In its second-largest acquisition, Amazon buys the company for $970 million.
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Perry Ellis International is also turning to a SaaS platform, from Venda Inc., to relaunch the e-commerce sites for its Original Penguin and Perry Ellis fashion apparel brands. Speed of deployment, the ability to include multiple features already integrated with an e-commerce platform, and fixed, relatively low costs were key reasons for choosing Venda, says Michelle Magallon, vice president of e-commerce at Perry Ellis International.
Venda also offers other things particularly suited to Perry Ellis’s needs, including server infrastructure in the U.K. “We were looking for international capabilities of a SaaS platform, and Venda originated in the U.K. and has a strong presence there,” Magallon says.
Venda, which charges a flat fee of $12,000 per month per web site, also offered what turned out to be the best deal for getting sites up and running, Magallon says, adding that Perry Ellis will use its own I.T. staff to integrate the Venda platform with the retailer’s Oracle-based back-end enterprise resource planning system. “We’re looking at a strong ROI, with capital investment next to nothing,” she says.
By comparison, pricing for the ATG On-Demand SaaS platform starts at about $25,000 per month based on the numbers of orders and visitors, plus a set-up fee starting at about $100,000. Demandware charges a monthly fee figured as a percentage of a client retailer’s revenue, though the rate table declines with the retailer’s volume; there may also be separate fees for implementation services.
The right combination
Demandware’s platform is designed to support retailers with annual sales of $20 million to $1 billion, though its sweet spot is between $25 million and $250 million, says founder and executive chairman Stephan Schambach. Venda serves companies within a range of $5 million to about $80 million, CEO Jeff Max says. ATG On-Demand is targeting companies doing $10 million to $50 million a year, says ATG vice president of product marketing Bill Zujewski.
When deciding on a SaaS platform, a retailer should look for the best combination of technology, local control and pricing that meets their goals and expense budget, Wu says. It’s also important to clarify terms related to infrastructure and services, she adds. SaaS platforms are designed to share software code among multiple retailers, but some share more than others, which can affect how much control a retailer has in modifying its web site or whether it has to run some of its own web servers, Wu says.
And while SaaS vendors have been stepping up their level of ongoing services to clients, retailers should ensure they’ll get the level of service they need, she adds. Reader’s Digest, for instance, operates with a limited I.T. staff but has received extensive ongoing assistance from Demandware’s client services team to improve things like site navigation and pages optimized for natural Internet search, Sockloff says.
Davis, who in his previous job had run e-commerce on a software-as-a-service platform for Sirius Satellite Radio, was already sold on the SaaS concept before deciding on it for Tommy Hilfiger, he says. But he remains concerned that SaaS platforms with operating costs lower than ATG’s could present performance problems-a risk he’s not willing to take while competing against brands like J.Crew and Banana Republic. “I knew that if I bought into this platform we could grow for the next three to five years without a problem,” he says.
Although Demandware and other vendors contend their infrastructure is sound, Davis figures ATG provides extra control.
For example, he says, the new ATG On-Demand SaaS platform provided his merchandising team the control and flexibility they needed to better serve customers in the rush of the 2008 holiday shopping season.
When the retailer noticed that female shoppers were buying a lot of men’s sweaters early in the holiday shopping season, for example, merchandisers modified the merchandise displays presented to them. If Tommy Hilfiger figured a shopper was a woman, either because she logged in or because she navigated the site in a way typical of other female shoppers, the retailer showed her several products, like polo shirts, similar to men’s sweaters. “We don’t want to dissuade them from buying men’s sweaters, but we also don’t want to run out of sweater inventory, so we make sure they see similar products,” Davis says.
The merchandising tactic worked so well, he adds, that Tommy Hilfiger increased by tenfold the number of men’s apparel items sold per day.
With ATG as well as other SaaS vendors offering more technology options as well as better service, retailers are in a good position to choose among them, Wu says. “It’s a buyer’s market,” she says.