Two things surprise me about XSellco.
First, their Chairman is a hugely successful Irish technology entrepreneur – Ray Nolan. His many ventures include the world’s top hostel-booking site Hostelworld.com, and flight comparison tool Skyscanner. But that’s not what surprised me. What’s unusual is that Nolan isn’t just a passive investor in XSellco, he’s the company’s founder, and has been hands-on in shaping their software for online sellers.
Second, XSellco acquired competing company ReplyManager earlier this year. Acquisitions aren’t exactly rare in this industry, but this case was unusual again: ReplyManager was the only direct competitor to XSellco’s Fusion, and the company will continue to provide both tools indefinitely.
So I caught up with Nolan and new XSellco CEO Victor Corcoran to talk about why the company was founded, what makes their tools different, and their plans for the future.
Andy: Why did you start XSellco, and what was your first software tool?
Ray Nolan: Well, it’s been a long time in the making. I came across a former colleague who was in the online retailing space, and he was using some tools to manage the data distribution across channels.
But he was also using many tools alongside it. He was using one tool for data distribution, a different tool for repricing, and a different tool for CRM. Then he was also using Magento, and the tools didn’t talk to each other at all. He was buried in a quagmire of data, but most importantly he was losing money on individual transactions, because he wasn’t able to tie down his costs to each sale.
He was buried in a quagmire of data, but most importantly he was losing money
He couldn’t identify what we call “net-net”, your true net margin on every single sale. You’ve got VAT, depending on the jurisdiction, you’ve got currencies. You’ve got what you bought it for, your shipping costs, Amazon or eBay fees, maybe FBA fees, pick-and-pack fees. The central tool this guy was using wasn’t capable of giving him net-net on every transaction. I could see that it was never going to work.
Then he was using repricing and CRM outside the system, and it wasn’t properly cloud hosted so he could only run it on his dedicated PCs at work. When he wanted to check things at the weekend he had to connect into the office. I just felt it was a poor setup for him. So we set about building a world which knew what net-net was all about, an enterprise class piece of software that would integrate CRM, pricing, data distribution, purchase orders, invoicing, warehouse management – the whole lot.
And we did it. It took a couple of years to build. Then we set about selling it and discovered that, first of all, the business is more complex than we first imagined, which wasn’t surprising – most businesses are. But also the pricing model wasn’t necessarily aligned with the customer. It was a very long sales cycle, and there wasn’t really the appropriate margins for the software provider. There was a very front-loaded cost to get involved with that kind of software.
Then there was a big implementation cycle. The software company invested all the time on the implementation, then after a period of time people would get out of it for something that was $100 cheaper. We looked at what we had, and we still had customers who wanted our enterprise software, but we thought we were doing something else really, really well. We were seeing people accelerate their sales significantly by implementing the repricer element of our software. And also they were getting much, much better ratings on Amazon and eBay because they were responding to queries much faster.
Our biggest customer has more than two million products
Those were things that we knew that we could cut out of the main product pretty easily, shrink wrap them as separate tools, and sell them at a much lower ticket price. There would be almost zero implementation cost – you can switch it on and be live and repricing in an hour. Then you can implement our CRM system and have all of your support queries handled. So Fusion and Price Manager were born.
We put a lot more effort into those two products and really, really invested in making the interfaces very smooth, giving the ability to solve CRM issues on mobile phones or tablets for example, and building what we think is the best repricer out there.
We’ve got a lot of people moving to our tools, and very low churn away from us. We have some very big customers on Price Manager with many hundreds of thousands of products. Our biggest has more than two million products. Because we’re Amazon-hosted, we get the best connection to Amazon, the fastest repricing.
Fundamentally I think we really solved the customer support problem with Fusion, for people who are logging into four or five dashboards to handle support queries. Even if they have a central tool, the CRM element tends to be pretty poor. So now we only do tools for CRM and repricing.
What is it about the online marketplaces sector that appealed to you? Selling through eBay and Amazon is not at the glamorous end of ecommerce.
Ray Nolan: Well, I like to serve markets that I feel are underserved, and as we grew up into our core products, I didn’t think this market was being served well.
People may criticize online marketplaces, but I think that to be a web retailer of any kind, and not to have a toe in that water is not right. We have a world with Amazon and eBay, and the cost of selling is significant. But you get scale with the marketplaces pretty quickly, whereas with your own online marketing you can throw hundreds of thousands of Euros at it and really you’re only just starting.
I’m a guy who’s previously spent six million a month on pay per click advertising
A lot of people get into ecommerce and think, “I’ll buy the clicks and I’ll do my own marketing”, but I’m a guy who’s previously spent six million a month on pay per click advertising, in businesses that I’ve been involved with. That’s quite a chunk of spend if you equate it with what Amazon and eBay charge as seller fees. Anybody selling online should always have a place on the marketplaces, it’s madness not to.
We need to be on a busy street. If the busy street is Amazon, and your shop is on a quiet country lane, you’ve got to pay people to direct them off the main road into your little town. Well then, why not go to the busy streets? Yeah, the rent on the high street is more expensive than the rent in the country town, but there are more people there and that’s why.
Victor, what kind of business were you in before joining XSellco?
Victor Corcoran: I’ve been in the telecommunications business for the last eight or nine years, in general management in a very, very competitive sector. I think there’s a lot of similarities between telecommunications and ecommerce. It’s about growing your customer base and knowing your metrics, knowing your cost of acquisition, making sure that you bring your customers on at a cost-effective price point. Then delivering stunning customer service to keep them buying from you for as long as possible, and trying to upsell them.
A lot of the core principles are very, very similar. They’re both great industries because they see data. You can measure every interface of the customer, and see every part of the customer journey. It’s very much about looking at your data, making a smart commercial decision, then managing the customer relationship and executing properly.
Ray Nolan: When I met Victor, I found the parallels quite interesting between mobile telephony and XSellco because we’re in the SaaS [Software as a Service] business. The biggest thing that matters to a telco is new customer acquisition, and churn. What are the costs to get a new person to use your mobile phone service? What’s the marketing cost? What’s the onboarding cost? Then what’s the churn rate, how are they leaving, and why are they leaving?
In the SaaS business, it’s imperative that we attract customers, provide great products quickly and cheaply, and continue to delight them with the product so they don’t feel they have to go elsewhere. So they’re very parallel in terms of how these businesses work.
Online sellers are mostly small or mid-sized businesses, have you worked with those kind of businesses in the past?
Victor Corcoran: I have been working for a large company, but setting up business units on small islands [in the Caribbean] and to survive in any small business area, you have to be very dynamic and a bit quirky. You have to be flexible. So the scale isn’t that different. XSellco is already a business of scale, and Ray has done a great job building a successful machine here.
Ray Nolan: The biggest business that I’ve founded is Hostelworld, and Hostelworld was underpinned by 30,000 SMEs with varying degrees of professionalism in their organisations. In the early days of Hostelworld, every hostel was typically a mom and pop organisation or a lifestyle business, with maybe 20 to 50 beds. Interestingly as its grown, hostels have completely changed and become more professional. The bigger guys have come in, and now a hostel is as good as many three and four star hotels, except it has the vibe and it’s a cool place to hang out.
You’ve got people doing 10, 20, 30 million a month on eBay and Amazon sales now
So that is not dissimilar to the way I see this industry going, in that some people are very happy to run their lifestyle businesses, with one or two people selling a certain amount of products. Then some are going for it. You’ve got people doing 10, 20, 30 million a month on eBay and Amazon sales now. I think that’s going to be an increasing trend because realistically, if you’ve got a lot of inventory, you’ve got to be there on the high streets of Amazon.
Victor Corcoran: At XSellco we’ve got our pricing model aligned with our customers. We have customers who are starting off, and we have customers with several million SKUs. Our solution can be there from the very, very beginning of your business lifecycle, all the way up as you scale.
Ray Nolan: One of the things that I really like about where we are with XSellco is this alignment with our customers. With the initial enterprise type software it was burdensome for both sides to implement, and the payback was over many, many months. Whereas our current tools are implemented very quickly, and there’s an immediate impact. We can continue to improve our software and we’re aligned with the customer. The more busy you are – the more sales you are making – the more support tickets that will be raised. With our model the more tickets you get the more you pay, and the price per ticket goes down. We’re not in a world where we’ve got a huge upfront fee and you’re committing to us forever. As you get busier and up your package plan, we can also put more into improving the product.
It cost an awful lot of money to add translation to the product
So for example, we launched multilingual capability. People who previously would have been afraid of trading across Europe because they don’t speak French, German, Italy, Spanish, can now comfortably trade and support their products. We do the translation for them as the transaction happens. So you can sell comfortably to customers in Italy, and when they write to you in Italian and say, “it’s broken” or “what colour can I get this in?”, the translation happens around you.
Does it cost extra for us to do the translation? Sure, it cost an awful lot of money in terms of our investment into the product. Is it extra for the user to have translation switched on? Not a penny. Why? Because the busier you are, the better for you. And the more tickets that will be raised, the better for us. So we’re aligned, we want you to grow your business bigger. By putting language translation into Fusion, which is the only tool of its kind to do this thing, it helps you to get bigger and more profitable. We want our customers to feel that they’re growing and growing with us. Our model is key to that and I think that’s where we’re getting our success.
Let’s step back a bit. On a fundamental level, what is XSellco Fusion and what does it do?
Ray Nolan: If you have a number of sources of customer interaction, be they eBay, Amazon, Jet.com or your own website, you will get customer support requests by email, and will have to go to the Seller Central to answer questions and so on.
We all know that customer ratings are key to profitable selling. Feedback matters on the marketplaces, and it also matters on your own website. So instead of having to go through your email or worse still, go to six different interfaces, we collect all of your customer interactions into one dashboard, present them in the same interface, and allow you to answer the questions from there. We attach the order data, even if the customer has not given the order number, and present everything to you including the address you sent it to. We’ll show it on Google Maps, show you the text they wrote, what they ordered, the price, ship date and so on.
That gives you the ability to answer the questions. A typical one is, “Where’s my product? I should have got it yesterday”. We know the ship date, and have template responses so it can automatically answer some questions for you. Or you can pick one of your standard answers. It will feed in the “Dear Ray”, it will put in the product and the date it was shipped into a perfectly formed email response to the client.
It gives you the time left to answer, and will count down what’s an appropriate response time. You can defer your answers, boost them to more senior members of your team, tag them as a refund or whatever. And you get better reporting, so you can run your business better. If it’s your second job, or you run your business at night or over the weekend, there’s a mobile app so you can answer the query wherever you are. If you’re out for the weekend you can see what messages are in your inbox, and try to resolve them really quickly.
Our estimates are that it saves about 75% of the time spent on customer support. You’ve got the data to hand, you’ve got templates, you’ve got translation. We’re trying to make it so that you are not burdened by support. We’ve seen people save significant man hours or headcount by virtue of the fact that they can solve the problems much quicker. And course the quicker the problem gets solved the better your rating on Amazon or eBay. That’s the nuts and bolts of Fusion.
It saves about 75% of the time spent on customer support
Originally we had a subscription business, not unlike Zendesk. But that wasn’t right, it wasn’t aligned properly. You’re trying to get 50 bucks a user, even though there might be very few tickets and people might want four different users answering the questions. So we said, “No, let’s drop that and make it so you can buy tickets and have all the users you want for the same price. You can have people doing support on the east coast of the States, and people doing it in Europe, and it doesn’t matter how many users you’ve got. It’s all about ticket count.
It’s a beautifully simple product, people can get it configured in 20 to 30 minutes and away they go. Ironically something like 30% of our customers have taken the time to write to us, unprompted, to say how they love the product. I must have been writing software for 30 years, and I’ve never seen anything like this. It has just touched the right nerve, and a lot of people want it..
People who look for a customer support tool might find their way to a helpdesk system like Zendesk. What does Fusion do better than that type of solution?
Ray Nolan: I did a site visit recently and got to see what the business was using. They had Zendesk. It does centralise your communications to some degree, but it doesn’t pull the order in. It doesn’t have a connection to get your data from Amazon or eBay, you just get an email then can do stuff with it. With this particular site, they were using Zendesk for support then actually putting the data into Salesforce. They were paying 50 bucks a head for Zendesk licensing, 40 or 50 bucks for the base CRM tool in Salesforce, and still didn’t have the answers in front of them.
What we’re doing is combining the two tools, and putting the order right in front of you. We think a lot of people give up on those tools and come to us. Ironically Zendesk was built for software support and they’ve done a great job of software support. It’s for, “My software doesn’t work, give me the knowledge base, let me raise a support ticket that I can push around the business”. It’s not built for a one-off interaction, where someone bought an iPhone case and is unlikely to come back. You want to make sure this person gets the answer they need as quickly as possible and rates you highly on the platform they’ve bought from. And that’s not the sole purpose of anybody else’s product in this space.
Let’s move on to Price Manager. What’s it for, what does it do?
Ray Nolan: Price elasticity on Amazon and eBay is key. eBay repricing is slightly more difficult, but we’re working on something right now. But on Amazon, obviously you want the Buy Box, and the Buy Box is influenced by price, but also by reputation and your ability to sell and all the other things that come with it.
It’s all about the science of the Buy Box. We know that’s inexact and no one has the algorithm, but we know for sure that price matters. You want to know what your competitors are pricing at, and you want to price profitably, which goes back to my very first interactions in this space, seeing people selling unprofitably because they didn’t have the data to hand. So we’re helping people make a net profit on every single transaction they make.
You basically plug in your Amazon code and we bring down all your products, so there’s no configuration required. We take the data from your Amazon accounts. You can have UK, French, German, Italian, US, Japan etc, Amazon accounts. We take all your inventory and we offer you the chance to price it programmatically by looking at the prices that your competitors have. You can create very simple rules, like, “I want to be five percent cheaper than the competition, but I don’t want to make anything less than $10 per transaction”, or you can get very, very complex.
You can exclude certain sellers. You can exclude competing against FBA, you can exclude competing against Amazon. Some people just set it and forget it, and some people play the market, change the rules, customize some rules to the products they’re selling, maybe even on an individual product level. Basically we’re in charge of the Buy Box and our job is to try and get it for you. Price and reputation are the two key things here, and the marriage of Fusion and Price Manager is how we can help you get the Buy Box, or metaphorical buy box on eBay.
We see an immediate spike in sales if someone’s coming from no repricing to repricing
We’ve got a couple of price packages, some of them are more complex in terms of set up and some of them reprice faster, and that can matter depending on the kind of products you sell. But we’ve put a lot of time and effort into this; we see an immediate spike in sales if someone’s coming from no repricing to repricing.
But sometimes people have a drop in sales. That’s can be hard for us to deal with. We’ve had arguments explaining to customers, “But you understand now you’re only selling stuff profitably.” Other repricers will allow them to chase the price down into a world where they hadn’t included Amazon’s fees, VAT and so on. They were just pricing blindly. What we’re trying to do is make sure that we’re pricing every product to sell profitably. So we allow you to have fairly rudimentary rules, more complex rules, bigger sets of inventory, more frequent pricing. We’re very pleased with the product that we have.
It’s cloud-hosted also and only Amazon hosted, there is no quicker connection than an Amazon box to another Amazon box. We can respond to other peoples’ price changes immediately. A lot of our pricing is pricing upwards. If somebody has been competing with you for the Buy Box on price, once that has stopped we price you upwards as quickly as possible. That’s the root of what we’re trying to do here –trying to get you the most profit for every product that you sell.
Victor Corcoran: It’s a very simple, clean software, a wonderful user interface but extremely powerful instant repricing. We’ve added India, we’ve got Mexico, it’s a state of the art repricing tool which is simple if you want simple, but powerful if you want to add more complex rules.
Unlike Fusion, Price Manager has a lot of competition. How do you set yourself apart when someone’s looking for a repricer?
Ray Nolan: We’ve seen repricers go disastrously wrong. There was that incident at Christmas, where people were being repriced down to a penny. I’m a long time at this. We’re in a world where businesses I’ve been involved in have been doing literally hundreds of millions in sales. We know what it takes to run online businesses at scale, this is not something that was knocked up in an afternoon in someone’s bedroom. We’ve got a very competent team of engineers. We’ve taken this space very seriously, and we want to dominate it.
We’ve taken this space very seriously, and we want to dominate it
I see a lot of small guys come and try, and they will continue to do so. But we will compete and will endeavour to win, because our product will always be the best. Why? Because we know what churn is. The value of a customer to us is paramount, because if they like our repricer they may buy another tool from us. We could have a runway of other tools that will appeal to them, and we want to make sure they’re aligned with us. The value of having other products is we can try and get our customers to see that we produce good stuff, and that we can switch on another feature in an afternoon and say, “Let’s just try Fusion for an afternoon.” That kind of stuff matters.
We’re here for the long haul, we know how enterprise class software works and we know where they are weak. And while we don’t really want to get into enterprise again, we want to make sure that we do a phenomenal job of repricing. There is no point in switching on a rudimentary repricer within one of those enterprise products, because they’re not going to get the Buy Box. If you run our repricer in a set-it-and-forget-it mode, you will sell more. End of.
The enterprise class products cannot afford to run the best repricer and the best CRM as well. They’ve got so much on their plate dealing with data issues, purchase orders, multiple warehouses and all this complexity. It’s just beyond comprehension that they could produce a great repricer. In our world we’re the guys who have invested the most in repricing. And we have some pretty cool plans in terms of how we can show opportunity. I would like to be in a world where we can help people sell more, and get rewarded for that.
Why did you acquire Reply Manager? What’s the strategy there?
Ray Nolan: Well, because they were our only competitor. As pure marketplace ecommerce support goes, they have the nearest thing to what we have. They have got a great product, they are a great business. They’ve been around a long time. Jodi the CEO, remains the CEO of that business, and she does a phenomenal job. We have no plans to change it substantially.
But we want to give people an option. We regard it as a slightly different product in that it is a way of compartmentalising your incoming communications from your customer, and certainly speeds the response. It hasn’t got the same level of integration that Fusion has, but many of their customers don’t even have any marketplace ecommerce connectivity.
They have guys who sell stuff online, but also travel agents use Reply Manager to handle incoming mails and deal with time zones and support across multiple jurisdictions. There are similarities, but they’re not the same. It’s great to work with them, and they’ve got a big customer base which has been great. We’ve been able to make offers to our new Reply Manager customers, and some of them are taking up our offers on Price Manager.
Like all SaaS businesses there will be churn, but if people are planning to move away from Reply Manager we want them to think about Fusion. We’ll make sure they know how it works. So it was a great buy, great company and so ingrained in the culture of marketplace ecommerce, particularly in the US and with many customers around the world. It’s been really great to work with them.
Victor Corcoran: It gives us a scale and access to the US. We now have a team of live support in US time zones, based in the US, and we can provide support for them in Europe. There’s a lot of synergies with scale that comes with it as well.
If someone who sells on multiple channels is looking for a customer support tool, how do they choose between Fusion and Reply Manager?
Ray Nolan: Some of them will choose on price. Reply Manager is cheaper. Reply Manager’s model is not ticket count, it’s sold on storage. So you get a certain amount of “hard drive” for your base subscription fee. You purchase more space as it is needed. So I think it’s horses for courses.
I’ve come from an online travel world, and I was around when the people who owned Expedia just bought Hotels.com. We once said, “Surely they’ll merge the two as they’re fundamentally the same offering”. But they’re both still here ten years later. The same way as companies make ten different washing up liquids, it’s absolutely sound that we would own two similar but not the same offerings in the same space.
What’s next in the pipeline at XSellco?
Ray Nolan: We have six or so streams of development in terms of new products, and enhancements to existing products. In terms of eBay repricing, the move from eBay to effectively an ASIN [Amazon’s product code] world, makes repricing more possible. It relies on everybody adopting those ASIN models, but that’s a logical thing to do. Or we could just replicate the Amazon price into eBay for you. We’ve got to keep thinking along those lines for eBay repricing.
But soon to be released tool is feedback solicitation, writing to customers and asking them to rate you highly on the marketplace. We are bringing out a feedback solicitation tool which will allow you to filter products and orders, and send a request for a rating via the Amazon and eBay API links. It will be called High5. People are already beta testing it, and they seem to like it a lot. The beauty of it is you can filter out the more simple products, and tune the message based on the product that was sold, the jurisdiction it was sold in and so on. There’s many, many rules that you can apply.
Victor Corcoran: It’s very simple but easy to use powerful software, with a lot of strong options. At a very basic level you can set it up as little as a couple of minutes. We have had the beta test live for over a week, we’re adding customers to it, and it’s getting very positive feedback.
Ray Nolan: It’s part of our goal, because we think price and we think reputation. That’s the same as the corner shop in your village, price and reputation. If you deliver a decent product on time at the right price, people will keep buying from you. This is more on the reputation theme, how do we get people that have had a great experience buying from you to rate you highly?
It may be that you find that the product that you’re selling is extremely complex, and involves a lot of customer support or maybe, God forbid, you have a bad batch or a bad product. You may decide not to include those people in your feedback solicitation. Maybe you only want to write to people that bought something that can’t break and was delivered on time, because we know the delivery date and know you’ve beat the expectation, so the customer should be happy. High5 is coming in a matter of weeks.
We can direct the seller, we can look at their products, and we can show them opportunity
Then in terms of the vision, we see data. We see a lot of data. We think we can provide opportunities for people to illustrate where they can sell more products, and that’s pretty exciting. For example, if you sell shoes in the UK, and you’re selling them at £95, should you sell them for the same price in Germany? Maybe you haven’t seen that the same shoe sells for £150 in Germany.
People carrying 10,000 products are by no means big sellers in terms of channel sales. But if you watch 10,000 products hard enough there will be opportunities where, for example, in France there’s nobody selling this particular item and you could sell it there for much more. We have instances where products sell for 40% or 50% more just by putting it into that marketplace. So we can direct the seller, we can look at their products, and we can show them opportunity. I see opportunity in data and I think that by being true to our values, and trying to be aligned with our customers and trying to make sure that they make more sales, that’s where we will deliver pretty exciting stuff to people.
Finally, you are both seasoned business people. How does XSellco compare to what you’ve done before?
Ray Nolan: I’ve been in involved in many different businesses, all of them software and pretty much all of them made a profit and serviced their customers well. But this by some margin is my favourite business in a long, long time. The reason is I’m a programmer of old, and computing was originally designed to take pain out of peoples’ lives, and deliver them something new and brilliant. And we have the chance to do that.
We’re not at the drudgery end of software, we’re at the exciting end. You should be delighted because you made more sales, or you finished work at three o’clock instead of seven o’clock, because you’ve got your customer support dealt with. That’s why it’s a great sector to be in. We’re here, we’re going to continue to develop new software. We’re not resting on our laurels.
We’re not at the drudgery end of software, we’re at the exciting end
Our current live customers do four billion dollars in sales every year. We are effectively only a year in this space with our current tools, our customers are selling a lot, and our job is to help them sell more. So it’s a hugely exciting place, you know. I love it. I’m not a full-time executive here, but I came in and we saw the vision for the next product, and how we might think about data. It’s a beautiful world when you are into data like I am.
Victor Corcoran: What I love about this space in comparison to telecoms, is that customers get a free trial of products. There’s no credit card, no commitments, they can try the products and then it’s up to the products to sell themselves. As long as we continue to deliver great software as we have done up to today, then this business will deliver itself.
Andy: Ray, Victor, thank you for sparing your time and sharing XSellco’s story. Your focus on customer satisfaction is a great example for marketplace sellers to follow.