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 ...
E-retail executives reveal e-commerce technology and services buying plans.
Web retailers are clearly on a shopping spree for more e-commerce hardware, software and systems.
Specifically, more merchants are creating a prioritized shopping list and looking to purchase a diverse array of applications and services that expedite order processing, analyze shopping behavior and give shoppers more personalization tools, according to the results of Internet Retailer’s latest monthly survey-this one on e-commerce technology spending intentions.
The research, which includes responses from 195 chain retailers, catalog companies, virtual merchants and consumer brand manufacturers, reveals that 78.2% of the retailers surveyed plan to increase their spending on e-commerce applications and services this year. Just a few years ago retailers made do with outdated internal systems and first-generation third-party applications as they coped with a bad economy. But the Internet Retailer survey, based on feedback from 57 chain retailers, 25 catalogers, 85 virtual merchants and 28 consumer brand manufacturers, shows more companies will increase their spending on a wide range of new applications and services.
To pay for new technology, retailers are funding bigger budgets. The survey finds 10.1% expect to spend as much as 50% more on e-commerce technology this year, while 9.4% will increase their spending from 26% to 50%, and 41.9% between 11% and 25%. Only about a third-34.5%-say their expenditures for new systems and services will grow by 10% or less. “Retailers are spending more on a wider variety of applications and services because they want to keep pace with giving their customers a better shopping experience,” says Mike Brinker, e-commerce and web channel solutions leader for Deloitte Consulting, a unit of Deloitte & Touche LLP. “An e-commerce site needs to do more than just process a transaction. The merchants using updated technology today and getting ready for anything, anytime and anywhere Internet retailing tomorrow are the ones that will remain the most competitive.”
The survey was e-mailed in early June to all subscribers of IRNewsLink, the magazine’s e-newsletter, and all responses were collected and analyzed by Vovici Corp. (formerly WebSurveyor), which has partnered with Internet Retailer in a series of surveys on the e-retailing industry. 31.7% of retailers participating in the research operate with an annual e-commerce technology budget of $50,000 or less, compared with 29.6% with yearly budgets ranging from $50,001 to $200,000; 13.7% from $200,001 to $500,000; and 8.5% from $500,001 to $999,000. On a larger scale, the survey also finds that 12.1% of merchants maintain annual e-commerce budgets of $1 million to $2.5 million, 5.8% from $2.501 million to $5 million and 4.4% at more than $5 million.
At nearly one-half of companies taking part in the research-46%-the main technology buying decision maker is the CEO followed by the chief marketing officer at 11.6%, and chief information officer at 11.1%.
Regardless of the size of the budget or which executive has the final OK on spending, web retailers are prioritizing their e-commerce technology spending, beginning with an updated e-commerce platform. The survey finds that a new e-commerce platform is the top priority for 28.8% of companies, followed by web analytics at 14.7% and site search software at 13.6%. Fourth on the list of priorities are new order management and customer relationship management applications, each with 8.7% of survey respondents ranking it as a key purchasing objective.
A new e-commerce platform with advanced modules for order processing, content management and customer service can cost an e-retailer from $100,000 to $400,000-more depending upon customization and the number of end users.
But a state-of-the art e-commerce platform can also be used as a competitive edge for retailers that want to use the web to drive multi-channel sales and offer more interactive content and personalized shopping. The survey finds that purchasing a new e-commerce platform within six months is a top objective for 23.4% of all companies. An additional 14.4% plan to purchase a new platform in six months to a year, 16% within two years and 6.4% in more than two years.
“A first generation system is adequate for basic order processing, but it probably isn’t capable of handling all of the multi-channel initiatives customers want to use on an e-commerce site,” says Rob Garf, vice president, retail strategies at AMR Research, a Boston e-commerce technology and retail systems research firm.
Some retailers see a new e-commerce platform that’s integrated with a wider range of back-end systems and databases as the most expedient means of keeping up with a business-to-consumer e-commerce market that is projected to grow at around 20% to an estimated $172 billion in 2007. But other retailers believe that updating specific applications such as web analytics, site search software and order management programs is the best way to attract shoppers and boost average orders and sales conversions.
The survey finds that 29.4% of companies will purchase a new web analytics program in the next 12 months, compared with 13.4% within two years and 2.7% in more than two years. A total of 44.7% of retailers also expect to purchase a new order management system within 24 months, including 16.5% by the end of the year or in early 2008 and 28.2% within two years. On the front end, site search applications, especially programs that guide the user intuitively through a query and deliver an array of personalized results and recommendations, are a priority. 24.9% of retailers in the survey plan to purchase an advanced site search program within six months and 32.2% in six months to two years.
“Programs that guide visitors through the shopping process quickly and intuitively and tools that give retailers access to real time information across multiple channels are in demand,” says Sahir Anand, retail research analyst with Aberdeen Group, a Harte-Hanks research company that covers technology in various vertical markets, including retailing. “Real-time data helps retailers do a better job of knowing their customers and reacting to changing behavior.”