The new realities of online retailing require technology that is flexible and scalable
Two years ago, the online retailing market seemed to be hitting its stride. In mid 2003, sales were on track to hit $54 billion for the year--continuing a string of 25%+ annual growth rates that had been the norm since the dawn of the market eight years earlier. Practices were well established by then and customer satisfaction was high.
But hindsight shows that the market was still developing and only two short years later much of the technology that retailers had implemented is inadequate for the new realities of the marketplace. "E-commerce systems today need to handle a wide range of solutions," says David Fry, president of Fry Inc., web site design, hosting and technology company. "Web sites don`t operate in isolation today; they could need as many as 20 integration points."
Part of the mass market
The new technology requirements are the result of the mainstream adoption of online shopping. "We are way beyond the era of the early adopters when just the Internet savvy consumer was shopping online," says Ruud van Hilten, senior director of Business Consulting Services, of e-commerce technology provider BroadVision Inc. "With the penetration of broadband very deep into European households and building in the U.S., online shopping has now hit the mainstream. We`re part of the mass market."
That move into the mainstream has broad implications for the technology that drives retailers` e-commerce web sites, not the least of which is the ability to create a cross-channel experience. "Shoppers` behavior is substantially different from what it was before," van Hilten says. "People use any channel to interface with the retailer--it`s not Internet only; it`s any channel any time. That forces retailers to tie the channels together more closely than they had to a year or a year and a half ago."
The new retailing reality forces retailers into complex technology management. "One of the biggest changes in recent e-commerce history is that it is no longer feasible for retailers to run their e-commerce applications in a silo," says John Marrah, president of e-commerce software and solutions provider Ecometry Inc. "E-commerce has now become a part of a broader technology footprint, as well as a broader business model. As a result e-commerce requirements have changed over the past two to three years."
And not only have requirements changed, but the technology has failed to keep pace with those changes, meaning that retailers today are at a major crossroads with their technology decisions. "Most of the retailers we talk to are the more sophisticated retailers who have been online since the mid and late 1990s and they are at the end of the commerce platforms that got them into the business," says Jeff Max, CEO of e-commerce platform provider Venda.
Uniting e-commerce, marketing
Among the primary changes that is forcing retailers into technology decisions is the intertwining of e-commerce and marketing, Marrah says. "Retailers are segmenting their customer databases to create extremely targeted campaigns to drive traffic to their web sites," he says. "Using click stream data from the web sites, they get instant feedback on the impact of their marketing activities on traffic and conversions. To improve their profiling, sophisticated retailers analyze the relationships between the targeted segment in a campaign and the pages they viewed and items they bought."
Retailers use that information to create micro-segments of customers and to identify additional cross-sell and upsell opportunities. "As a result, most companies are looking for an integrated analytics and e-marketing capability within their e-commerce platform," he says.
Successful retail sites are thus forced to adopt numerous components that feed into each other and add to the further complexity of web sites. "Web sites cannot be giant monolithic structures any more," Fry says. "They need to adopt a component system. And that in turn means there are many more monitoring points that retailers need to be aware of."
Among the areas that retailers could need expertise in today are messaging interfaces to fulfillment, EDI links to inventory and SOAP interfaces to Amazon.com, if they have a presence at that site, Fry says. "That all adds to the complexity of a web site," he says.
Van Hilten stresses that BroadVision seeks to remove the rigidity from e-commerce systems. "Retail web sites must have agility and be able to launch new applications quickly," he says. "Demand could arise overnight."
Old platforms in a new market
Indeed, says Max, many retailers have sought that flexibility for some time and have failed to find it in their existing e-commerce systems. "Many feel that they`ve spent a tremendous amount of money and the promise of flexibility never came through," he says. "Today, they`re on an antiquated platform in a fast-moving market."
What Venda and most e-commerce technology vendors say they are providing these days is on-demand computing. One of the new technology buzzwords, on-demand computing means that the technology provider hosts the applications and hardware and makes the computing power available to users when demand arises. It also provides automatic technology upgrades. But Max cautions that retailers must make sure they understand which companies offer true on-demand computing and which don`t. "There`s so much noise from competing vendors it can seem overwhelming to make a decision that can affect you for the next five to seven years," he says.
The decisions all come back to the two words that vendors stress these days: flexibility and scalability. "If the tools deliver as promised, merchants will see unbelievable growth in revenue," Max says. "They better decide if the solution they`re choosing can take them there." Further, he adds, retailers need to examine the health of vendors. "They need to determine if the vendor will be there in the future and look at the vendor`s viability and profitability," he says.