PetSmart acquired Pet360 for $130 million in cash and up to $30 million more in future performance-based payments.
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This kind of outsourcing helps get retailers online faster and with less fuss. Even highly packaged e-commerce solutions can be difficult to set up, points out Leah Knight, an analyst at Dataquest, a research firm in San Jose, Calif.
Open Market competes in the hosted storefront arena with ShopSite, a company it acquired in May 1998 that plays at the lower end. “We’re attractive to companies that have less than $10,000 per year to spend on e-commerce,” explains Nathan Rawlins, ShopSite’s product marketing manager. “Quick, easy and inexpensive is our mantra. We’re trying to be what QuickBooks is to management.” Online retailers using ShopSite include the L.A. Dodgers, Amtrak and Radio City Music Hall. Granted, Radio City Music Hall is not a small business, “but they’re running their online store as a small store,” explains Rawlins.
Both Open Market and Intershop’s hosted solutions are available in varying degrees of functionality, which means the software prices that retailers have to pay escalate accordingly. With Intershop’s E-pages, merchants can set up “mini-stores” on a server. With Hosting Edition, retailers still share a server with other merchants, but win more space, reducing the time it takes to search and load pages. The top-of-the-line hosting product, Merchant Edition, offers retailers their own server.
Getting what you pay for
Although Intershop and Open Market dominate the hosted storefront field, numerous competitors have been popping up, particularly at the entry level. “The Web store is quickly becoming a must-have for the portal,” says Baltaxe pointing to Yahoo! Store. Even IBM gets into the act with its Homepage Creator, a very basic catalog solution.
One caveat: you get what you pay for. Retailers trying to hawk a few T-shirts can get by on entry-level merchant software. But once a store’s inventory and customer base begins to grow, they need more horsepower. Unlike high-end applications, these solutions limit the number of products that can be sold and usually don’t link a store’s catalog with important back-office operations like inventory and shipping. “A storefront is the easy part of the overall process,” says David Liederbach, director of e-commerce marketing for IBM Net.Commerce. “The game is won when you’re able to provide a higher level of sophistication for business functions beyond the storefront.”
Online customers are no longer content to fill a shopping cart and check out. They want to find out whether the product is in stock right now before fishing for their credit card. If they’ve already placed an order, they want to know when it’s going to show up on their doorstep.
With fancy graphics on their storefronts, it’s easy for small merchants to look like major players online-at least initially. But that smoke-and-mirrors illusion only lasts so long. If sites don’t meet consumer expectations, retailers will not win repeat business.
Today’s online shopper is getting discerning, and tomorrow’s shoppers will be even more demanding, warn analysts. “Internet shopping has moved beyond the early adapters and innovators. The next generation of buyers will need more hand-holding,” says Scott Latham, an e-commerce analyst at AMR Research, a Boston research firm. Parents of Baby Boomers may be e-mailing birthday cards to their grandchildren, but their technical savvy only goes so far. If a site is hard to navigate, shoppers will lose patience quickly-and retailers will lose sales just as quickly.
With that in mind, functionality becomes a key theme today and vendors are beefing up commerce server software to be more intuitive. In the pipeline is greater integration into back-end systems, content management and personalization. “Personalization has been around for awhile, but it keeps getting better and better,” says Knight at Dataquest.
Chipshot.com, an online golf retailer, has been using its own software since its Web debut in 1995. But recently Chipshot.com turned to BroadVision, a major software developer based in Redwood City, Calif., for stronger profiling and personalization capabilities. “If you come to our Web site and read three articles on Tiger Woods, we would tag you as a Tiger Woods fan and target you with appropriate product. We can’t do that with our current application,” says Rajeev Goel, vice president of technology at Chipshot.com in Sunnyvale, Calif.
Presenting the right products
Because his company offers a large variety of custom golf equipment, Goel wanted to leverage customer profiles with its product database. “We need to learn as much as possible about our customers in order to present them with the right products quickly,” explains Goel.
Presenting merchandise and services consistently is another new spin, as software companies enhance their products. InterWorld has won kudos for its process-centric software, which allows retailers to use the same business models both offline and online. But now “channel synchronization” is a new buzzword. Explains Rich: “We’ve focused for a long time on the how-process centric computing-but we realized it’s now more appropriate to focus on what retailers can do with this.”
The issue at stake is “channel shifting,” says Rich and InterWorld has refined its product to help retailers provide consistent service across channels. Say that a shopper is on a major gift-buying spree and wants to have purchases shipped to different addresses-and pay with different credit cards. You can do that in a store, you should be able to do the same online, says Rich.
If the customer has been shopping exclusively online, then suddenly walks into a bricks-and-mortar store one day, retailers need to recognize that he or she is a preferred customer and extend appropriate incentives and service. “Companies want that overall channel integration capabilities so that it so doesn’t matter where that customer comes in-they’re able to take the deal down,” observes Rich.
When it comes to winning market share in the commerce server arena, it’s still a horse race. “We’re about at a quarter mile and none of these vendors have really broken out,” says AMR’s Latham.