The e-retailer heads into the holiday shopping season behind a 30% increase in fulfillment spending and a widening net loss. North American sales increased ...
Some retailers don’t want to make programmers and software developers rich, so they turn to open source software to create home-grown applications.
When liquidation site ReturnBuy.com was making plans for a site upgrade last fall, it wanted an e-commerce platform that had it all: scalability, operating efficiency and the capacity to handle a very complex inventory mix. “We don’t offer just one variety of the same unit of product,” says CTO Greg Scharer, definitely understating the challenges facing the b2c site that sells returned and refurbished goods in various states of completeness and repair. “We may have hundreds of different copies of one product, with different states of condition for each one.”
When Scharer submitted the wish list to several software vendors, the response was an eye-opener. Two things were clear: the cost of all that functionality was more than the company was prepared to spend, and the packaged applications-even with customized adjustments-still wouldn’t do everything Scharer wanted.
Though ReturnBuy in January filed for reorganization under Chapter 11 of the Bankruptcy Code with debt of as much as $10 million, it would seem it wasn’t overspending on technology infrastructure that burdened the bottom line. Finding neither the price tag nor the functionality in packaged applications to make them feasible, ReturnBuy turned to a solution that’s found favor with a satisfied group of mid-range e-retailers: a platform based on open source software built at a fraction of what it would cost off the shelf.
“In boom times, the message to IT leadership is get it done fast. Cost is not a major factor,” Scharer says. “But decreased revenues and increased corporate focus on cost containment make open source an attractive option.”
The idea behind open source is that web developers who create useful applications around a piece of software will put the applications-and the program codes-back into the developer community for free use. The goal is to accelerate software development and share the information. This kind of development, according to statements of the Open Source Initiative, a non-profit corporation of web developers organized around the issue, “produces better software than the traditional closed model, in which only a few programmers can see the source.”
Open source operating systems such as Linux and web servers such as Apache already are in commercial use. And recently, retail-focused applications have been developed on a number of platforms such as Interchange and the Open for Business Open Source Project, which offer an alternative to more expensive packaged applications sets.
Attractive though they may be in terms of cost, are they practical in e-retail? “In many cases, the open source solution is proven, scalable, and incredibly well-supported,” says Jupiter analyst Matthew Berk, cautioning, however: “The more exotic you get with an open source component, the less likely it is to be any of those three things.”
Top-tier e-retailers such as Amazon.com regularly create their own applications, but they have dozens or even hundreds of web developers in-house to do it. Now, in the space between an Amazon and two guys in a garage, open source is getting more attention among mid-size retailers attracted not only by cost savings, but also by the growing number of professional web development firms that support open source.
The cost savings are in the form of software licenses. Building its e-commerce platform internally with the help of web development company Zeneski, Jones and Associates, to which it paid consulting fees, ReturnBuy got for an initial $200,000 to $250,000 what it would have cost about $700,000 to buy off the shelf. Its main cost beyond hardware and internal resources was in consulting fees. The company realized significant savings by skipping the licensing fees attached to commercial software, Scharer says. In addition, Scharer estimates that going forward, open source will save about $150,000 a year in software maintenance fees, which run a yearly 10% or more of the upfront licensing fee.
The company has contracted with the web development firm for designated hours of support each month, but because the internal team worked with the developers on building the platform, ultimately taking on responsibility for about half the project, Scharer believes they’re equipped to handle most issues that might arise.
Driven by individuals frustrated with the constraints of commercial web development, open source culture historically has harbored a degree of
anti-establishment sentiment. “There is a developer mentality out there that if you have outdone the big boys, you should share it with the world,” Berk says. Now, many in the developer community, such as the Open Source Initiative, actively encourage commercial use of open source tools.
“We are seeing a maturation of the software and increasing education in the community-both retailers and the development community-about what is out there for less money,” says Ben Goldstein, CEO of web development company End Point Corp.
The possibilities are pushing some retailers into the sphere of web development. “We really don’t want to be a software company. We’re retailers,” says BackcountryStore.com vice president of marketing John Bresee. “We’re happy to outsource whenever it makes sense to outsource. But we’re at the point now where there aren’t companies making what we need. Of if we find a tool we like, the price tag is not in line with what it’s worth to us.”
Case in point is the sniplet generator, a handy application for which BackcountryStore.com has developed its own version, based on open source software. BackcountryStore offers its online sniplet generator to its affiliate sites as an ad-building tool. Affiliates choose from BackcountryStore inventory the items representing the brands, product categories and price points that best match the content of their site.
Any retailer could build a sniplet generator using open source, but at least for now, you can’t buy one off the shelf, notes Bresee.
The sniplet generator provides product images and short descriptions of the items, even ranking the best sellers among the products selected. Affiliates can customize the look of the ad to match the look of their sites, with options for table width, font size, link color and more. Critical to the sniplet generator’s ability to drive sales is that the affiliate’s link remains fresh-the online tool automatically updates the ad every day, revising the selected item’s availability, price and best-seller status. “You’re never directing a shopper to an out-of-stock product,” says Bresee.