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The cutoff point for going with a licensed or managed solution is about $200 million in annual sales, according to industry experts. "Below that level, it is too costly to go with an in-house solution," says Truition`s Langlois. "With a hosted solution, upgrades are scaled across the provider`s client base, which reduces the user`s cost and allows them to ramp up faster."
Even if retailers have to spend a little more per month than anticipated for a hosted e-commerce solution to get the scalability and flexibility that meet their business needs, the added expense can be justified through the time savings gained by not having to manage the system.
"The money saved on maintenance can be applied straight to marketing and customer service, areas that directly impact sales and customer satisfaction," says MonsterCommerce`s Leffler. "Budgets are a consideration, but retailers serious about implementing an e-commerce platform that can grow with them and that caters to the strengths of their business can`t afford to overemphasize cost."
More direct control over their e-commerce platform also provides retailers with greater flexibility as they can stretch their resources further. However since most have finite IT budgets, this causes retailers to become more involved in managing technology.
"Retailers` e-commerce strategies should allow them to focus on marketing and merchandising, not IT," says Hank Reeves, CEO of NewRoads Inc., which provides a hosted, on-demand e-commerce solution. "The more time they spend managing operational elements, the less they have to drive real differentiation and value creation." (See accompanying story, p. S18)
Besides, it is too easy for retailers to fall behind on the latest innovations in e-commerce technology. "Retailers can leverage third-party investments and avoid playing catch-up with technology," adds Reeves. "They should have the best functionality available to drive personalization and convenience--and be able to manage it without constantly engaging their IT staff."
Still, many retailers want the flexibility to start with a hosted solution and later pull it in-house as they grow. NewRoads, which provides retailers with a fully integrated range of outsourced e-commerce, customer care, fulfillment, logistics, and IT services, offers such flexibility. "Our front-end offering has the benefits of personalization and control, in addition to being portable as we use market-leading application providers so retailers can move that in-house if they desire," Reeves says. "We`re a value added integrator of these applications and our strategy is to match the right platform based upon the merchant`s needs."
Selecting a solution based on budget is not to be confused with selecting a solution that best fits the retailer`s needs. "The value proposition of the technology is more important than the financing option," says LaGarde Inc.`s LaGarde.
Choosing a platform based on price can lock a retailer into a solution that is not necessarily flexible enough to meet a retailer`s needs, experts say. "A retailer`s biggest need is for an e-commerce platform that allows them to sell product the way they ought to in order to satisfy customer expectations," continues LaGarde. "Look for a system that is flexible and scalable enough to be molded and shaped to meet future unknown business requirements."
Experts also recommend talking to current clients and attending online user forums or reading user blogs before choosing an e-commerce vendor. Such information can aid retailers in determining where a certain vendor`s expertise lies, especially if they are considering a single vendor to provide front-end and back-end solutions.
"Retailers need to consider the experience of the vendor, because it`s tough for any vendor to have the expertise in every aspect of an end-to-end e-commerce solution," says ATG`s Conneighton, who stresses that many e-commerce vendors do not have expertise in providing back-end accounting solutions.
"Retailers that want to have a single vendor need to pick a dividing line for what that vendor will provide," he adds. "It is feasible to chose a front-end supplier and a back-end supplier, just make certain their platforms can be integrated."
Scalability from the start
Considering integration between the front-end retailing solutions and back-end accounting, fulfillment and call center applications, and the scalability of those solutions, is often overlooked by retailers in the start-up phase when they are selecting an e-commerce vendor.
"Front-end and back-end solutions have to complement each other and scale accordingly as the business grows," stresses LaGarde. "Efficiencies gained at one end of the business can`t be lost at the other end, because losing those efficiencies affects operating costs, business processes and customer satisfaction."
While LaGarde includes some back-end functionality in its e-commerce platform, it draws the line at offering call center and logistics applications. In these instances, the company partners with best-of-breed application providers to ensure compatibility and scalability. "There is no one-size-fits-all menu," LaGarde adds. "Filling in holes with partners allows for a compatible, scalable solution. That point can`t be oversold."
Still, scalability and flexibility in an e-commerce platform mean more than just the ability to integrate third-party applications. Retailers must also consider the vendor`s ability to serve up pages to different form factors. Internet-enabled handheld devices, such as Blackberry, Treo, and cell-phones are steadily finding their way into consumer`s hands.
As manufacturers of these devices emphasize their Internet capabilities, a point that plays well with consumers under 35, the devices are being used more frequently for shopping, or at the very least, research prior to making a purchase, according to industry experts.
"With more emphasis on the use of handheld devices for online shopping, retailers are going to need to be able to simplify the pages fed to these devices to fit the constraints of the screen," explains Junction Solutions` Haines. "We are already seeing tests between large retailers and Microsoft using handheld devices to display special promotions to a consumer while they are in the store and feeding them a map to find the product from their in-store location."
Multi-channel integration capabilities are another consideration to keep in mind when evaluating an e-commerce vendor. With retailers looking to integrate their e-commerce platform into multiple channels it is essential to provide a 360-degree view of their business.