SPONSORED SUPPLEMENT: E-Commerce Systems That Do It All for Retailers

The new realities of online retailing require technology that is flexible and scalable

Two years ago, the online retailing market seemed to be hitting its stride. In mid 2003, sales were on track to hit $54 billion for the year--continuing a string of 25%+ annual growth rates that had been the norm since the dawn of the market eight years earlier. Practices were well established by then and customer satisfaction was high.

But hindsight shows that the market was still developing and only two short years later much of the technology that retailers had implemented is inadequate for the new realities of the marketplace. "E-commerce systems today need to handle a wide range of solutions," says David Fry, president of Fry Inc., web site design, hosting and technology company. "Web sites don`t operate in isolation today; they could need as many as 20 integration points."

Part of the mass market

The new technology requirements are the result of the mainstream adoption of online shopping. "We are way beyond the era of the early adopters when just the Internet savvy consumer was shopping online," says Ruud van Hilten, senior director of Business Consulting Services, of e-commerce technology provider BroadVision Inc. "With the penetration of broadband very deep into European households and building in the U.S., online shopping has now hit the mainstream. We`re part of the mass market."

That move into the mainstream has broad implications for the technology that drives retailers` e-commerce web sites, not the least of which is the ability to create a cross-channel experience. "Shoppers` behavior is substantially different from what it was before," van Hilten says. "People use any channel to interface with the retailer--it`s not Internet only; it`s any channel any time. That forces retailers to tie the channels together more closely than they had to a year or a year and a half ago."

The new retailing reality forces retailers into complex technology management. "One of the biggest changes in recent e-commerce history is that it is no longer feasible for retailers to run their e-commerce applications in a silo," says John Marrah, president of e-commerce software and solutions provider Ecometry Inc. "E-commerce has now become a part of a broader technology footprint, as well as a broader business model. As a result e-commerce requirements have changed over the past two to three years."

And not only have requirements changed, but the technology has failed to keep pace with those changes, meaning that retailers today are at a major crossroads with their technology decisions. "Most of the retailers we talk to are the more sophisticated retailers who have been online since the mid and late 1990s and they are at the end of the commerce platforms that got them into the business," says Jeff Max, CEO of e-commerce platform provider Venda.

Uniting e-commerce, marketing

Among the primary changes that is forcing retailers into technology decisions is the intertwining of e-commerce and marketing, Marrah says. "Retailers are segmenting their customer databases to create extremely targeted campaigns to drive traffic to their web sites," he says. "Using click stream data from the web sites, they get instant feedback on the impact of their marketing activities on traffic and conversions. To improve their profiling, sophisticated retailers analyze the relationships between the targeted segment in a campaign and the pages they viewed and items they bought."

Retailers use that information to create micro-segments of customers and to identify additional cross-sell and upsell opportunities. "As a result, most companies are looking for an integrated analytics and e-marketing capability within their e-commerce platform," he says.

Successful retail sites are thus forced to adopt numerous components that feed into each other and add to the further complexity of web sites. "Web sites cannot be giant monolithic structures any more," Fry says. "They need to adopt a component system. And that in turn means there are many more monitoring points that retailers need to be aware of."

Among the areas that retailers could need expertise in today are messaging interfaces to fulfillment, EDI links to inventory and SOAP interfaces to Amazon.com, if they have a presence at that site, Fry says. "That all adds to the complexity of a web site," he says.

Van Hilten stresses that BroadVision seeks to remove the rigidity from e-commerce systems. "Retail web sites must have agility and be able to launch new applications quickly," he says. "Demand could arise overnight."

Old platforms in a new market

Indeed, says Max, many retailers have sought that flexibility for some time and have failed to find it in their existing e-commerce systems. "Many feel that they`ve spent a tremendous amount of money and the promise of flexibility never came through," he says. "Today, they`re on an antiquated platform in a fast-moving market."

What Venda and most e-commerce technology vendors say they are providing these days is on-demand computing. One of the new technology buzzwords, on-demand computing means that the technology provider hosts the applications and hardware and makes the computing power available to users when demand arises. It also provides automatic technology upgrades. But Max cautions that retailers must make sure they understand which companies offer true on-demand computing and which don`t. "There`s so much noise from competing vendors it can seem overwhelming to make a decision that can affect you for the next five to seven years," he says.

The decisions all come back to the two words that vendors stress these days: flexibility and scalability. "If the tools deliver as promised, merchants will see unbelievable growth in revenue," Max says. "They better decide if the solution they`re choosing can take them there." Further, he adds, retailers need to examine the health of vendors. "They need to determine if the vendor will be there in the future and look at the vendor`s viability and profitability," he says.

One of the challenges that that new reality imposes on retailers is the challenge of making their web site content accessible to shoppers. E-retailing sites today host thousands of products, forcing customers to search for the right product. "As a result, the abandonment rate on web sites is typically high," Marrah says. "New technologies such as guided selling have emerged to address this issue." Guided selling technology walks a consumer through an interactive product recommendation and selection process to present a targeted view of a product catalog on the web site. "Innovative retailers are increasingly asking for guided selling as a part of the overall e-commerce solution," Marrah says.

Besides offering deep inventory, web sites in today`s market need to be able to handle a variety of transactions, not just a sale. For instance, many retailers want their customers to be able to initiate product returns through their web sites. Others want customers to be able to schedule service or installation appointments online. Consumers are also changing in what they want from a web site, van Hilten says. "Customers don`t want transactions, they want interactions," he says. "They don`t want only content; they also want contact."

The choice imperative

Among the functionality that retailers must be prepared to offer today, van Hilten says, is the ability for the consumer to choose multiple shipping addresses and shipping options, gift wrap or no gift wrap, order online-pick up in the store, and so on. "It sounds easy but it`s quite complex," he says. "Then you have to determine if you want everyone to have all that capability or if you want to present it just to certain customer segments." Whatever the retailer decides, choice is imperative, he says. "The moment a web site does not provide a sufficient level of choice, cart abandonment goes up," he says.

BroadVision, which participated in a high-profile, successful relaunch of Circuit City Stores Inc.`s web site last year, provides such flexibility, van Hilten says, and its customers take advantage of its expertise. "Our customer base is ample proof that we have a personalization product that works," he says.

Guide to E-Commerce Technology

These are all functions that retailers didn`t necessarily recognize five years ago when they made their initial investments, van Hilten says, so the capability isn`t there in many systems. But many retailers don`t want to start all over. "You don`t want to overhaul the entire e-commerce infrastructure as new requirements come along," van Hilten says. "That`s risky. You want to be able to just add capabilities to a web site."

BroadVision addresses that issue through its Total Agility Suite. Implementation starts with understanding a retailer`s objectives and building from there. "We model the complexities that a retailer needs and add to what they already have," van Hilten says. "We understand what you want to do and where you want to go."

Ultimately, a web site must create relationships with customers and successful retailers understand that that is where differentiation resides, van Hilten says. "In a market where everything is commoditized, a competitor can copy everything you do except the relationship with your customer and your level of adaptability," van Hilten says. "If you` re adaptable, it`s very difficult for a competitor to copy you."

Open source

Fry, which was started 11 years ago as a web site development company, approaches retailers` challenges with its Open Commerce Platform, an open-source e-commerce system that meets the bulk of retailers` needs right out of the box and can be easily modified to meet the balance, Fry says. The Open Commerce Platform replaces traditional e-commerce software that has two drawbacks, Fry says: Developers charged ongoing licensing fees and as much as 30% of the code had to be replaced with new code to meet retailers` specific needs. On top of that, Fry says, such software is often difficult to integrate into existing systems.

With a shopping cart, a content management capability, the ability to provide targeted content and other basic functionality, "the OCP has 80% of what a retailer needs; we build the other 20%," Fry says. Such customization meets the needs of retailers as they define them, not as some software developer defines them. For instance, the Fry Open Commerce Platform comes with a core shopping cart, but retailers can change how certain customer options are displayed. In the case of Fry client Kmart Corp., the retailer allows shoppers to specify shipping and delivery instructions on the product page, while client Lillian Vernon chooses to offer those options at checkout. Both are built on the Fry core. And that makes the customization process easier, Fry says. "Rather than build on top of someone else`s platform, we build on our own framework," he says.

A package deal

Fry says the company has adopted an open platform for a simple philosophical reason: "The intellectual asset of software development is going down in value while the expertise around the software is going up in value," he says. He notes that the prices of much e-commerce software have declined in the past few years as competition has increased. "The licensing cost was not tied to the value of the software but to what the market would bear," he says.

Fry doesn`t re-invent the wheel with every application, however. It has integration agreements with technology vendors in rich media, search and navigation, analytics and others. "We incorporate best-of-breed components," Fry says "We don`t want to re-create what other people do well."

He adds, however, that Fry continues to work with retailers who have built their e-commerce systems on other platforms, such .Net and J2EE. Fry notes that his company`s approach has been successful, with $1 billion of e-commerce flowing annually trough Fry platforms.

With all the complexity that retailers face today, Marrah says they should seek out an integrated e-commerce, e-marketing and analytics solution that can scale as the business grows and support peak buying periods. "They should try to buy a packaged application, rather than either trying to build such a solution themselves or buying components from multiple vendors and integrating such components themselves," he says. That, in fact, is what is happening, he notes, citing a recent Gartner study that reports a shift in the market from e-commerce toolsets to packaged e-commerce.

Integrated solutions

In addition, he says, mid-market retailers should look for a vendor that provides integrated e-commerce and back-office capabilities. Further, he says, retailers should integrate customer interaction channels to gain a better understanding of customers so they can better merchandise each channel appropriately and learn how to market to various consumer segments more effectively. "To realize these advantages, they must use underlying technology that integrates such customer interaction channels," Marrah says.

Ecometry got its start as a provider of applications to catalog merchants with an integrated suite of catalog management, call center, campaign management, order management, shipping, warehouse management, inventory management and interfaces to financial systems, then expanded into e-commerce and analytics capabilities.

Ecometry`s parent company recently acquired Blue Martini Software to add multi-channel interaction capabilities to Ecometry`s solution. Blue Martini software includes a scalable e-commerce solution, guided selling, gift registry on the web and at a kiosk, messaging ability at retail point-of-sale terminals, clienteling for the sales associates, dialog marketing, analytics and loyalty programs.

"We will continue to expand our footprint and will explore acquisitions in the area of merchandizing and store operations in the future, to become a provider of integrated consumer-facing, mid-office and back-office applications to the retail industry," Marrah says.

Venda offers an e-commerce platform built on technology that the company developed, sold to fashion retailer Boo.com, then re-acquired at fire-sale prices after Boo.com went out of business in 2000. Boo garnered a huge amount of attention during its short life--mostly for the slick web site it built and its brash, up-to-the-minute approach to fashion retailing. Boo, however, was ahead of the market, Max observes, with a flashy, image-heavy site that required broadband Internet connections years before most shoppers had broadband in their homes. That worked to Venda`s benefit, however, when Boo went down and Venda snapped up its technology.

Removing the hurdle

Today, with no investment in the technology to recover, Venda is selling its services at a flat monthly rate for everything a retailer needs to be online, Max says. "We`re taking a huge technology hurdle out of the way of the middle tier market," he says.

Venda already has a base of customers in Europe and is making its move into the U.S. It boasts a grid computing network that runs many sites today. Venda leverages its expertise running those sites to create applications for customers. All customers thus get the benefit of what Venda develops for each customer and the core functionality is woven into the Venda system. "When new functionality is required, it doesn`t mean a massive overhaul of the entire platform," Max says.

Venda fashions its core capabilities into the look and feel of each customer`s web site. Those capabilities include everything from running the web site to providing search and navigation technology, cross-selling and upselling, transaction and payment processing, order fulfillment, customer service and marketing.