Welcome to the first edition of our new bi-annual investor newsletter. In this newsletter we plan to provide updates on the company and its customers along with the deeper information you need to fully understand SLI’s market. This time I’ll kick it off with an overview of the e-commerce market and where we believe it’s going.
When SLI started business in 2001, the e-commerce industry was in its infancy and the market opportunity for our site search solutions was relatively small. Today that market has matured, vastly expanding the opportunity for our services to improve the bottom line for online retailers around the globe.
Worldwide business-to-consumer e-commerce sales are expected to increase 20% this year to reach US$1.5 trillion, according to eMarketer, with a compound annual growth rate of 17% between 2012 and 2017. RJ Metrics projects that 110,000 English-language e-commerce sites do business today. We believe that only a small portion of these sites have sophisticated site search capabilities in place. SLI is well positioned to capitalize on this global e-commerce growth. We have the people, processes and technologies to service a large number of retailers globally.
With this continued growth the online retail market is moving toward more personalized experiences for individual shoppers. By providing each individual shopper with a specific, tailored experience, websites are able to further improve the customer experience and ultimately sales. SLI is well positioned to be a leader in this personalization trend. Our products are all built on patented technology that allows the website to “learn” from each individual shopping trip and to use the discovered information to present shoppers with an online experience that results in higher sales for the retailer.
SLI offers Software-as-a-Service (SaaS) solutions to provide websites with site search, navigation, product recommendations, and user-generated Search Engine Optimization (SEO). SLI solutions increase the top line for e-commerce sites by making it easier for their customers to find what they are looking for and therefore easier to purchase. And this year our opportunity to help retailers improve business has just increased with the introduction of our two newest products – SLI Learning Recommendations™ and SLI Dynamic Product Banners™.
Learning Recommendations, an extension of the company’s foundational product SLI Learning Search™, displays highly relevant product recommendations in different areas of websites. Because the product automatically learns based on previous shoppers’ behaviour, Learning Recommendations can display the products that are likely to succeed in driving incremental sales for the retailer.
Dynamic Product Banners reduce bounce rates by showing related products to visitors arriving on product pages from Internet searches. By presenting shoppers with alternatives that are proven relevant to the products they have chosen to view, Dynamic Product Banners increases conversion rates and hence revenue from those people coming from search engines such as Google.
And we have the results to prove it. For example, U.S. educational products retailer Lakeshore Learning saw a 30% increase in revenue on its e-commerce site after implementing SLI solutions. Chemist Direct, the UK’s leading online pharmacy, experienced a conversion rate improvement of 175% and a search average order value increase of 196%.
We passed a significant milestone of a year and a half as a publicly-listed company and we are proud of our achievements during that time. Over this period we continued to build on our strong record of sequential growth. Annualised recurring revenue (ARR1) – our key measure of financial performance – rose 29.4% in the year to 30 June 2014.
We have expanded our client portfolio with some exciting names this year including Battery Mart, LakeShore Learning, Exclusively Wedding in the U.S.; Brazilian pharmacy store Ultrafarma; Bathstore, Paul Smith, Jigsaw, Claire’s Accessories and Eason in the UK; and Kathmandu in Australia. These customers join names such as Fabergé, Sports Authority, World Soccer Shop, Harrods, plus many others.
We are excited about having Neil Thomas join SLI as Chief Revenue Officer and President of North America. Make sure you read our article on Neil in this edition.
We are also enthusiastic about the holiday season and the role SLI solutions will play in this critical time for retail. Our focus in the coming year is to ensure that the significant investments we have made in the business continue to deliver long-term value. We remain confident we can achieve these goals.
1Annualised Recurring Revenue (ARR) is calculated based on the subscription revenue generated from the existing customer base in the reference month and then annualised. ARR is calculated based on the exchange rates at that time. When ARR is presented for a historical time series all points are calculated on a constant currency basis.