May 23, 2012, 4:29 PM

More retailers outsource key technologies

Data from the Top 500 Guide show a shift to merchants buying rather than building.

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With online retail’s rapid evolution, many web merchants are looking beyond their own walls for technology expertise. Data from the 2012 Internet Retailer Top 500 Guide shows fewer retailers are relying on their own technology in 16 of 25 categories for which data are available for both 2011 and 2010.

For example, only 28 retailers reported using in-house affiliate marketing services last year, down from 32 in 2010. Last year the percentage of retailers providing their own live chat/click-to-call technology dropped to 10.61% from 12.89%, and for web performance monitoring, to 25.60% from 28.41%. 235 retailers in 2011 managed their own search engine marketing, compared with 250 in 2010.

Behind this trend, retailers say, is the need to add new features and services quickly to keep up with stiff competition, and the fact that in many cases vendors have made technology easier to plug into existing systems than it was in the past. Many retailers say they would rather focus on what they know and leave technology to the specialists.

“It makes sense to outsource things that are not our core competencies,” says Richard Sejean, director of e-commerce at Browns Shoes Inc. “Browns is a kick-ass company—at selling shoes. It’s four generations of selling shoes, not software development.”

After decades of developing technology internally—including for its factory and call center—retailer Hanover Direct Inc. has changed course in recent years, turning to vendors to provide its e-commerce platform and e-mail marketing and fulfillment services.

Other retailers are making a similar shift to relying more on outside service providers. Abt Electronics Inc., No. 148 in the Top 500 Guide, has brought in vendors to add customer service functionality to its web site. And web-only Overstock.com Inc., No. 27, while maintaining an in-house technology staff, has no qualms looking to vendors if they can build and maintain e-commerce technology faster and more efficiently than Overstock can itself.

“We have bigger fish to fry,” says Sam Peterson, senior vice president of technology at Overstock.

The exhibit hall at the 2012 Internet Retailer Conference & Exhibition in Chicago this June will feature 563 e-commerce technology and service vendors on a show floor covering 250,000 square feet.

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