11/04/13

Full service

That’s what top brands expect from their e-commerce software. Learn how four vendors vie to satisfy multinational clients with an array of integrated capabilities.

Amy Dusto , Associate Editor

When Benefit Cosmetics LLC planned to expand its online sales internationally three years ago, it went shopping for e-commerce software. It deemed IBM Corp.'s Websphere and ATG Inc.'s software too expensive and complex, and narrowed its choices to hybris AG and Demandware Inc. Language capability helped cinch the deal for hybris, a German e-commerce technology provider acquired this year by another German software company, SAP AG.

At the time, hybris could handle Chinese character sets and Demandware could not, says Valerie Hoecke, senior vice president of digital for Benefit Cosmetics, which now sells online in 32 markets.

Demandware subsequently added Chinese capability to its software. And, in the last two years, such global brands as athletic shoe maker Puma SE and cosmetics brand Groupe Clarins have launched e-commerce sites in China, as well as in other countries, on the Demandware platform.

That's just one example of how multinational brands are demanding more from e-commerce software, and how the providers of that software are responding. Today's e-commerce platform must handle more than just orders, inventory, customer files and payments. It must also let a retailer or brand sell globally, reach consumers on social networks and through mobile devices, feed product data to online marketplaces like Amazon and eBay, and adapt what an e-commerce site displays to take into account shifts in customer buying patterns, an individual consumer's history, profit margins and product availability.

In fact, selling across all channels today requires roughly 25 distinct technologies, according to Tom Johnson and Joe Lamano, retail consultants at PricewaterhouseCoopers LLP. For an e-retailer that relies on 25 vendors to fill those needs, that's potentially 25 upgrade cycles, programming languages, user interfaces and databases to keep in sync. Having one vendor provide most of those technologies can help simplify all that.

When multinational brands look for that one provider of comprehensive e-commerce software they primarily look at IBM; Oracle Corp., which acquired ATG in 2010; SAP, since its recent acquisition of hybris; and Demandware. All four are moving aggressively to provide a fuller range of services—the first three mainly through acquisitions and Demandware through building interfaces to technology providers dedicated to specific tasks, such as making product recommendations or international shipping.

None are cheap—an e-commerce platform from IBM, SAP or Oracle, with implementation costs factored in, can cost a retailer tens of thousands to millions of dollars, experts say. Demandware, meanwhile, typically costs less than $500,000 to implement for its largest clients, a spokeswoman for the company says. Retailers also have to consider the ways the vendors charge. IBM, SAP and Oracle charge licensing fees, which can be a hefty sum for a retailer just getting started online, but easily manageable for a large e-retailer; Demandware charges a percentage of client revenue, which makes it more affordable for smaller retailers, but means fees increase along with sales.

On top of that there are significant personnel and resources costs to maintain these sophisticated software suites. Retailers on average spend $212,000 annually on such overhead and $92,000 per year on platform upgrades, with the largest retailers spending much more, according to a November 2012 Forrester Research Inc. report commissioned by Demandware.

The four companies have different origins and strengths. IBM is among the world's leading providers of software and information technology consulting and booked 2012 revenue of $104.5 billion. Oracle is a dominant provider of database software and competes directly with SAP for the business of multinational companies in the area of enterprise resource planning, or ERP, the accounting and software suites used by businesses with global manufacturing and marketing operations. Oracle generated $37.1 billion in 2012 revenue and SAP $22.0 billion.

Demandware is much smaller, with only $79.5 million in 2012 sales. But it raised $88 million in an initial stock offering in 2012 and has built its business largely on helping consumer brand manufacturers sell directly to consumers via the Internet. Its clients include such brands as L'Oréal S.A. and Crocs Inc.

IBM and Oracle are the leading choices for the biggest North American e-retailers. The two companies provide e-commerce software to 33 of the Top 100 retailers in the Internet Retailer 2013 Top 500 Guide, with most of the rest building their technology internally or outsourcing online sales to eBay Enterprise, the eBay Inc. unit that includes GSI Commerce Inc., which eBay acquired in 2011. IBM boasts 17 Top 100 clients, including Staples Inc. and Target Corp.; Oracle's 16 clients include Apple Inc. and Wal-Mart Stores Inc.

Demandware serves 20 Top 500 clients. SAP can claim only two Top 500 clients, but, reflecting hybris' European roots, it has 16 clients in the Internet Retailer 2013 Europe 500 rankings.

The four companies seek to build on their strengths as they compete for the e-commerce business of the world's leading brands and retailers.

In the case of SAP and hybris, they not only share German roots, they also shared 300 clients before SAP's acquisition of hybris this summer. They've since begun building tighter integrations between their software so new clients can launch them together.

Even before the SAP acquisition, the comprehensive hybris offering made it attractive to North American companies like Airgas Inc., a supplier of specialty gases and equipment for welding and other purposes to business customers. "We wanted a single provider so we wouldn't have to deal with the challenge of making two companies' systems talk to each other," says Steve Max, eBusiness director at Airgas. Airgas began migrating to hybris shortly before SAP acquired it. While Airgas doesn't use other SAP technologies so far, Max says the company will consider it down the line, one reason being that his small e-commerce team wouldn't have to master several tool sets to do its job.

SAP also offers retailers a consulting service called MaxAttention that handles all integrations—including for software from other providers—during its own upgrades, Jonathon Becher, chief marketing officer at SAP says. Approximately 460 SAP customers around the world use MaxAttention and more than 95% of the company's customer base pays for some kind of additional support.

Oracle customer Ashford.com uses almost all of the vendor's commerce technologies, including its commerce service center, order management system, site search and merchandising tools, says Joel Katz, the high-end watch e-retailer's chief operating officer. It also uses more than a dozen tools from other vendors for functions including enterprise resource planning, accounting, fulfillment, warehouse management, inventory control and purchasing.

That may change, Katz says. Most of the non-Oracle pieces in Ashford's puzzle are relics of earlier company decisions, he says. "We're actually looking to integrate more and more with Oracle, because we like Oracle's road map and feel they're putting a huge effort into integration and supporting and understanding their customers."

Katz cites several recent moves by the vendor that have solidified his confidence. The biggest one, he says, is the integration of ATG Web Commerce, Oracle's e-commerce platform, with Endeca Commerce, Oracle's site search and navigation software for providing personalized content to shoppers. Oracle acquired ATG in 2010 and Endeca in 2011.

ATG's previous back-end merchandizing tool was not easy to use and lacked certain merchandising capabilities, Katz says, while Endeca lacked the ability to personalize and run promotions through the entire web site. By last year, however, Oracle had combined the two tools so that retailers can go into one dashboard and change the product assortments and pricing on each page, then set rules for which products appear to which customers throughout the site, he says.

Not only would buying piecemeal each of the technologies Ashford requires take far more information technology work, but it would require the retailer to devote time and money to constantly stay abreast of each vendor's updates and new releases, he says. Moreover, once a retailer has established a successful business, the only way to grow is to scale up—which requires tightly integrated technologies, he says. For example, a growing retailer that needs to ramp up its shipping capability quickly would find that difficult without already integrated order management, inventory management and customer service, he says.

Outdoor gear and apparel seller Moosejaw Mountaineering uses IBM Smarter Commerce software for mobile POS and social media marketing. The mobile POS tool, which vendor Crossview designed to work with IBM, allows associates to search web inventory and place orders for customers who can't find what they're looking for in the store, shipping items directly to their homes. The integration has proved so advantageous that Moosejaw has opened new stores with primarily mobile POS checkout rather than traditional cash registers, and 70% of all transactions at those locations are now mobile, says Moosejaw Mountaineering CEO Eoin Comerford.

In 2011, IBM launched its Smarter Commerce suite with the goal of meeting all the technology needs for businesses trying to adapt quickly to new trends like social and mobile. IBM built the suite on its WebSphere Commerce platform through acquisitions, including of Coremetrics, Unica and Xtify Inc. "Having an approach that is integrated with capabilities from the supply chain to order management is critical to success," says Alisa Maclin, vice president, industry solutions marketing, for IBM.

IBM has also made strides this year to build out its "cloud" capabilities, that is, making its software available over the Internet rather than as an on-premise-only solution. The company has positioned itself to compete with cloud-based e-commerce technology providers, including Demandware, that cater to midsize retailers and divisions of large retailers, says Gene Alvarez, vice president and information technology analyst at Gartner Inc. Moreover, by adding cloud services, IBM can offer more ways for large companies to use its products, he says. "Cloud providers have captured a portion of the market that larger vendors have missed," he says. "But larger vendors are realizing they should be spreading out" with the technology options they offer.

In some cases, Alvarez adds, a retailer may use licensed e-commerce software as its main e-commerce technology platform, while using cloud-based technology for sister sites or specific applications. For example, a U.S.-based retailer might want to expand to Portugal, but find the cost of running all its existing technologies in that country would be much higher than it is domestically, Alvarez says. In this case it might make sense for the retailer to launch in Portugal on a cloud-hosted platform, he says—and if the retailer is an IBM client, it could simply purchase the hosted version of the licensed technology it already uses at home.

Like IBM, SAP and Oracle offer cloud-hosted versions of their commerce software, too. All three of those technology providers historically offered licensed software for a retailer to install and run on its own machines—a complicated, expensive proposition. Indeed, larger online businesses are turning to cloud-based technology for its speed and capabilities, especially as its security and stability continue to improve. For example, Dutch web-only retailer Wehkamp, which booked 600 million euros ($792 million) in 2012 web sales, in June began using one of IBM's cloud-based tools to optimize its markdown pricing. And the American Red Cross, which posted 2012 revenue of $3.17 billion, migrated all of its several hundred web sites for local chapters to a single, cloud-hosted Oracle ATG Web Commerce platform.

Meanwhile, some smaller vendors that offer only hosted technologies are making headway in the high-end arena against SAP, Oracle and IBM. Demandware is one of them. Demandware offers an entirely cloud-hosted e-commerce platform that client retailers connect to via the web.

The vendor's strengths lie in its ability to launch and manage multiple global sites from one platform and its built-in merchandising capabilities, according to a 2012 Forrester report. However, the vendor's order management technology remains appropriate only for smaller, less complex retailers, the report says; IBM leads the pack for high-end order management capabilities through its Sterling Commerce unit.

Unlike SAP, Oracle and IBM, Demandware doesn't aim to offer a full suite of technologies from logistics to customer service. Instead, its e-commerce platform is built to serve as a portal connecting a retailer's existing back-end software, according to chief operating officer Jeff Barnett. More than 70% of Demandware's customers already use technology from SAP, Oracle or IBM, he says.

"An e-commerce platform is an e-commerce platform, but it's really beneficial when you can integrate with the best technologies of all the third parties," says Naveen Gunti, director of technology for high-end menswear retailer and Demandware client Brooks Brothers Group Inc. In addition to connecting to its existing software, including an order management system from Micros Systems Inc., Brooks Brothers uses about a dozen extensions from Demandware's Link marketplace, he says. The Link Technology Partner program is akin to the Apple App Store, but for e-commerce functionality modules rather than apps.

For instance, Brooks Brothers tried and then installed a module from vendor ShopRunner, which provides free two-day shipping for retailers via a membership program. Because the integration between ShopRunner and Demandware was already built, the retailer was able to launch the service in less than two weeks, Gunti says. Without the Link marketplace, he estimates his technology team would have taken six to eight weeks to customize a ShopRunner extension.

Like many multichannel brands, Brooks Brothers focuses on selling in physical stores as well as online, and in many countries. Retailers are increasingly looking for providers that can manage all their e-commerce sites, both domestically and globally, writes Forrester analyst Zia Daniell Wigder in a recent report. Previously, vendors couldn't offer standardized functionality and support across international sites, she says. But today, top retailers and brands demand it, and they have a better sense of their current and future needs, she says; therefore, vendors that can meet all those needs are especially attractive.

SAP's acquisition of hybris this summer represents the end of a three-year era in which the top vendors built their commerce portfolios, according to Forrester analyst Peter Sheldon. "There will be future acquisitions for sure, but there are few independent vendors left now," he writes in a blog post. "The enterprise commerce space has entered a new phase of maturity."

Despite this milestone, the big players will have to adapt to changing market requirements, including the need to operate more complex technologies globally and on multiple channels, Sheldon says. IBM, Oracle, SAP and Demandware are poised to provide those capabilities. What remains to be seen is which ones will innovate the fastest to provide the best overall service, at the right price, for the largest e-commerce operations.

amy@verticalwebmedia.com

@AmyDusto


FEATURED RESOURCE PROVIDERS OF E-COMMERCE PLATFORMS

UniteU (www.uniteu.com)
UniteU's e-commerce software and services include uMobile POS and UniteU Commerce, a cloud, or web-based, commerce platform. The platform is designed to meet the needs of multichannel retailers, supporting custom designs, integration, rich media, advanced promotions, multiple payment and shipping options, and intuitive search and navigation. Learn more.

Gorilla Group (www.gorillagroup.com)
Gorilla Commerce, a boutique web firm based in Chicago, offers web site design services, including platform selection, search engine optimization, web store, navigation/search, product catalog, merchandising, customer accounts, site management order management, fulfillment, data and integrations, and customer relationship management applications. Learn more.

Topics:

Airgas, Alisa Maclin, Ashford.com, ATG, benefit cosmetics, Brooks Brothers, cloud hosting, Demandware, e-commerce software, e-commerce technology, Endeca, Eoin Comerford, Forrester Research Inc., Gartner Inc., Gene Alvarez, Hybris, IBM, IBM Smarter Commerce, implementation, Jeff Barnett, Joe Lamano, Joel Katz, Jonathon Becher, Moosejaw Mountaineering, Naveen Gunti, November 2013 Magazine, Oracle, Peter Sheldon, PricewaterhouseCoopers, SAP, Steve Max, Tom Johnson, Valerie Hoecke

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