales. The news isn’t dire for all retail channels. E-commerce is poised to grow 18 percent following a 14.9 percent gain in 2019, further evidence of the digital shift.”
“It’s been like a holiday season in the middle of spring,” Spitz said. “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.”
ChannelAdvisor is one of the Triangle’s big success stories, 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.
Channel Advisor CEO David Spitz
“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 lived through other downturns. “But as this thing was forming, none of those things were really clear.”
From his perspective, this is their time.
“We’ve always been built for scale, so we were able to handle these loads without having to change anything. 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. I would say if anything, we’re just leaning into this right now.”
(Side note: Serial entrepreneur Wingo left ChannelAdvisor, the company he co-founded and served as CEO up until 2015, to run the on-demand car care, technology and services company, Get Spiffy, which is co-founded with Karl Murphy. Unlike ChannelAdvisor, it has been hit hard by the pandemic but it’s already innovating its way back.)
The haves and have nots
ChannelAdvisor is just one example of this latest windfall. On the back of a pandemic and stay-at-home orders, e-commerce has surged, creating the “haves and have nots.”
Take a look at the month of April, shortly after the COVID-19 outbreak: US e-commerce saw a 49 percent spike in daily sales in April, based on the Adobe’s Digital Economic Index. In particular, the online grocery sector jumped a 110 percent jump in daily sales that month. BOPS (Buy-Online-and-Pick-up-in-Store) sales, meanwhile, saw a 208 percent year-over-year growth rate.
“Everything we’re seeing with e-commerce is unprecedented, with growth rates expected to surpass anything we’ve seen since the Great Recession,” said eMarketer principal analyst at Insider Intelligence Andrew Lipsman in the report. “Certain e-commerce behaviors like online grocery shopping and click-and-collect have permanently catapulted three or four years into the future in just three or four months.”
Amazon is expected to increase its e-commerce market share to 38 percent. This will push Walmart into the No. 2 position for the first time. Along with Target, Best Buy, The Home Depot and Costco Wholesale, Walmart is expected to grow e-commerce sales more than 35 percent in 2020, according to eMarketer.
Even Facebook wants in. It recently announced Facebook Shops, a new service to help small businesses build out digital storefronts on Facebook and Instagram. ChannelAdvisor happens to be one of the first partners for the endeavor.
Meanwhile, closer to home, it appears to be trickling down to small business owners — like Jason Jefferies, general manager of Quail Ridge Books located in North Hills, Raleigh.
“Before the virus, we did ship, but we were not an online business, predominantly,” Jefferies said. “We are having to change our business model, as we have been flooded with orders. It was slow going at first — if folks made it a habit of supporting local stores before COVID-19, instead of someone like Amazon that doesn’t pay taxes, we would have had the necessary infrastructure in place long before. Hopefully, we will have this going forward.”
When stores were permitted to reopen in early June, he added: “We saw online orders level off briefly, but they have spiked again and we are glad for this.”
‘Tripling in less than a week’
Spoonflower, which happens to be one of ChannelAdvisor’s clients, is another local e-commerce startup that is winning big at present.
Founded in May 2008 by Stephen Fraser and Gart Davis and headquartered in Durham, Spoonflower is an on-demand, digital printing company that prints custom fabric, wallpaper, and gift wrap. It also serves as a global marketplace connecting makers and consumers with artists worldwide. Consumers can either design their own patterns on premium fabric, wallpaper and home goods or shop from one of the world’s largest marketplaces with over 1 million designs from independent artists.
By early April, the conpany also reported a surge in orders. Stuck at home, people wanted fabrics for new home projects, or to make masks or blankets.
“You name it,” Spoonflower’s CEO Michael Jones said in a video call from home. “We were doing about 33 percent year-over-year growth in March, and it went from [that] to literally tripling in less than a week,” he said. “It’s been a really, really big change for us,” he added, “not only from a supply standpoint, a demand standpoint but then also how we have to manage and operate our business.”
Spoonflower is having to scale quicker than expected.
Within 30 days, the startup doubled the size of its factory to 50,000 square feet and added three new industrial printers – one flown all the way from Israel. It’s also hired 45 new employees, bumping up its numbers to roughly 280 globally.
“We can’t hire them fast enough,” he said, adding plans for another 50 hires in coming months. “It’s been really unbelievable how quickly we’ve had to make these changes,” said Jones.
Even more so when you consider that Jones only joined the company this January. A year prior, Jones was working as the chief revenue officer for the London-based internet company Amplience. He’s also had a nine-year stint at ChannelAdvisor and spent four years working for eBay in San Jose work.
‘”It’s been a whirlwind 120 days,” he admitted. “I will never forget this time of my life, I can say that with lots of certainty.”
Spoonflower employees working to meet surge in demand related to COVID-19.
Here to stay?
Chloe Glaeser, assistant Professor at UNC Kenan-Flagler Business School, says once the pandemic ends, it’s unlikely this surge will stay at current levels but a portion is “likely” to remain.
“The online retailers and channels are currently acquiring a new segment of customers who would have not tried these services or fulfillment channel without the pandemic,” she says. “A portion of these customers are likely to stick with their newly formed purchasing pattern even after the pandemic.”
One thing is clear, she said: All businesses – big or small – must have a digital presence to reach new customers.
“This can be done with minimal investment by opening a business Instagram account or a Facebook page,” said Glaeser. “If the business would like to continue building the online channel even after the pandemic, building a website with e-commerce functionally may be the right response. The businesses that are least impacted are the ones that have invested heavily in building their online channel.”
Jones and Spitz are watching the markets closely.
“I keep our dashboards up every day, looking for signs of increase or decrease,” Spitz said. “At this point, we’re incrementally bullish and therefore looking for different ways we can lean into how we help our customers. The macroeconomic backdrop is still pretty tough. So the back half of the year is a little bit uncertain.”
Jones sounds similar.
“Will there be a drop off? Probably some,” predicted Jones. “But I do think that there could be a new normal that is set for some businesses, and obviously I really hope that we’re one of them. Every day, we’re leaning in, investing. But we’re also trying to be as flexible as possible – month-to-month leasing; leasing our printers versus buying. We’re doing temporary employees that could go to permanent, if things continue to hold. It’s hard to tell where things will go, but I’m cautiously optimistic.”
