When scaling up means new technology, smaller online retailers balance strain and gain
By Mary Wagner
When Juergen Link went live with his premium tea site SpecialTeas.com in 1996, a Yahoo search under “tea” brought up only 19 listings. SpecialTeas.com, initially a home-grown effort, didn’t even have a shopping cart or an order management system; most shoppers weren’t yet ready to supply their credit card information to an Internet store, anyway. Customers printed out a form from the site, filled out their order on paper and mailed it in.
An admittedly rudimentary effort, the site was nevertheless on par with much of what was available online at the time. But it wasn’t long before growing demand forced some upgrades. SpecialTeas added a shopping cart the next year, the program written by a local Internet service provider that had some development capabilities. A commercially-written packaged shopping cart applica-
tion followed in 1999, and later,
additional modular components and eventually a new web site.
Integration needed
But it was the need for full integration of the customer-facing web site with supporting back-end software and functions that prompted a move to the enterprise platform of provider Ecometry last September. “Without that integration, it’s really difficult to process orders,” says Link, founder and president. “Ecometry is our back office software and it drives our site, which means we have real-time ordering, real-time inventory, item management and offer management.”
Web and catalog company SpecialTeas.com has grown to 16 employees in the last nine years. Scaling up has meant decisions on—and investment in—technology, has required significant changes to the original web site and enterprise software system supporting it, and has served up all the strain that can accompany such changes.
Facing technology upgrades is the eventual price of success for every small retailer that thrives and grows. The initial excitement of just making contact with customers and logging in the first Internet sales quickly gives way to the ongoing challenge of trying to figure out how to drive more sales volume most efficiently at the least cost, and when it’s time to bite the bullet and invest in the technology that will better support that effort. The tipping point on when it’s time to move from an initial home-grown solution to packaged or customized applications, or to different service or software providers, varies with each retailer’s vision, resources and game plan.
Link says he hasn’t yet measured the effects of an improved web site design and supporting technology in incremental sales, but he sees clear gains in operational efficiencies through more automation of processes. “Between not having to get in touch with customers on sold-out items, not having to physically review every order, getting orders to the warehouse more quickly and processing them more quickly, I’d say 50% is probably a fair assessment of time savings in turning an order around,” he says.
Gaining efficiencies
Like Link, Anne Yates of
eLearningToys.com. measures the benefits of boosting the technology that operates and supports her site most directly in terms of labor saved and increased operational efficiency. Behind the e-commerce site that went live in 2003 is a classic
Internet entrepreneur story: Yates left a full-time job to be a stay-at-home mom, then launched a store to offer to others the type of educational toys she’d had difficulty finding for her own child.
Like many who launch their own retail operations online, Yates’ first foray into e-commerce had been on eBay, where she eventually attained power-seller status by selling items she sourced at local discount stores. When she decided to open her own online toy store, her previous
career as a programmer for Nortel
Networks allowed her to get over one of the first technology hurdles: she was able to write the HTML mock-up of the site personally. Since inventory overflowing her home’s living room and closets first forced a move to outside storage space, Yates has moved the fulfillment operation three more times before settling in eLearningToys’ current digs, 4,000 square feet of warehouse space in a former textile mill.
Yates chose a Miva Merchant shopping cart application from Miva Corp., in part because she saw the active user community associated with the tool as an important resource. She’s stayed with it through a switch of hosting companies necessitated by the site’s move to a dedicated server, with the Miva cart a bundled offering available from her current hosting company. Miva’s cart also provides the site with search functionality and the business with an inventory database.
Finding the right shopping cart for the front end still left Yates with difficulties in handling those orders on the back end, however. “To be able to show the product on your site is one thing. To be able to collect money, take the order through the entire process and keep in touch with customers became our biggest obstacle,” she says. Handling orders and customer communication through e-mail as order volume grew became “a complete nightmare,” says Yates.
Through Miva, she eventually was introduced to Stone Edge Technologies, whose business management software includes an order management system that targets online retailers with order volume of 20 to 2,000 per day. “In traditional business school terms, that’s small to minuscule,” says president Barney Stone. “But over the years, our customers have had some incredible growth. When you get to the point of doing about 20 orders per day, there is a pain threshold. You get tired of retyping names and addresses and piling through stacks of paper when someone calls to ask where their order is. That’s where we come in.”
Complete automation
By connecting her shopping cart with Stone Edge’s Order Manager last September, Yates automated most of the site’s former manual requirements for re-entering orders, shipping and communication on order status to customers, reducing workload at her small company by the equivalent of two jobs.
“Picking and packing is the only obstacle we have now,” she says. “Once I make the sale on the site, Stone Edge takes care of it from that point on.” The order management system pulls the order from the web site, checks inventory levels, and contacts customers to let them know their order had been received. Once the order has been packed, the system sends customers notification and a tracking number, decrements inventory, and sends that information to Miva’s software to reconcile inventory data.
Yates says that the capacity she gets from Miva’s cart and Stone Edge Technologies’ Order Manger keeps eLearningToys, which had sales of nearly $500,000 last year, running smoothly with three employees. Functionalities attached to the two products – for example, the basic inventory database that is part of the shopping cart application – can handle operational demands at the site’s current level of activity.
But as volume grows bigger, sites may find that the capacities bundled into the technology solutions used early on need a boost—and a move to higher-powered, discrete technologies to drive individual functions. “Our experience is that most of the time, all-in-one packages that provide a shopping cart, order management and warehouse capabilities are usually deficient in one or another,” says David Fry, CEO of web design, development and managed
e-commerce services provider Fry Inc., whose retailer clients span small, mid-sized and large sites. “When e-commerce sites are just starting out, there is a perception that you just need something that routes orders into the OMS and that’s it. But that’s a decision that may be made by an IT person, not a merchandiser.”
The site operator’s desire for functionality such as merchandising
tools or the ability to do targeted promotions as the site evolves often highlights what may be missing in entry-level technology solutions, Fry says. Basic storefront solutions that work for a site’s initial iteration may be outgrown when they’re not up to integrating features from outside providers: for instance, dynamic imaging that’s becoming increasingly important in the online sale of apparel. Search can help drive conversion, but site search that arrives bundled into another function may not equal the more developed offerings of stand-alone site search vendors.
The business reasons
Or take a feature such as gift cards. The online purchase made with a gift card requires authentication at the front end in the interests of fraud reduction, but the order management system the retailer may have in place doesn’t accommodate that if it automates user authentication at the end of the checkout process.
In that case—and in every case—the decision on whether or not to upgrade to a system that can better adapt to the addition of new features depends on how much is to be gained from doing so. Retailers should look for that answer in a well-developed business plan that identifies the best opportunities for return on investment, Fry says. “For example, something like 30% of online consumers buy gift cards. By not having online gift cards,
are you leaving 30% of revenue
opportunity on the table?” he adds. “It really depends on the nature of your business.”
Beyond the need to sharpen up discrete functions and features on the site, another indicator that it’s time to upgrade technology on the road from small to big can be order volume itself. One Fry Inc. prospect is an online retailer that did $6 million in sales last year, but 15,000 of those orders were shipped in December. “For one month, they are a very big retailer and they need to have a technology solution scaled to handle that: order management, hosting capability, data capability—technology across the board,” says Fry.
Both growth prospects and the desire for more functionality were behind PoolQuest.com’s switch in March from a Yahoo storefront
to one from provider LaGarde Systems. PoolQuest.com, an
e-commerce venture of an
established group of Florida-based pool supply stores, went live in November. Built by IT director Chris Smith on a Yahoo storefront template, the initial site wasn’t
delivering the sales and traffic Smith knew were possible.
“We wanted a visual web site, but ours was more text-based. I knew that was one reason we weren’t getting the sales,” Smith says. “I didn’t just want a template. I wanted something more customized.”
A switch to LaGarde’s storefront in March gave the web site a custom design from LaGarde and improved its dynamic ability.
PoolQuest enters product information into the LaGarde software using the system’s merchant tools. When a customer pulls up a category page, the software automatically populates the page with everything in that category.
PoolQuest worked with
LaGarde on additional customization to integrate the web store with two other pieces of software on the back end needed to complete transactions, Mail Order Manager from Dydacomp and Shopping Cart Assistant, a small-business application from JTA Consulting.
An order through the LaGarde storefront on PoolQuest.com
generates an e-mail notification to Shopping Cart Assistant, which exports the order into the Mail Order Management System. The Mail Order Management system then generates an order to the correct vendor or PoolQuest’s own warehouse, and sends the customer a receipt. The M.O.M. system tracks inventory levels and order status.
Basically, LaGarde software handles the front end for
PoolQuest.com, including online marketing such as web search, while the two other software systems handle all back-end functions. Smith notes that the LaGarde system is capable of handling many of the same functions now assigned to M.O.M software, but that PoolQuest uses the M.O.M. software on the back end because it does one thing the LaGarde software does not: provide the same order tracking functionality for orders from other sources, such as phone orders.
One more reason PoolQuest chose LaGarde when looking to move beyond its original Yahoo storefront bears consideration both by other retailers thinking about whether to scale up technology and by the technology vendors poised with solutions. “They let me test their program,” says Smith. “They gave us a test program to play around with.” While declining to disclose numbers, Smith notes that since it went up in March the redesigned site, bolstered by more automation on the back end, already is pulling in sales that exceed those of the company’s largest brick and mortar store.
The financial calculation
Whether adding a new feature or application for the first time, working to integrate what have become a site’s multiple applications, or moving to an entirely new platform, technology upgrades are an unavoidable part of retailing online for sites that are alive and growing. The retailer’s challenge is in
making the choices that best support business objectives, and timing them for the best return with the least interruption.
“Changing the enterprise software and the web site is not something that you want to do any more than is necessary,” Link says. “You make the financial calculation of how much it costs to add people to do certain things manually
versus how much it costs to upgrade. Over a period of several months, you come to the point of saying, it’s time now.”
mary@verticalwebmedia.com
