In an episode of the popular ABC show “Shark Tank” that aired last week, founders of the web-only fashion retailer ranked in the Second ...
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Top 100 e-retailers like Hayneedle may opt for nearly all-in-one services like those marketed by Oracle and IBM because the fierce competition those big web merchants face drives them to continually innovate, says Gene Alvarez, vice president of research in the customer relationship management practice at research and consulting firm Gartner Inc. "Because of the amount of revenue tied to the top e-retailers, there is tremendous pressure for customer experience, and those e-retailers are more apt to make that move because it would free them to focus on customers," he says. "What happens is that the list of functional requirements gets so long, they have to do 15 to 25 integrations to complete the customer experience. Now they want one vendor who can sell them a broad set of capabilities."
Dee says Hayneedle realized that kind of benefit when the vendor it uses to monitor its web site performance, Gomez, was acquired in 2009 by Compuware Corp., a provider of a broad range of information technology services to businesses and government. With its contract with a previous data center monitoring vendor set to expire, Hayneedle, a Gomez client since 2007, decided to extend its contract to include Compuware's data center monitoring service. The bundled services cost a bit less, but Dee says the real win was that the Gomez interface improved with Compuware's help, and service improved. For example, a Gomez account representative and engineer paid Dee a visit post-acquisition, which had never happened before. "They went out and started to be more proactive in their communication," Dee says.
Gomez has more money now to invest in customer service because the company, which made no secret before the Compuware deal that it planned to go public, no longer has to prioritize painting an attractive profit picture for Wall Street, says Eric Schurr, who joined Gomez prior to its acquisition and is now senior vice president of marketing for Compuware Gomez. "Gomez was a lean and mean company that was headed for an IPO," Schurr says. "It was managing every penny to optimize for growth and profitability. Now, with Compuware it has money to invest and fuel growth in a way that it hasn't been able to before."
Similarly, a company like order management firm Sterling Commerce, now part of IBM, can innovate more quickly than it could on its own, says John Stelzer, worldwide industry executive for retail, B2B and Commerce Solutions for IBM Software Group, who joined IBM after 27 years as an executive at Sterling Commerce. What's more, he says, e-retailers that engage IBM's e-commerce services—which now include the assets of Coremetrics, Unica, Netezza and Sterling Commerce—will be able to respond more quickly to changes in consumer behavior and competitor moves because IBM will be managing the technology and investing for the future. "You will not outgrow us," Stelzer says. "We have the agility to respond to, keep up with and get ahead of what's happening, and that's limited in the vendor marketplace."
Selection and service
Nor does all the acquisition activity involve vendors to Top 100 e-retailers. Firms that sell primarily to smaller and midsized e-retailers also are consolidating, and some e-retailers say they expect to benefit from those mergers. Alvarez says he expects more smaller vendors to either go public, giving them capital for growth and product development, or be acquired by larger firms in the next 12 months.
At office and business supply e-retailer ReStockIt.com, No. 354 in the Top 500 with approximately $26 million in sales last year, CEO David Redlich says he's excited about the future relationship his company will have with its order management vendor Stone Edge Technologies, which Monsoon Commerce acquired in April. He says Stone Edge founder and president Barney Stone called him shortly after the acquisition to discuss it with him, and that kind of service is what makes him stay with the vendor. "We chose Stone Edge for a reason, and the opportunity for them to do even more is exciting, but that has to come with a checklist," Redlich says. "They have to keep their identity and their culture. Is Barney still there? Will we have the same level of service? The answer, in this case, is yes."
Redlich says he hasn't gotten a sales call from Monsoon Commerce, which helps retailers sell on online marketplaces, about offering those services to ReStockIt.com, but he's anticipating one. "Most customers would be anxious for that call because everyone is looking for an advantage to grow," he says. "If a company you have an existing relationship with comes to you with something that is relevant, you want to hear it."
Donald Cohen, founder and managing partner of Tool King LLC, No. 337 in the Top 500 with $27.5 million in sales last year, says he expects ToolKing.com and other small and midsized retailers will reap benefits from eBay Inc.'s acquisition of Magento, just announced last month. Tool King has sold on eBay's marketplace for at least a decade, Cohen says, and rebuilt ToolKing.com on Magento's e-commerce platform in 2009.
Cohen believes eBay's financial backing will help Magento develop more advanced tools that might otherwise be out of its financial reach. "If done right, it will be a coup for small to medium-sized e-commerce companies that are looking for a platform," he says. "EBay could make it more affordable because of its larger scale and bring some resources to Magento that Magento wouldn't have on its own."