They Did It Their Way

When liquidation site ReturnBuy.com was making plans for a site upgrade last fall, it wanted an e-commerce platform that had it all: scalability, operating efficiency and the capacity to handle a very complex inventory mix. “We don’t offer just one variety of the same unit of product,” says CTO Greg Scharer, definitely understating the challenges facing the b2c site that sells returned and refurbished goods in various states of completeness and repair. “We may have hundreds of different copies of one product, with different states of condition for each one.”

When Scharer submitted the wish list to several software vendors, the response was an eye-opener. Two things were clear: the cost of all that functionality was more than the company was prepared to spend, and the packaged applications—even with customized adjustments—still wouldn’t do everything Scharer wanted.

Though ReturnBuy in January filed for reorganization under Chapter 11 of the Bankruptcy Code with debt of as much as $10 million, it would seem it wasn’t overspending on technology infrastructure that burdened the bottom line. Finding neither the price tag nor the functionality in packaged applications to make them feasible, ReturnBuy turned to a solution that’s found favor with a satisfied group of mid-range e-retailers: a platform based on open source software built at a fraction of what it would cost off the shelf.

“In boom times, the message to IT leadership is get it done fast. Cost is not a major factor,” Scharer says. “But decreased revenues and increased corporate focus on cost containment make open source an attractive option.”

Spreading ideas

The idea behind open source is that web developers who create useful applications around a piece of software will put the applications—and the program codes—back into the developer community for free use. The goal is to accelerate software development and share the information. This kind of development, according to statements of the Open Source Initiative, a non-profit corporation of web developers organized around the issue, “produces better software than the traditional closed model, in which only a few programmers can see the source.”

Open source operating systems such as Linux and web servers such as Apache already are in commercial use. And recently, retail-focused applications have been developed on a number of platforms such as Interchange and the Open for Business Open Source Project, which offer an alternative to more expensive packaged applications sets.

Attractive though they may be in terms of cost, are they practical in e-retail? “In many cases, the open source solution is proven, scalable, and incredibly well-supported,” says Jupiter analyst Matthew Berk, cautioning, however: “The more exotic you get with an open source component, the less likely it is to be any of those three things.”

Top-tier e-retailers such as Amazon.com regularly create their own applications, but they have dozens or even hundreds of web developers in-house to do it. Now, in the space between an Amazon and two guys in a garage, open source is getting more attention among mid-size retailers attracted not only by cost savings, but also by the growing number of professional web development firms that support open source.

The cost savings are in the form of software licenses. Building its e-commerce platform internally with the help of web development company Zeneski, Jones and Associates, to which it paid consulting fees, ReturnBuy got for an initial $200,000 to $250,000 what it would have cost about $700,000 to buy off the shelf. Its main cost beyond hardware and internal resources was in consulting fees. The company realized significant savings by skipping the licensing fees attached to commercial software, Scharer says. In addition, Scharer estimates that going forward, open source will save about $150,000 a year in software maintenance fees, which run a yearly 10% or more of the upfront licensing fee.

Contracted support

The company has contracted with the web development firm for designated hours of support each month, but because the internal team worked with the developers on building the platform, ultimately taking on responsibility for about half the project, Scharer believes they’re equipped to handle most issues that might arise.

Driven by individuals frustrated with the constraints of commercial web development, open source culture historically has harbored a degree of

anti-establishment sentiment. “There is a developer mentality out there that if you have outdone the big boys, you should share it with the world,” Berk says. Now, many in the developer community, such as the Open Source Initiative, actively encourage commercial use of open source tools.

“We are seeing a maturation of the software and increasing education in the community—both retailers and the development community—about what is out there for less money,” says Ben Goldstein, CEO of web development company End Point Corp.

The possibilities are pushing some retailers into the sphere of web development. “We really don’t want to be a software company. We’re retailers,” says BackcountryStore.com vice president of marketing John Bresee. “We’re happy to outsource whenever it makes sense to outsource. But we’re at the point now where there aren’t companies making what we need. Of if we find a tool we like, the price tag is not in line with what it’s worth to us.”

Case in point is the sniplet generator, a handy application for which BackcountryStore.com has developed its own version, based on open source software. BackcountryStore offers its online sniplet generator to its affiliate sites as an ad-building tool. Affiliates choose from BackcountryStore inventory the items representing the brands, product categories and price points that best match the content of their site.

Any retailer could build a sniplet generator using open source, but at least for now, you can’t buy one off the shelf, notes Bresee.

Driving sales

IRCE 2008 Conference Multi-Media CD-ROM

The sniplet generator provides product images and short descriptions of the items, even ranking the best sellers among the products selected. Affiliates can customize the look of the ad to match the look of their sites, with options for table width, font size, link color and more. Critical to the sniplet generator’s ability to drive sales is that the affiliate’s link remains fresh—the online tool automatically updates the ad every day, revising the selected item’s availability, price and best-seller status. “You’re never directing a shopper to an out-of-stock product,” says Bresee.

The tool, which allows the affiliates to design site-specific, dynamic ads with professional polish, has boosted affiliate sales. Bresee says affiliates using the sniplet generator are driving conversions at twice the rate of other affiliates. In January, the sniplet generator was the company’s sixth most effective campaign, ranking among other campaigns such as deal-finding sites.

The sniplet generator is just one example of functionality developed at low cost with open source software. BackcountryStore’s entire e-commerce platform, built on the open source platform Interchange, had a start-up price of about $250,000. The cost, outside of internal resources and hardware, was in consulting fees to web developer Red Hat Inc. “Most of the commercial e-commerce platform companies we looked at have high licensing fees. It could have wound up being a $500,000 to $5 million installation,” Bresee says. “Interchange did everything we wanted it to do. It has optional log-ons for checkouts, it was indexable by search engines, and it was open source, so it didn’t require any licensing fees.”

The challenges

Users of open source solutions are advocates, but going that route does present more than a few challenges for retailers nosing around the idea.

Web development firm End Point, for example, supports open source components for its clients. But in some instances, grants Goldstein, commercial products may have an edge. “There will be some cutting-edge functionality commercial providers can offer that hasn’t yet been developed in the open source arena,” he says. “In that case, they are in a position to charge for that software.” And while such applications can be and are re-created using open source software, there can be lag in development time.

There is the cost rationalization argument. “With a packaged application, theoretically, when you’ve paid for the package, your work is just to customize it. That may be a lot of work or a little work,” Berk says. “With open source, you pay nothing for the software, but you might have to do a lot of work to customize it. So you either spend on the license or the development.” In some cases, adds Berk, e-retailers can wind up essentially paying double if the buy high-priced proprietary applications that still require considerable adjustment.

Then there is question of support. While there’s a big community of individual developers using open source tools willing to share information at no charge, it’s on their own time. The bigger the retailer, however, the greater the need for professional support immediately, and for as long as it takes, to fix a problem.

“For a long time, the big hurdle for open source was the issue of support,” Goldstein says. “Even accomplished developers are happy to have a support line to call for help. It’s taken a while before the open source community seized on that opportunity and offered that kind of support.” Today, End Point, which supports Interchange and other open source platforms, is one of a growing number of developer/consultants that offer such service.

The legacy question

Investment in installed legacy systems that tie retailers to proprietary software is another key consideration for those eyeing open source. While a company adding open source applications may save on licensing fees, integrating such applications with a commercial base may be time- and labor-consuming, requiring retraining of in-house staff—one reason commercial providers say expanding on the same platform is easier and less expensive.

That’s why fine china, crystal and silverware retailer Replacements.com went open source, using only HTML and JavaScript, when it added e-commerce functionality to its web site two years ago. It’s used a “platform agnostic” authoring tool, Dream Weaver, to write all the code for what has grown into a web site with 200,000-plus pages.

“A few years ago, you had a couple of proprietary choices,” says vice president of Internet sales and marketing Jack Whitley. “If you had invested a lot of money in developing your site along proprietary lines then, you’d have some real issues in moving to an open source server platform now.”

Replacement’s site is open source on the back end as well. For example, the site offers cart functionality though it doesn’t have—and therefore does not pay licensing fees for—an applications server. The cart functionality is written in JavaScript. It’s a small piece of code that’s downloaded into a user’s browser when the user downloads a Replacements web page that, in effect, gets the user’s browser to serve up the application itself.

Last year, the company decided to boost cart functionality. Replacements customers regularly receive e-mails on the availability of china patterns for which they’ve registered interest. Previously, to order the items listed in the e-mails, they had to manually fill out a form pasted into the e-mail. Now, new coding supports a button on the page that a customer can click to fill in the form automatically. “When they push a button, their browser adds the items to their cart and calculates the total,” Whitley says.

Doubling the volume

When Replacements took the new cart live last August, online order volume doubled within a month, says Whitley—one factor in increasing web sales that have grown to 50% of company’s business in the just the past two years.

“Cart functionality is nothing new, but we did it on the customer side from a web page without requiring a database and applications server on our side,” Whitley says. “Not only did the application cost nothing, but when traffic increased for the holidays, our servers were not bogged down with processing that work.”

Plenty of e-commerce sites make similar use of JavaScript to write custom applications in-house, Whitley guesses. “Our goal was to grow and see how long we could go without making the commitment to a multimillion dollar applications server and packaged applications,” he says. “Two years later, we’re still doing it on our own. If you’ve got developers who know how to use them, you can create a huge amount of value with readily available open source tools.”

mary@verticalwebmedia.com