The average return on Facebook ad spend rises 26% in Q3, according to social media advertising firm Nanigans.
To capitalize on the growth in online and multi-channel sales, retailers are beginning to shop for a new breed of e-commerce platforms
It may be the biggest shift in e-commerce since the boom days of the late-1990s: From heavy investments in e-commerce platforms unsupported by sufficient consumer demand then to sharp and steady growth in consumer demand unsupported by investments in new e-commerce platforms now. "At the height of the dot-com boom, there was a lot of e-commerce technology investment but not a lot of consumers online," says Adam Sarner, e-commerce analyst at research and consulting firm Gartner Inc. "Now there are a lot of people online but a flat investment in e-commerce platforms. There`s a gap there."
The reason, Sarner and others say, relates at least partly to a fear among e-commerce executives of repeating the early excesses of e-commerce. "Companies that got burned early in e-commerce didn`t want to spend money," Sarner says.
At least they didn`t want to spend until now. The e-commerce industry is entering the "Slope of Enlightenment," as Sarner puts it, which is leading to an undeniable burst of e-commerce technology spending. "This is round two of the e-commerce technology market," says Rob Garf, retail industry analyst with AMR Research Inc. "Several key forces are converging to make this market hot again."
Among those forces, says Garf, are retailers looking to revamp their existing multi-channel commerce platforms, new software vendors challenging the incumbents and consumers expecting nothing but a true multi-channel experience. "This business is very similar to what retailers lived through six years ago," he says.
At the same time, it has become painfully obvious to many retailers that their existing e-commerce platforms are not going to get them to Forrester Research`s estimated $300 billion in online sales, or 13% of overall retail sales, by 2010. Only 13% of retailers rated their e-commerce platforms 9 or 10 on a scale of 1 to 10 in a survey by consultants The E-Tailing Group Inc. 87% rated them 8 or under; and 31% rated them 5 or under.
Over the next two years, 48% of the 160 e-commerce executives surveyed expect to change their e-commerce platforms, The E-Tailing Group found. A Forrester survey of 700 companies found slightly different numbers--36% of U.S. and European online retailers, including manufacturers selling direct to consumers, plan to spend more on e-commerce platforms this year than they did last year. In addition, Gartner reports that 75% of Fortune 1000 companies will increase their investments in e-commerce next year.
The actual numbers may differ from one another, but the bottom line is the same: Retailers are buying, the vendors are selling--and that means new competition on the vendor side of the business. "No incumbent vendor should feel comfortable with their current position in today`s retail environment," Garf say. "The market is up for grabs, especially for those retailers who are looking to re-invest in their e-commerce platforms."
The major emphasis, as many analysts see it, is toward customer-oriented, multi-channel commerce platforms. "The big thing now is customer centricity and customer convenience--letting customers buy where they want, pick up where they want and return orders where they want," says Paula Rosenblum, director of retail research at Aberdeen Group Inc. But with 5- and 6-year-old technology, many retailers` e-commerce platforms are not up to that new reality.
Indeed, many multi-channel retailers operating legacy e-commerce platforms realize that they`re not in a position to benefit from a web-technology-driven multi-channel enterprise--where they can serve customers and leverage customer shopping data across each channel--unless they upgrade to a new platform that can operate in a truly integrated multi-channel environment. "First-generation e-commerce systems were very e-commerce centric, and didn`t take in the full multi- channel strategy," Garf says. "So now many retailers are looking to refresh their e-commerce platforms to make them more multi-channel."
The use of web technology in multi-channel retailing, meanwhile, has proven itself among industry executives as a profit center instead of just a tool to increase customer service and cut traditional operating costs. In fact, Gartner reports that the largest companies will invest in e-commerce technology to attract new customers and increase e-commerce revenue, goals that will be more important to them than reducing costs. "The focus has gone from, `This is a channel we`ll offer so customers won`t bother us in our call center` to `This will actually produce revenue and profits for us,`" Sarner says.
The North American e-commerce vendor community is responding to this growing demand with new players and technology platforms. They include brand new players like Venda Inc. and Demandware Inc. and new offerings from established players like Art Technology Group Inc., IBM Corp. and Ecometry Corp.
And while making multi- channel shopping more convenient, the latest e-commerce tools and platforms are also geared to helping retailers capitalize on shoppers` multi-channel behaviors. By recording, viewing and analyzing consumers` shopping preferences, for instance, merchants are better able to customize their merchandising and marketing according to customer shopping patterns.
A growing interest by both retailers and shoppers to benefit from e-commerce platforms integrated across multiple channels is presenting the vendor community with a new opportunity to sell new technology as well as new means of distributing it. Of particular note is a renewed interest by retailers in hosted applications, offered in various forms by Venda, Demandware, Vcommerce Corp., Truition Inc., ATG, IBM and others. Hosted applications let retailers with overworked IT departments deploy relatively quickly, with limited start-up costs, e-commerce systems to support their overall operations, whether a merchant is a web pure-play or an all-out multi-channel retailer.
In addition, web services technology-- the use of XML and other technologies that enable new software applications to integrate with older legacy applications--is letting vendors offer retailers the flexibility they need in deploying applications across disparate systems.
E-commerce technology vendors now offer several deployment options:
l A retailer can license its e-commerce software and run the software on its own servers, as retailers have traditionally done, retaining maximum control over operations. Such arrangements are available from veteran vendors like ATG, BroadVision, IBM, CommercialWare Inc. and Ecometry.