A Forrester Research report analyzes the early successes and failures of Apple’s mobile payments system.
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Although Big Al`s could have developed similar functionality in-house, it would have been a difficult and time-consuming project, Hamilton says. "If we had to develop this with our own design team, we probably would not have it done in time for this year`s holiday shopping season," he says.
In some cases, retailers may even decide to take back in-house certain outsourced operations as they develop expertise and reach levels of critical mass that make in-house operation more cost-effective. Since launching in 1999 on a turnkey e-commerce platform provided by Fry, Crate and Barrel, for example, has taken back some operations to have more control of directly making and scheduling changes in functionality of its site, Seebeck says.
"When the Internet first came along, companies like ours didn`t have the experience to go online, so it made sense to get help from outside for building and hosting a web site," he adds. But with a large in-house graphics department for its catalog and store operations, Crate and Barrel is now using its graphics expertise more directly on the web instead of always resorting to Fry. "We`re about to launch zoom on our site, but by not relying on Fry to do the whole project, we`ll know how much time it`s taking day to day," he says.
There also are cost advantages for Crate and Barrel to taking some things in-house if it has the level of in-house expertise, Seebeck says. Fry continues to provide site-hosting and managed services, including monitoring key performance indicators like web page download times.
The right mixture
While finding the right mixture of technology services is important to any outsourcing relationship, perhaps nothing is more important than the trust a retailer has in its technology partner, experts say. When Wilsons decided to go with GSI, it realized that it was going with a company for which apparel was a new category. GSI Commerce just started serving apparel retailers this year.
"They are not as fashion aware as we are," Angelacci says. "But we felt we could teach them that aspect, because they offered the most flexibility in what we were looking for. They have extensive experience with search engines and affiliates--experience we don`t have. And because we`re working with them in a revenue-sharing model, we feel they have an incentive to build our business. It`s a great partnership."
At CrazyGrazer, Hall says he became comfortable with Vcommerce as an outsourcing partner after he learned about its aggressive approach to serving the retail market. Its innovative products would free him up to concentrate on marketing and merchandising, he says.
"Like us, they were a young, aggressive company that wouldn`t let anything get in the way," Hall says. "From an attitude standpoint, we hit it off with them right away."
Outsourcing one piece at a time
While retailers like CrazyGrazer, Wilsons and Big Al`s prefer to outsource their full e-commerce platform, others outsource only pieces to optimize overall platform performance. CompactAppliance, for example, owns and manages its own e-commerce platform including order management and inventory management, but it outsources its site search function to Atomz, its site analytics and e-mail marketing to Manticore Technology Inc. and its live chat and inbound e-mail technology to InstantService.com. Although it operates its own customer service call center, it also outsources an after-hours call center operation to Proxy Communications. "That allows us to spend more time on our core business of marketing and merchandising," says Jason Roussos, senior vice president of strategic development for CompactAppliance.com.
Retaining several outsourcing partners can bring both benefits and challenges, he adds, because each outsourced operation can offer more functionality than a small retailer like CompactAppliance is likely to use in the short term, and because each requires monitoring to assure it adheres to the retailer`s objectives.
CompactAppliance chose Atomz to replace an in-house site search function that offered basic search without an easy way to modify results or integrate with cross-selling and marketing efforts. "Now we can go in and assign different relevancy to particular products in search results to promote certain products and brands," Roussos says. "There`s so much we can do with Atomz, it`s almost overwhelming."
When a CompactAppliance shopper searches for a particular product or category, parts of the search function will leave the CompactAppliance.com site to operate on an Atomz-hosted server. Though unnoticeable to most shoppers unless they notice slight changes in the URL address of each page of the search function, the server-switching routine is a process the retailer must monitor for reliability. Roussos reports no problems, however. "We`re getting better conversion rates," he says.
In some cases, outsourcing can improve a retailer`s ability to monitor its own employees` skills and effectiveness. By outsourcing its inbound e-mail and live chat technology to InstantService.com, for example, CompactAppliance can use its partner`s servers to run reports on its customer service agents` activities. "We can see who`s doing more live chat sessions, and we can check the grammar of text of e-mail messages," he says. "If we set a policy that all customer e-mail must be replied to within an hour, we can run reports to show if agents are meeting that."
To build such a system in-house, he adds, would have been costly in terms of both money and time. "We have our own internal e-mail system on Microsoft Exchange, but to install software like InstantService, do it well and maintain it, would take a lot of time and IT resources," Roussos says.
CompactAppliance also keeps close tabs on its outsourced after-hours call center. "There`s a big concern with how call center outsourcing can maintain brand and service levels," he says. "But we can monitor calls to make sure they`re not taking too long, if service is not professional or if a call came in and was not relayed to us. We`ll also look at total sales vs. calls billed to us to see our return on investment."
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