Capmark Financial Group’s newly combined companies generated more than $1 billion in 2014 e-commerce sales.
Open source e-commerce software offers low cost and flexibility for the tech-savvy. It may be too bleeding edge for others.
Consumers are picky about what their children sleep on. And so, when FamilyBedding.com, a retailer of custom-made infant, children and teen bedding, launched its e-commerce site in 2004, it wanted to give shoppers plenty of options, says Santino Sebastiani, vice president.
“We offer about 200 custom bedding products from comforters to drapes and each of those items is available in over 100 fabrics,” Sebastiani says.
Such a plethora of choices may be great for choosy moms, but it can create problems for an entrepreneur like Sebastiani building a highly customized e-commerce site with limited capital.
Free programming language
FamilyBedding.com found an answer to its need with PHP, a free programming language for web sites that over the past 15 years has been enhanced through open source collaboration-that is software developers from around the world have improved the code and made additional building blocks and features available for free online. Sebastiani, who built the FamilyBedding.com e-commerce site in-house, says using PHP was the only option he could afford that allowed him to support hundreds of thousands of orders and pricing combinations.
Anything that’s free is going to get a look. But open source software has yet to make much headway in e-commerce. Some experts say the open source e-retail software available is not suited for large web merchants, and retailers lacking in-house technical expertise could find themselves at a loss to maintain or improve their sites without major vendors standing behind them. But for technically adept start-ups, like Sebastiani’s, open source software offers not only low cost, but unlimited ability to customize a site.
That’s because there are no secrets. Open source is a movement that’s grown up over the past 20 years as the Internet made it easy for developers all over the world to share their ideas and improve on each other’s work. Open source programmers make available their work on the web for others to freely use. Most such programs are supported by online communities where users contribute ideas, report bugs, develop patches and test the latest features.
But there are downsides to this free love software concept. The strength of an open source program depends in large part on its community. And free to access doesn’t mean free to customize and update. Open source e-commerce platforms require significant I.T. expertise to maintain and enhance a site, which can raise the total cost of ownership to beyond that of off-the-shelf e-commerce technology.
Open source made sense for FamilyBedding.com because Sebastiani had several years of experience working with the PHP programming language. Thus, the retailer, with modest sales of about $500,000 a year, didn’t have to pay for help. Now Sebastiani is in the middle of migrating FamilyBedding.com to CakePHP, another open source application development framework that he says will allow him to make changes to features like his shopping cart or site search faster than traditional PHP.
FamilyBedding already uses CakePHP for some tasks such as custom drop-shipping integration and order management.
As more e-retailers look to re-platform, the concept of free open source software is intriguing, says Brian Walker, senior analyst, e-commerce, at retail consultancy Forrester Research Inc. 27% of online retailers polled by Forrester last year were planning to re-platform in the next 18 months, he says.
Vendors such as Magento, a unit of Varien, and Oxid offer e-commerce software packages that run on open source software. Magento and Oxid, which both use PHP, offer a pared-down community version of the software for free and make their money by charging for more robust professional editions, support contracts and integration.
Too good to be free?
Magento’s enterprise edition, for example, starts at $8,900 a year for one production server license, plus $2,225 for one non-production license, and includes such features as data encryption, and integration with accounting software and merchandising.
Open source advocates say that’s relatively inexpensive. For instance, an e-commerce platform from Demandware Inc. starts at around $20,000 a month, or 3% of sales, says Jamie Kail, director of e-commerce services at Lyons Consulting Group, which works closely with Magento. Demandware did not return requests to comment on its pricing.
And Janet Sherlock, research director at AMR Research Inc., says vendors of licensed e-commerce platforms charge on average an annual maintenance fee of about 22% of the initial software license fee.
But the savings offered by the open source option can be offset by added I.T. costs.
“You really are on an island unto yourself with open source, if there is a problem or defect with how the program actually works, well too bad. It was free,” Sherlock says. “You have to pay for what you want it to do and you have to pay to keep it running.”
Vetting the vendors
Do the rewards outweigh the risks? Action sports retailer Zumiez had a hunch they did, and hired a consultant to test that theory. The consultant compared the open source option to technology available from established e-commerce vendors and concluded open source was the way to go.
Zumiez then switched to Magento from its previous custom-built platform, says Troy Brown, senior vice president of direct for Zumiez, which reported total sales of about $408 million last year. He did not break out web sales.
Zumiez outsourced design and development to Delorum Inc. after first testing its skills. Brown asked the development firm to build a prototype of a similar web site on the Magento platform and have it up and running in four to six weeks. Once it showed its worth, Zumiez signed on with Delorum and Magento and signed a contract for Delorum to provide ongoing maintenance and updating work on Zumiez.com.
The full re-platforming took a year and cost a third less than the bids Zumiez received from other e-commerce vendors, says Brown, who in the past has helped re-launch e-commerce sites for two large apparel retailers. Zumiez also is supplementing its Magento platform with guided navigation and search functions from Thanx Media`s Endeca On-Demand service and product recommendations from Art Technology Group.
Brown says there have been hurdles in integrating the new site with other systems, such as order management or fulfillment, but he says that’s mainly because of the age gap between the systems.