ChannelAdvisor announces RichFX acquisition!

July 16, 2008

Today we’re excited to announce that ChannelAdvisor has acquired RichFX.   RichFX provides over 200 brand-name retailers (50 in the IR500!) with rich media solutions.  RichFX’s solutions have shown they consistently increase a retailer’s conversion rate 10%+.

Here are some great examples of what the RichFX solutions are capable of:

This is just a sampling of the solutions we now will be able to offer.

Why are conversion rates so important?
RichFX marks
ChannelAdvisor’s first foray into a segment of the market that I call
‘conversion enhancers’.  Here’s our thinking.  We have litterally
hundreds of case studies of improving the GMV via ecommerce channels
(search, cse, marketplaces) for retailers.  In every single channel the
math is effectively the same for return on spend (ROS):

ROS = revenue/cost

if you want to express this as a ‘take rate’, it’s the inverse:  cost/revenue

Expanding ROS out a bit for pay-per-click (CPC) models you get:

  • ROS = rev / cost
  • rev = (clicks*CR*AOV) {note: AOV is average order value, or on eBay, ASP as there is no cart.  CR is conversion rate}
  • cost = (clicks*cpc)
  • OR: ROS = (clicks*CR*AOV) / (clicks*CPC)

The clicks effectively cancel out and you are left with: (CR*AOV)/CPC.

Thus for your average CPC ecommerce channel in addition to the
channel optimization that you do (CPC, etc.) the most strategic
datapoints you can look at are your CR (conversion rate) and your AOV
(average order value).

What happens when conversion rates increase?
In our
experience, when a retailer enjoys an increase in conversion rates it
dramatically improves not only their ecommerce channel ROI, but it also
gives them a competitive advantage.  They have several ways to leverage
that advantage.  They can use the improved CR to keep their channel
spend the same and increase sales or they can drop the savings to the
bottom line.  Most retails use CR improvements to double down on their
ecommerce channel spend.

What’s this mean for Comparison Shopping Engines?
One
of the intriguing things to us about the RichFX acquisition is
previously this technology was limited to only the websites of retailers.  Retailers spend tons of time and $ in their digital assets, and then when they put their products on CSEs, they are many time stuck with a flat stock-image that is usually teeny tiny.  Here’s an example of a boot search on shopzilla.

Imagine you are a boot retailer and you have implemented some really nice rich media on your website. What if you could syndicate that to the CSE and have that same rich experience happen at the CSE? Your clicks would naturally convert better and you’ll effectively leverage the merchandising experience throughout your channels vs. limiting it to just your website.

Of course its going to take a while for us to realise this vision,
but thanks to RichFX, we are pretty close to having the pieces needed
to make this happen.

Closing it out with a conversion rate example

Let’s say there’s a retailer – RetailerX that is doing some  CPC via CSE.  Their conversion rate is 3.5% and their AOV is $100.
RetailerX is paying $.50/click and they get 5000 clicks/month for a
particular product.

Their ROS is: revenue /cost

  • Revenue = clicks*CR*aov = 5000*3.5%*$100 = $17,500
  • cost = clicks*CPC = $2,500
  • ROS = rev/cost = 17500/2500 = 7
  • Or take rate is = cost/rev = 14.29%

Now the retailer works on improving their CR via some rich media
(Note: Rich Media  can also improve your AOV – see the tux builder, but
for this example let’s just focus on CR).  The retailers is able to
improve their CR 10% (from 3.5% to 3.85%)

  • Revenue = 5000*3.85%*$100 = $19,250
  • cost = $2,500
  • ROS = 7.7
  • or take rate is = 12.98%

With this example you can see that the retailer is now able to
effectively get 10% more out of that $2500 spend.  If the retailer is
managing their ecommerce channel via an effective take rate and their
margins support 15%, then the 13% take rate for this product now gives
the retailer the ability to either pocket that 2% as extra margin, or
to increase their CPC, which would give them more clicks and thus more
volume of sales for the same effective take rate.

Want to learn more?
If you have any questions about how
Rich Media can improve your sales, we’re hosting a webinar next week,
July 23 at 3pm ET, you can register here.  Alternatively feel free to leave a comment or contact your rep at ChannelAdvisor for more details.