June 28, 2007, 12:00 AM

State of the Industry: Digging deeper

(Page 2 of 2)

Expensive proposition

Investing in a new third-party application such as an e-commerce platform or an order management or content management system can be expensive. Retailers can purchase a basic e-commerce platform with limited features and functions for as little as $25,000 to $50,000. But a more advanced platform that’s hosted, designed to run on a wider variety of back-end systems and databases, and features advanced storefront, order management and customer service modules can range from $200,000 to $400,000, depending on the number of licensed users and custom applications, according to Internet Retailer’s 2007-2008 Guide to E-Commerce Technology.

For a large chain retailer processing millions of annual web transactions, the cost of a new e-commerce platform, including one that’s internally developed using Microsoft .Net, Microsoft’s web services architecture, can easily exceed $1 million. “E-commerce departments are justifying the cost of putting in premium, tier-1 platforms because they are getting the blessing of the executive committee to spend more,” says Jim Okamura, senior analyst at J.C. Williams Group. “We’re seeing more senior management tell the e-commerce department: ‘Keep growing the web,’” he adds.

A new or updated e-commerce platform can help web merchants implement advanced multi-channel applications such as using a web site to locate inventory across stores, catalog and the Internet or for doing a ship-to-store or buy online/pick up in store transaction. A recent survey of about 30 large chain retailers by AMR Research reveals that retailers will increase their investment in order management systems that link the web with other back-end systems from an average of $791,608 in 2006 to $1.7 million in 2007.

Cross-channel interaction

“Purchasing order management and inventory systems that deliver seamless cross-channel interaction is becoming a higher priority for chain retailers,” Garf says. “A cross-channel shopper can generate 4.5 times as much business over the course of a customer relationship as a single-channel shopper.”

A typical business-to-consumer e-commerce site now uses hardware, software and services from nearly two dozen categories-more if the retailer is implementing advanced programs for video webcasts, mobile commerce or social networking. As e-commerce platforms become more interactive, retailers may eventually begin to add futuristic features and functions such as natural language technology, an artificial intelligence application that mimics human language and enables shoppers to interact more naturally with an e-commerce site.

Customer behavior

Another and more immediate objective for web retailers is increased use of web analytics and tools that measure customer behavior, especially in real time. A recent study by Aberdeen Group, a Harte-Hanks company, of 110 retailers with annual sales ranging from $50 million to $1 billion shows 70% of retailers rank the purchase of real-time analytics software that measures both web and multi-channel behavior as their top technology priority over the next 12 to 24 months. That is followed by 53% that plan to purchase new software for better product information and content management performance.

“Web retailers are seeing a clear business case for purchasing more analytics and programs that provide and measure customer information in real time,” says Sahir Anand, a retail research analyst at Aberdeen Group. “Access to more real-time data will help merchants do a better job of tracking buyer behavior, analyzing transactions and measuring satisfaction.”

mark@verticalwebmedia.com

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