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Survey: E-commerce technology spending
Online retailers have long technology shopping lists for the year ahead.
Topics: November 2012 Magazine
Nearly 70% of online retailers will spend more money on e-commerce technology applications and services next year, according to the latest Internet Retailer survey. E-commerce platforms will get the most attention in technology budgets, and fewer than 14% of respondents say they intend to design that platform in-house. That's likely because they don't have enough personnel to do so; 55% of respondents cite staffing as a main challenge to upgrading technology. For details on the respondent base see the first chart on page 38.
For Market America, an online retailer of private-label cosmetics, health and beauty aids, and related merchandise, spending on e-commerce technology could increase by as much as 20% next year, says chief technology officer Michael Brady. Market America, which expects to grow e-commerce sales 30% in 2012 to $461.2 million from $354.8 million in 2011, spent nine months last year redesigning its e-commerce site. The new site includes a more sophisticated shopping cart, customer reviews and ratings, and personalized product recommendations.
And the work is far from over. Market America, which spends several million dollars annually on e-commerce systems and services, expects to add as many as 25 new web designers and programmers, which will bring the staff dedicated to these functions to more than 250, Brady says. In 2013 Market America's main priorities are rebuilding its internally designed and maintained site search engine to support a growing inventory of nearly 100 million products, developing more international e-commerce sites in China and elsewhere, and expanding mobile commerce.
"Next year we will spend more to ensure we have the systems expertise and personnel in-house that will allow us to stay flexible in our approach to constant changes in e-commerce technology and grow globally," Brady says.
CafePress Inc., an online retailer of apparel and other merchandise that consumers and companies can customize, also cites mobile commerce as a top technology spending priority, and it's in good company. More than 33% of survey respondents did, too.
In August, CafePress launched an enhanced mobile commerce site that gives consumers access to more than 300 million products they can buy and many filtering options to help them find what they are looking for quickly. CafePress spends about $13 million annually on e-commerce technology and development, or about 7.4% of total annual revenue of about $175.5 million.
Other retailers intend to invest in integrating and improving technology assets that smooth the buying process for consumers. Spending more on systems integration is critical for GourmetGiftBaskets.com, a web-only merchant that makes and markets personalized gift baskets, says company founder and president Ryan Abood. He expects his spending on systems integration could increase by as much as 10% in 2013, although he declined to disclose specific figures. The e-retailer recently acquired J. Drizzle Gourmet Popcorn Co. and the assets of Cheesecake.com, and Abood says integrations in 2013 will have to support a bigger customer base and bigger revenue expectations.
The biggest technology spending expenses for GourmetGiftBaskets.com next year include developing a new integrated shopping cart that allows customers to shop multiple sites at the same time, implementing a better order entry system and designing checkout features that lets consumers and companies select a gift basket and send the gift to up to 10 recipients without having to fill out multiple shipping forms.
GourmetGiftBaskets.com does almost of all of its technology upgrades and software development in-house. But increasingly retailers are turning to vendors for help as they add new technology. Asked how they prefer to add new features to their web sites, only 16.2% of retailers taking part in the Internet Retailer survey say they prefer to develop and host them internally, compared with 33.8% that look for licensed software they can host on their own servers and 50% that prefer the software-as-a-service approach in which applications are hosted by a vendor and accessed via the web.
Retailers say they intend to add or replace applications and, based on their preference for licensed and SaaS programs, many are likely to come from vendors. 34.3% of retailers responding to the Internet Retailer survey say they'll add or replace live chat/click-to-call applications; 32.3% will add or replace content management applications and 26.3% will add or swap site search applications.
As the charts on these pages suggest, online retailers have long wish lists when it comes to e-commerce technology.