November 5, 2013, 12:57 PM

Demandware woos large e-retailers with a new product

Its Large Enterprise e-commerce platform targets large omnichannel retailers.

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Demandware Inc. has released an Internet-hosted e-commerce platform designed for large, multichannel retailers with multiple, globally dispersed e-commerce sites. In addition, the company reported today that its third-quarter revenue rose 31% year over year to $24.5 million, as it signed several new contracts in the quarter with retailers and consumer brand manufacturers including Payless ShoeSource in the United States and L’Oreal in Europe.

“With our Large Enterprise solution, we now offer a defined package designed to simplify execution and accelerate time to value for large retailers,” says Jeffrey Barnett, Demandware’s chief operating officer.

The Large Enterprise platform is an extension of the vendor’s Demandware Commerce platform, which the company provides under a software-as-a-service, or SaaS, model. SaaS technology lets client companies subscribe to Internet-hosted  software without having to deploy their own web servers.

The new enterprise version is packaged with additional services that enable large retailers to customize e-commerce features, deploy them on web and mobile sites, and integrate them with bricks-and-mortar stores. For its e-commerce technology platform, Demandware charges subscription fees ranging from 1% to 4% of a client’s revenue. As a client’s revenue increases, its fee typically falls within the lower end of that range, says Rob Garf, vice president of product and solutions marketing. The company charges separate fees for services.

Analysts say the combination of quickly deployable Internet- or “cloud-based” e-commerce technology with high-end customized services addresses an increasing demand among large merchants to deploy technology that supports cross-channel retailing. Such technology enables merchants to let customers shop as they please across multiple channels, such as placing an order on a mobile device and then picking it up along with additional purchases in a store. “Our industry is changing at a stunning pace, and tier one retailers need to move quickly to compete,” says Paula Rosenblum, managing partner at research and advisory firm RSR Research. “Solutions like Demandware's that package cloud software and premium services will improve time to market and accelerate growth for complex retailers.”

Bill Mirabito, founder and president of B2C Patners, a consulting firm that works with clients of Demandware as well as those of other e-commerce technology providers, says Demandware’s expanded services can help retailers better understand how to use and get maximum value out of the vendor’s technology.

Garf notes that Demandware’s services team includes e-commerce experts who are former retailers from around the world, including the United States, Europe and Asia-Pacific. But he adds that Demandware still sees itself as primarily a software company, and that it will also continue to work with outside consulting firms that help Demandware’s clients deploy and modify their e-commerce technology.

The announcement of the Large Enterprise product follows Demandware’s launch in September of its Digital Store system, which lets retailers use the Demandware Commerce technology platform to process in-store sales transactions on tablet computers, while also letting store employees view records of customers’ cross-channel shopping transactions and check updated records of inventory available to both store and online channels.

New services and features that come packaged with the Large Enterprise platform include:

● Strategic consulting from a dedicated team of Demandware e-commerce experts who provide assistance in areas such as merchandising and benchmarking a retailer’s sales and technology performance against industry averages;

● Architect services to help guide how web sites are architected, data models designed, and e-commerce technology is integrated across multiple e-commerce sites;

● Performance testing to ensure new or redesigned e-commerce sites can handle peak traffic volumes;

● Operational dashboards that allow retailers to monitor and control web page performance and web page features, such as videos or product configurators, that are hosted through external web services.

For the third quarter ended Sept. 30, Demandware also reported:

● Software subscription revenue rose 39% to $22.6 million from $16.3 million a year earlier;

● A 24% decrease in services revenue to $1.9 million from $2.5 million;

● 184 customers with operating e-commerce sites, up 34% from 137;

● 741 operating client web sites, up 43% from 517;

● New contracts signed with Hancock Fabrics in the United States; Eu Yan Sang in the Asia-Pacific region; and Mackay Stores, Ritual Cosmetics and Stokke AS in Europe.

● A net loss of $6.3 million, compared with a year-earlier loss of $3.6 million, which the company attributes to increased costs related to growing its business;

● A 38.5% increase in research and development expenses to $5.4 million from $3.9 million; and a 51.8% increase in sales and marketing expenses to $12.9 million from $8.5 million.

For the nine months ended Sept. 30, the company reported:

● A 28.2% Increase in total revenue to $68.2 million from $53.2 million;

● A 38.1% increase in subscription revenue to $62.3 million from $45.1 million;

● A 27.2% decrease in services revenue to $5.9 million from $8.1 million;

● A net loss of $22.7 million, compared with a net loss of $11.1 million a year earlier.
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