August 1, 2010, 12:00 AM

Fixed foundations

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In addition, the systems are designed to be accessed through web browsers, which means customer service agents can open a browser from any computer and get the information they need. That also enables SkyMall to employ home-based agents to take telephone orders from its in-flight catalogs, Scannell says.

Time for a change?

Despite the advantages of homegrown systems, some experts believe more retailers will gradually move to commercially developed products, to take advantage of more sophisticated technology and to shift the burden of maintenance to the software provider.

“Many of the e-commerce platforms today offer richer sets of functionality than they ever did before and so a lot is commercially available,” says Alvarez. That means many of the lower-tier Top 500 companies can match the e-commerce capabilities of the largest online retailers, and often can do so for less money.

The cost of implementing a new e-commerce platform can vary widely, from less than $50,000 when the retailer agrees to share revenue with a vendor, to several million dollars, depending on the scale of the project and the business model of the vendor selected, experts say. While the investment can be substantial, the technology has improved and many new platforms also bundle other technology, including content management and e-mail marketing, which enables retailers to upgrade multiple systems at once.

“From a budgeting standpoint, new e-commerce platforms are helping the middle class of retailers compete with the elite—and that will challenge the elite to do more. The gap between the top tier, the Amazons and Staples, and the middle 200 is narrowing on a features and functions basis,” Alvarez says.

Rock Bottom Golf (No. 287) chose not to build a proprietary platform when it began selling golf supplies and equipment online in 2004. After developing a customer base by selling on eBay, the retailer, which did $31.5 million in web sales in 2009, turned to Yahoo for its underlying web-selling system, says Brian Schwank, director of marketing.

“We’ve been with Yahoo quite a while and they’ve grown with us,” Schwank says. “We thought we were going to outgrow them a couple of times, but they kept up.” Rock Bottom Golf runs its e-commerce site on technology from Yahoo Small Business.

At one time Yahoo’s offerings were slim and Rock Bottom Golf was looking for some new features, including customer sign-in and a better coupon code system. But before the web-only retailer could explore other commercial systems, Yahoo and its network of outside developers made the features available, Schwank says.

As with e-commerce platforms, feature availability plays a big role when retailers make decisions about their content management systems. For Power Equipment Direct Inc. (No. 302), a web-only power-generating and outdoor equipment retailer, the need for more functionality is behind a search for commercial content management tools, says Jon Hoch, founder and CEO. “We are redoing our ElectricGeneratorsDirect.com site and want to either bolt on software or build it ourselves,” he says.

The company, which had $29 million in web sales in 2009, has seen several demos and is rounding up pricing, but the decision won’t be easy. “We can lease or build. It’s a whole lot cheaper to build, but you need to spend the time,” Hoch says. “If a license costs $5,000 a month then that’s $120,000 a year for a two-year license. The question is can you build one for less?” Crafting the content management system in-house could take several months, and even a commercial version would take time to implement. “But if you want it to be ready to go ‘yesterday,’ it’s better to buy,” he adds.

More mature technology

In many cases it still makes more sense for retailers to build than buy a content management system, says Brian Walker, a senior e-commerce analyst at Forrester Research Inc. “The need for content management systems grows as e-commerce sites become more mature and marketing gets more sophisticated. But solutions have not kept up,” he says. Often a commercially available content management system is not geared to a specific e-retailer’s personalization or search engine optimization strategy. “There also are fairly significant integration issues.”

New channels such as mobile commerce will only make it harder for vendors to meet retailers’ needs, but the technology will improve, Walker says. However, he adds, “We can expect to see available solutions mature rapidly over the next three years or so.”

SkyMall is looking at a commercial content management system to replace a proprietary system. “We’re looking at a content management system that’s more robust and can support other systems,” Scannell says. Options are expanding because there are some applications available based on open source coding, and off-the-shelf software is not as expensive as it once was, he says. Open source refers to software that is freely shared, although vendors often charge to customize it.

E-mail marketing tools

Most Top 500 retailers use commercial e-mail marketing applications because, unlike more foundational technology like an e-commerce platform or content management system, they are simpler to integrate into existing e-commerce systems, retailers say. Many are self-contained and newer applications are fairly easy to add, says Rock Bottom Golf’s Schwank.

The retailer has used commercial e-mail marketing software since its launch. “We collected e-mails from selling on eBay and built our customer base,” Schwank says. “That helped us get started and now we send a couple of million e-mails a month.”

Rock Bottom Golf uses software from Blue Sky Factory now, its third e-mail marketing provider.

AC Lens developed e-mail marketing software internally about seven years ago, but now is exploring outsourcing, says Clarkson. “At the time it was state of art. But we don’t have full-time staff devoted to deliverability issues and we’ve fallen a bit behind on behavioral targeting for e-mail,” he says.

Comments | 3 Responses

  • Buy v. build - the classic, perennial question. Retailers should do serious due diligence in terms what makes the most fiscal sense, but it is certain that vendors’ offerings have significantly matured over the past few years. And - retailers can really often underestimate the cost of developing their own e-commerce technology. Again - the key is thorough planning and analysis. Tucker ATG

  • There’s a common theme here. Staying in the game has always meant companies need to keep their businesses working the way their customers expect, they need fresh content and good product, and they need to do all that and still make money. Build vs buy always comes down to getting those jobs done quickly and on budget. I definitely agree this is a balancing act, but I think the “build vs. buy” theme is getting a little outdated. Ecommerce platform tools are evolving so that companies don’t really have to choose one or the other (build or buy), and then they’re stuck with it. In fact, if what you’ve got isn’t something you can use to both build AND buy, you’re not going to be around long…there isn’t a retailer in the top 500 who doesn’t partner up for some things, and have some merchandising functionality that’s uniquely their own. As long as long as you’ve got a solution that evolves and fuels your sales, it doesn’t really matter if you made the fire with two sticks or if you used a match. If you have good infrastructure, keep it. Whether it’s homegrown or a purchased solution, you can use that as your starting point and build (or buy) from there. Infrastructure which is tough to update: that’s the kind of brittle foundation that can’t be fixed, and if that’s what you’ve got, whether you built it or bought it, that’s the point at which you need to consider hitting the reset button. Connie Chappell, Ability Commerce

  • Looking at it from an ROI standpoint, it is funny that the overall costs initially appear to be similar. Monthly fees or commission vs Hiring steady personnel. The kicker really comes down to the pace at which the technology changes. It used to change once every few years. That pace has sped up exponentially, making it more cost effective to stick with a 3rd party as it is in their best interest to always be up-to-speed. And if not, you have the choice to select another vendor. Modifying in house software by retraining or hiring and firing new personnel is simply not good for business.

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