The leading application and service providers who help lay the foundation for the Top 500 retailers’ e-commerce operations
By Bill Briggs
Web retailers and home builders have a number of traits in common, although thankfully the condition of their respective markets isn’t one of them. Both rely on skilled craftsmen who know how to wield the tools of their trade to create safe and secure domains.
Like those carpenters, electricians, plumbers and other craftsmen and women who piece together a house, web retailers rely on specialists and their technology tools—both internal and external—to construct and maintain their e-commerce businesses. Similarly, e-retailers depend on information technology tools in helping them build their own information systems, working with third-party providers and service companies, or mixing the two.
But retailers’ own technical skills are all across the board in terms of their ability, and sometimes willingness, to acquire, implement, deploy and manage their e-commerce applications. That’s where software and services providers come in.
In the Internet Retailer 2008 Top 500 Guide, retailers identified whether they develop technology in house, work with providers or do both. The following report examines the vendors in their respective technology categories that were cited most often by Top 500 retailers. The top three vendors in each category were determined by research for and published in the Top 500 Guide. Data was gathered by Internet Retailer from January through April of this year and the provider rankings are based on the frequency with which those providers were cited by merchants in the 2008 Top 500 Guide.
Affiliate Marketing
Steady business
Affiliate marketing is a perennial revenue producer for e-retailers, made doubly attractive because of the low investment and risk involved. 72% of this year’s Top 500 retailers use one of three providers to help manage their affiliate programs. Commission Junction, a subsidiary of ValueClick Co., led the way in the 2008 Top 500 with 167 retailer users, followed by LinkShare Corp. with 103. DoubleClick Performics, a unit of Google Inc., was next with 88 retailers. The three providers serve 358 of the Top 500 merchants. Commission Junction’s Top 500 customers include HP Home & Home Office Store (No. 5) and SonyStyle.com (No. 13); LinkShare’s Top 500 customers include Office Depot Inc. (No. 3) and Wal-Mart Stores Inc. (No. 14); and DoubleClick Performics serves merchants such as OfficeMax Inc. (No. 6) and Sears Holdings Corp. (No. 8).
Content Delivery Network
Serving up video
As web retailers become more adept at using video online, they need technology to ensure speedy loading and high quality images. Content delivery network service providers such as Akamai, Mirror Image Internet Inc., GSI Commerce Inc. and Yahoo Inc. provided services to 96 of this year’s Top 500 retailers. Another 106 Top 500 retailers, 21%, handle the task in house. Akamai was cited most often as content delivery network provider with 81 retailers, including top five retailers Staples Inc. (No. 2) and Office Depot Inc. (No. 3). Mirror Image Internet serves seven customers in the Top 500, including LEGO Brand Retail Inc. (No. 140) and Furniture.com Inc. (No. 164). GSI Commerce is used by four Top 500 retailers, such as the National Football League (No. 130) and RadioShack Corp. (No. 235), while SuperMediaStore.com, a unit of Linkyo Corp. (No. 233), and UnbeatableSale.com Inc. (No. 355) are among four Yahoo clients.
Content Management
Real time placement
Content management applications are helping e-retailers transform the way they present product images, video and other content on their web sites. Today’s technology enables them to change product placement based on consumers’ viewing and buying habits as they shop. Most Top 500 retailers—267—develop their own technology in house. Among many providers, GSI Commerce Inc. was cited most often this year, by 18 retailers including Toys ‘R’ Us Inc. (No. 43) and Ralph Lauren Media LLC (No. 87). Escalate Retail and Interwoven were next with nine each and Fry Inc. with seven. Escalate Retail clients include Saks Direct, a unit of Saks Fifth Avenue (No. 46), and Kohl’s Corp. (No. 63); Interwoven clients include Staples Inc. (No. 2) and Quixtar Inc. (No. 26); and Fry serves Orchard Brands Corp. (No. 60) and Team Express Inc. (No. 218).
CRM Systems
Retail relationships
Customer relationship management technology enables retailers to learn more about consumer browsing and buying habits. As retailers expand into multiple channels or better understand existing channel sales, CRM tools help them track shopper behavior in store or online. 185 Top 500 retailers manage CRM entirely in house, while another 18 combine third-party provider tools with internal efforts. Escalate Retail led CRM providers with 13 Top 500 clients, followed by GSI Commerce Inc. with 11 and LivePerson Inc. with six. Escalate customers include Macy’s Inc. (No. 28) and Redcats USA (No. 29). GSI Commerce’s clients include Dick’s Sporting Goods Inc. (No. 123) and The Timberland Co. (No. 408), while LivePerson’s list features Campmor Inc. (No. 272) and Rugs USA (No. 284).
Customer Service
Monitoring all channels
Customer service was broken out as a separate technology category in the 2008 Top 500 to help distinguish it from CRM technology. Applications are designed to help online and call center customer service reps coordinate customer orders, changes and returns, and access cross-channel data to assist with upselling and cross-selling initiatives. 111 Top 500 retailers develop customer service technology internally. Among customer service applications providers, RightNow Technologies Inc. was cited most often, by 14 retailers. Clients include HSN (No. 25) and Overstock.com Inc. (No. 30). GSI Commerce Inc. was next with nine mentions and Escalate Retail followed with eight. GSI Commerce customers include BabyCenter LLC (No. 239) and Spanx Inc. (No. 379); Escalate clients include Redcats USA (No. 29) and Nordstrom Inc. (No. 32).
E-Commerce Platform
Complex choices
Choosing the right e-commerce platform has become increasingly complex as web retailers ponder whether to integrate multiple legacy systems or consolidate into a multifunctional package. As in the 2007 edition, Microsoft Corp. was named most often this year, including 27 companies using .NET web services architecture in some capacity and 13 using the company’s Commerce Server platform. Top 500 clients include Best Buy Co. Inc. (No. 12) and Costco Wholesale Corp. (No. 18). IBM Corp. was cited by 30 e-retailers, including Sears Holdings Corp. (No. 8) and Follett Higher Education Group (No. 68); Yahoo Inc. was used by 29 retailers, including The Vermont Teddy Bear Co. (No. 179) and OpticsPlanet Inc. (No. 220). Follett’s e-commerce site migrated to an IBM WebSphere platform early this year as part of a major upgrade, a spokesman says. “The biggest enhancement is the migration to the most current version of IBM WebSphere to offer enhanced functionality and stability for the site.” The number of retailers who developed their own e-commerce platforms climbed by 29% this year to 194, compared with 150 in the 2007 edition.
E-mail Marketing
Refining the focus
E-mail marketing is undergoing a transition as a marketing channel. As ISPs begin scrutinizing e-mail senders’ reputation and consumers complain about inbox overload, many e-retailers are looking at ways to segment recipients. The goal is moving from general to specific consumer targeting, using shopping history and message testing. The top three vendors served 104 retailers this year, compared with 140 retailers who use internally developed applications. CheetahMail, a subsidiary of Experian Co., led the way with 64 retailers, followed by Responsys Inc. with 21 and Yesmail with 19. CheetahMail customers include Office Depot Inc. (No. 3) and Sears Holdings Corp. (No. 8); Responsys’ client list features Musician’s Friend Inc. (No. 39), and J.C. Whitney & Co. (No. 111); and Yesmail customers include HP Home & Home Office Store (No. 5) and HSN (No. 25).
Fulfillment
Global reach
Retailers are becoming more interested in global e-commerce and some are turning to experienced providers to handle fulfillment. For example, Casual Male Retail Group Inc.’s reach into six European countries last spring was made easier because its e-commerce platform vendor, GSI Commerce Inc., has experience operating online stores in the countries, says Dennis R. Hernreich, executive vice president. In addition to fulfillment, GSI is handling site design, order processing and call center services for each of the six web stores. GSI and Escalate Retail were the top fulfillment providers among Top 500 retailers, with 22 customers each. CommerceHub, a part of Commerce Technologies Inc., was next with 13 Top 500 merchants, followed by Manhattan Associations with eight. Escalate customers include Urban Outfitters Inc. (No. 77) and Abt Electronics Inc. (No. 157). In addition to Casual Male (No. 254), GSI Commerce clients include Aéropostale Inc. (No. 203). CommerceHub’s clients includes Staples Inc. (No. 2) and Sears Holdings Corp. (No. 8), while Manhattan Associates’ features Recreational Equipment Inc. (No. 62) and The Parent Co. (No. 117).
Order Management
Technology upgrades
A survey of larger retailers in 2006 by AMR Research found 61% planned to evaluate a new order system by 2008, and 10% already were implementing a new one. A June 2007 survey by Internet Retailer found 30% of smaller retailers said they planned to replace their order management system within a year, and 14% within two years. Escalate Retail was cited as order management provider most often, by 36 Top 500 retailers. Customers include Nordstrom Inc. (No. 32) and American Musical Supply Inc. (No. 205). GSI Commerce Inc. was next with 24. Clients include Zale Corp. (No. 170) and The Hershey Co. (No. 304). MICROS-Retail and Stone Edge Technologies Inc. followed, each named by 11 retailers. MICROS clients include Abercrombie & Fitch Co. (No. 54) and Army & Air Force Exchange Service (No. 66); Stone Edge Technologies’ clients include OpticsPlanet Inc. (No. 220) and Beauty Encounter (No. 335).
Payments Processor
Global considerations
E-retailers are looking to expand internationally, but doing so requires an effective payments and fraud detection strategy. On the payments side, e-retailers need to tailor payment options to those of individual international markets, experts say. Fraud detection includes closely tracking the behavior of customers to understand their shopping and purchasing patterns. The top three payment systems providers in this year’s Top 500 served 231 retailers. Chase Paymentech was the leader with 110, followed by PayPal Inc. with 77 and CyberSource Corp. with 44. Chase Paymentech clients include Amazon.com Inc. (No. 1) and Dell Inc. (No. 4). PayPal merchants include SonyStyle.com (No. 13) and Bidz.com Inc. (No. 74), and CyberSource’s list includes Overstock.com Inc. (No. 30) and Nike Inc. (No. 47).
Rich Media
Form meets function
Online video is fast becoming the latest and greatest rich media tool, but e-retailers are realizing that they can’t just deploy video for video’s sake. Rather, they need to add video content that’s useful in helping consumers decide on purchases, and presenting it when and where they are most likely to want to interact with it. Scene7, an Adobe Co., counted 93 Top 500 retailers this year, while 42 merchants named RichFX Inc. Five cited WebCollage Inc. Scene7 retailers include Amazon.com Inc. (No. 1) and Office Depot Inc. (No. 3). RichFX’s Top 500 clients include Costco Wholesale Corp. (No. 18) and 1-800-Flowers.com Inc. (No. 36). WebCollage retailers include Toys ‘R’ Us Inc. (No. 43) and eCOST.com Inc. (No. 119).
Search Engine Marketing
Finding the right search
Paid search or natural search? Not long ago many retailers thought that paid search was the way to go with search engine marketing because they got faster results. But rising keyword costs are moving many retailers to reconsider natural search and to seek providers who know how to make it work. Top 500 retailers named DoubleClick Performics most often this year. DoubleClick had 18 mentions; ChannelAdvisor Corp. and The Rimm-Kaufman Group had 12 each. Didit was named by nine Top 500 retailers. DoubleClick clients include Cabela’s Inc. (No. 40) and Zazzle.com Inc. (No. 211). ChannelAdvisor’s Top 500 clients include AbeBooks Inc. (No. 73) and J&R Electronics Inc. (No. 95), while The Rimm-Kaufman Group’s list features Direct Marketing Services Inc. (No. 145) and Abt Electronics Inc. (No. 157). Didit clients include Brookstone Inc. (No. 131) and Miles Kimball Co. (No. 195).
Security Certification
Seal of approval
A 2007 Harris Interactive survey found that 25% of U.S. adult Internet users believe that web site security is the most important aspect of shopping on the Internet. The survey, conducted on behalf of Tealeaf Technology Inc., found that ease of completing a transaction was next, cited by 21% of respondents. This year’s Top 500 added Security Certification as a category and VeriSign Inc. was named by 102 customers. Next was McAfee—formerly ScanAlert—with 99, followed by Thawte Inc. with 16. VeriSign clients include Office Depot Inc. (No. 3) and CDW Corp. (No. 9), McAfee’s list features Cabela’s Inc. (No. 40) and The Home Depot Inc. (No. 42), and Thawte retailers include Blinds.com (No. 193) and Cymax Stores Inc. (No. 247).
Site Design
Internal expertise
The top three vendors in Site Design mustered only 29 mentions by Top 500 retailers. But the total is more significant when considering that 396 of the Top 500 handle site design in house. This year Fry Inc. was cited most often with 14 customers, including Spiegel Brands Inc. (No. 56) and Orchard Brands Corp. (No. 60). Next was GSI Commerce Inc. with nine, including Adidas America Inc. (No. 302) and ShopPBS.com (No. 380). ShopPBS.com’s recent site redesign took 18 months, says Andrea Downing, vice president of home entertainment and partnerships. But after its July 2007 rollout, the new version made products easier to find and yielded a 31.4% increase in orders and 3.4% more checkouts, she says. Solid Cactus Inc. rounded out the top three site design vendors and was mentioned by six retailers, including BizChair.com (No. 224) and TigerGPS.com Ltd. (No. 319).
Site Search
Seizing the searchers
Site search is the most common feature on e-commerce web sites but can sometimes be underused, experts say. Retailers seem to be embracing third party technology, as evidenced by Endeca Technologies Inc. and Celebros, the top two vendors in both the 2007 and 2008 editions. This year, the two accounted for 105 Top 500 retailers, at 78 and 27 respectively. That was up by 18% compared with 89 (67 and 22) the prior year. Mercado Software was listed by 25 retailers, including OfficeMax Inc. (No. 6) and Ross-Simons Inc. (No. 141). Ross-Simons deployed Mercado’s search, navigation and merchandising technology on its web site in September 2007. The jewelry retailer wanted online customer service to more closely match the level in stores and to give marketing and merchandising groups the tools to make changes more quickly, bypassing the I.T. department, says Larry Davis, vice president of marketing. Endeca clients include CDW Corp. (No. 9) and Newegg.com (No. 10) and Celebros Top 500 customers include Ice.com Inc. (No. 144) and Skymall Inc. (No. 153).
Web Analytics
Micro-metrics
Web analytics applications can tell retailers what shoppers bought—and what they didn’t buy—faster than ever before and that can lead to more sales. A 2007 web site upgrade that rolled out in late 2006 paved the way for 33% growth, to $85.2 million, for ShoeMall.com, part of Mason Companies Inc. With better e-mail technology, from CheetahMail, and better reporting using a new web analytics package from Omniture Corp., ShoeMall now concentrates on bringing more focused branding and merchandising messages to its core audience, says Internet director Jodi Bresina. Omniture, Coremetrics and Google Inc. were the top three vendors, in order, listed by Top 500 retailers. The providers account for the majority of web analytics customers, with a total of 389 retailers. Individually, they served 187, 116 and 86 companies, respectively. Omniture customers also include Apple Inc. (No. 7). Coremetrics’ list includes Office Depot Inc. (No. 3) and OfficeMax Inc. (No. 6), and Google’s features Blue Nile Inc. (No. 48) and CSN Stores Inc. (No. 69).
Web Hosting
Hand it over
A 2007 Internet Retailer survey of web retailers found that 72% of retailers use an outside company to host their web site, that is, to store and relay all data, and provide technical support and maintenance. The survey also found that most retailers were happy with their present hosting company: about 61% of retailers had no plans to replace their provider. Yahoo Inc. was listed by 25 retailers in the Top 500, followed by Rackspace with 22 and GSI Commerce Inc. with 17. Yahoo clients include OpticsPlanet Inc. (No. 220) and Jomashop.com (No. 222); Rackspace’s customers include Coastal Contacts Inc. (No. 120) and Decorative Hardware Direct (No. 241); and GSI Commerce clients include MLB Advanced Media (No. 158) and Liz Claiborne Inc. (No. 357).
Web Performance Monitoring
Varying performance
Despite a growing commitment to information systems, many web retailers still have erratic site performance. A 2007 survey by Internet Retailer found that 62% of web retailers measure lost revenue as a direct result of poor performance, even though most web retailers do some kind of web site performance testing. 51% use a third-party service or application and 49% do the job in house. The survey also revealed that, of the companies that do their own monitoring, about 51% had no plans to outsource the job, compared with 14% that expected to do so by the end of 2007, 6% in early 2008 and 29% that didn’t know. In the 2008 Top 500, Gomez Inc. was named most often in the web performance monitoring category, by 99 retailers. Keynote Systems Inc. was next with 36 mentions and AlertSite followed with 18 clients. Gomez customers include Amazon.com Inc. (No. 1) and Victoria’s Secret Direct, a unit of Limited Brands Inc. (No. 20). Keynote Systems customers include Hanover Direct Inc. (No. 81) and The Parent Co. (No. 117) and AlertSite was named by Sierra Trading Post Inc. (No. 99) and Lamps Plus Inc. (No. 139).
billb@verticalwebmedia.com
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