Moat: Network Effect Network Effect Importance Comments 1 Big Network ~50 retailers and ~10,000 suppliers. 2 Attraction is increasing Every joining retailer and/or supplier makes the network even stronger. • If 10 retailers want to onboard a new supplier, they would do 10 times collectively. 3 Economies of scale of • If all of them are CommerceHub’s customers, onboarding onboarding will happen only once => massive collective savings and CHUB would retain some of them. • Network effect makes CAC incredibly low. Incredibly low customer • CHUB Dropshipping business is 4 acquisition costs (CAC) growing 17% - 18% with S&M at ~10% of revenue while most peers are spending ~30% to achieve the same level of revenue growth. Caro-Kann Capital LLC 33