Daniel Lentz: We have more than enough sales capacity for the internal targets that we have set up, I feel confident about that. We also have really, really good ramp times with new reps. as growth starts to pick up, I’m really confident that we can add capacity and it will not be a barrier to our growth.
Operator: The next question will come from Parker Lane with Stifel.
Parker Lane: I was curious, Brent, if you could talk a little bit about the demand gen between your internal go-to-market teams and partner led motions. And there’s a lot of restructuring efforts around go-to-market and things that you’re emphasizing more now. But with the emergence of that partner channel, how much of the business is being driven by those two components?
Brent Bellm: For our enterprise plans, which are of course more than 70% of our total ARR, partners have over time driven between 35% and 40% of the top of funnel lead flow that ends up converting. And it’s probably running closer to 40% right now. Our agency partners and technology partners are really tremendous at working with us and helping us go-to-market and win business together. What is incremental now to our go-to-market motions are improvements in the way we outbound prospect, whether it is in our sales development rep channel or it is in with our enterprise AEs, there is an incremental amount of outbound hunting that we are doing, I think rather successfully. And then finally, I’d emphasize our events focus. We are really showing up at quality events with a quality presence and looking to get whether it’s category or vertical specific events or generally commerce industry events, we’re showing up with a strong big commerce presence, strong partner presence and trying to prospect as effectively as possible in those areas and we see great returns from those channels.
Parker Lane: And then I know it’s early, but you announced or have disclosed a bunch of different AI advancements over the last couple of quarters here. I’d love to hear your thoughts on how you think that transforms the e-commerce landscape and how it translates directly to merchant growth and success over time?
Brent Bellm: I’ve said in the past that I think our Feedonomics subsidiary has arguably already the best AI engine in the world of e-commerce. Why? Because their Feed AI is extraordinarily powerful and optimized for taking a merchant’s product catalog and then transforming it to perform through the Google schema. A typical business has out-of-the-box only about a 60% MACH rate in words for performance in the Google schema and Feed AI automatically will get that to over 95% and then sort of human movement intervention will get from 95% to 100%. What that does though is it lets a business perform optimally through Google Shopping, Google Ads and listings. And Google and search in general is on average, we see with our customers something like 35% to 40% of their last click source of GMV.
It’s an extraordinarily big channel. And Feedonomics is the best AI in the world for optimizing that. And by the way, most other ad channels, social networks, search engines, affiliates, display ads, kind of utilize the Google schema, not perfectly, but once you optimize using Feedonomics for Google, you are 80%, 90% of the way there to being able to add and perform optimally through any other advertising channel. There’s nothing else that’s going to boost the top-line bigger than that, that I know of. On top of that, I mean, just to be very quick, our other, some of our AI products are already live and that includes both how we’re using AI to better serve customers through chat and give them better answers directly, AI for creating product listings and content around that.
We’ve announced partnership with Google around product recommendations that we’re really excited about and have seen great testing results. A few other things and then there are already dozens of very good AI products live in our apps marketplace. So there’s widespread impact across all of those, but I always like to anchor on what Feedonomics can do for ad channel performance really starting with Google.
Operator: The next question will come from Samad Samana with Jefferies.
Unidentified Analyst : This is Jeremy Staller on for Samad. So last quarter you guys called out some customer launches being delayed until after the holiday. I guess, can you provide an update on whether all of these closed and what the impact was on the quarter? And then you mentioned in your prepared remarks that the sales cycle remains lengthened. Are there any new deals that you expect to close this quarter that are being pushed out further?
Brent Bellm: Well, in terms of launch, one really big customer is launching right now. In fact, I’ve already done transactions on them and we’re very excited about that. We had a good quarter for enterprise launches in Q4. We’ll start to see that GMV ramp this year. And then in terms of sales cycles, it’s I think a continuation of the story of last year. They’re just longer than they were before 2022. They happened a lot faster, well, especially during the pandemic, but pre-pandemic, sales cycles were shorter, they’re longer now and it’s just a reality that we’re living in until and unless the economy changes.
Unidentified Analyst : And then I guess as you shift this new like land that expands heavy model, I guess how are you thinking about NRR for 2024? Is there room for that to move? How much room for that to move above 100?
Daniel Lentz: I think there’s room for it to move above 100. But going into the year, our outlook is kind of based on an expectation that 2024 is going to look pretty similar to 2023. If that’s all of the motions that we are taking on the go-to-market side are specifically geared towards addressing that number because we think it is almost, if not the best, it’s one of the best long-term indicators of growth in any SaaS business. So that’s a clear area of focus for us. Just to be clear about how we’re thinking about the year, however, we’re building our plans assuming that 2024 is going to look a lot like 2023 in that respect. And we’re taking decisive action in order to control our own destiny and improve that number.
Operator: The next question will come from Maddie Schrage with KeyBanc.
Maddie Schrage: My first one for you is I’m just wondering if there’s any early learnings from January and February consumer trends? And then my second one is, I’m just wondering if you could talk a bit about the level of B2B penetration that you’ve made so far and maybe how much it’s going to contribute in 2024?
Daniel Lentz: Yes. I can address the first part briefly and then, Brent will take the question on B2B. January February, I’d say so far so good. There’s been obviously differences seasonally, which is normal, which is in line with what we would have expected. What we’ve seen so far is in line with where we set the guide.
Brent Bellm: Yes. On B2B, I am so bullish on where we are and where we’re going there. Remember, we didn’t even have an A2 B2B product three, four years ago. We then started with a partner product that we white labeled. We bought that product. But what’s most compelling now is that our B2B buyer portal has been built inside of BigCommerce from the ground up. It is the best user experience and most powerful buyer portal, we believe in all of e-commerce. And the pace of innovation that we are rolling out, just in the last quarter invoicing capabilities, credit management capabilities, we think that we can and will be over time the world’s leading B2B platform. Our penetration today in B2B is de minimis. And so this is largely upside.
It’s a high percentage of our sales mix. In fact, our general sales mix B2C versus B2B is, I think, roughly in line with global platform spend between the two. And again, for a company that for its first 10, 12 years was B2C only to now be competing as successfully proportionally in both categories, I think is a great testament to the work our B2B team have hold off in the last couple of years. Momentum is very big and I really hope we do earn our way there to being the world’s largest and best B2B platform.
Daniel Lentz: One small thing I would add on top of that as well. Our B2B customers are really excited about the possibility that BigCommerce offers them to pull all of their online and offline orders in together on one platform. And we are not charging transaction fees on offline orders when they are brought into our platform because we’re very much aligning the way we’re going to market with the what our customers are trying to accomplish. And I think that’s a differentiator for us and something that’s really, really been resonating powerfully with our B2B customers.
Operator: Your next question will come from Matt Pfau with William Blair.
Matt Pfau: Just one for me. In terms of the guidance for 2024, just wondering how you’re thinking about the split in growth between the retail and enterprise account segments, because if I remember correctly, relative to where you were originally expecting ’23 to come in, I think retail was a bit better, enterprise a bit weaker than you expected. So just wondering how you’re thinking about that trend into 2024.
Daniel Lentz: Yes. Good question. We’re expecting growth rates in the non-enterprise portion of the business to be a little bit lower than where the enterprise would be. Where we’re focusing our go-to-market resources and dollars remains on the enterprise side, where we see better long-term economics, higher LTV to CAC, but we are not ignoring our small business customers and we’re not ignoring that part of our business. I think it’s just one that we’re very much kind of thinking more about that as more of a self-serve, less sales generated heavy motion just to make sure that the economics stay efficient. And we’re focusing on our ideal customer profiles, which are established small businesses doing hundreds of thousands of dollars a year in the low single digit millions in terms of GMV.
Once you get above that, I think, again, we have an enterprise plan that we can price competitively even for those businesses that are $1,000 around there, a little bit more a month. So, we’re still focused on that part of the business. I’d like to see it stable across the year and then gradually starting to grow potentially as we exit the year, but really, really laser focused on acceleration on the enterprise portion of ARR.
Operator: The next question will come from Josh Baer with Morgan Stanley.
Josh Baer: Thanks for the question and congrats on the strong profitability. Was hoping you could give some more context for the 100% enterprise net retention rate. Just trying to get a sense for the drop, if it’s more a function of this quarter versus the year ago period or if dynamics got worse, better or stayed the same from last quarter? I guess, just in regard to customer downsizing as well as sales cycles, like how did these compare this quarter in Q4 versus Q3?
Daniel Lentz: Great question. The number that we quote, we quote it once a year. It’s a simple average of what we’ve seen across all four quarters. We’ve seen similar numbers across the year. Obviously, the time period that you’re referring to obviously is when we saw the most downgrade pressure, I would say, from existing customers. I think that’s reflective overall in the NRR results for the year. That specific issue has gotten better over the course of the last quarter or two. We’re still seeing more kind of customer initiated downgrades where they’re wanting to, call it, right size their contractual order volumes to the volumes that they’re seeing out of the pandemic relative to the numbers that they thought they would see in some cases when they entered into those contracts during the pandemic.
And as I said, we’re working with customers on that. We end up with higher price per orders. We’re not giving the same volume discounts. Normal pricing negotiations as you would expect, but we’re seeing improving trends in that area. Still elevated. We’re still expecting that to be a little bit higher than where it’s been for us in years past as we think about 2024. But it’s we’re definitely seeing improving trends in that respect versus where we were in mid-2023, like I had mentioned in my prepared remarks.
Josh Baer : And this metric should rebound later in ’24, room for it to go above 100%. But is 100% this quarter the floor or could that dip further before rebounding later?
Daniel Lentz: I mean, as I said, it’s an average across the year. There could be if we think that’s where it’s going to be kind of as a theme for the year as a whole, there may be some quarters that are a little below, there may be quarters that are a little bit above. Part of this is still macro driven. We need to see how the year shakes out. What I’m calling out specifically is how we’re thinking about the year from a sentiment perspective just so it’s clear how the guide has been put together. But we still need to see how the actual year plays itself out.
Operator: [Operator Instructions] Our next question will come from Brian Peterson with Raymond James.
John Messina: Thanks for taking the question. This is John on for Brian. Just one from us here. On international expansion, clearly, it’s been an area of focus for the company to expand internationally. I think in the past you’ve mentioned more of a partner led motion though with that expansion going forward. I’m just curious given the results you’ve seen here internationally, if that’s still the case or how you’re thinking about international expansion as we move into 2024?
Daniel Lentz: Correct. In the first, call it, three, four years of international expansion, we were focused on major new markets where we would lead with both our own personnel in sales marketing and partnership as well as building out a partner network in those countries. So think going from the UK and Europe into France, Germany, Italy, Spain, Benelux, Nordics, as an example. And then what we are doing now is staying strong in those major markets across EMEA, obviously Australia, New Zealand, U.S. and Mexico, Canada. But we’re not looking in last year or this year to put additional BigCommerce employees on the ground in the markets we’re expanding into, but instead work with partners. And we’re seeing very interesting partnerships develop in Japan, in Korea, in India.
