Groupon says its focus is on the bottom line, rather than top-line growth.
There are more, and more affordable, e-commerce technology options available. That’s a good thing for the many e-retailers ready to spend again.
With the economy on the mend, e-retailers are making out two types of shopping lists: one for diving into hot new areas like mobile commerce and social marketing, and another for upgrading the pillars of e-retail operations, such as shopping carts, e-commerce platforms, e-mail and search marketing, and product information management systems.
The two lists are joined by a common thread in the thinking of many web merchants and of technology providers: the recognition that e-commerce systems need to support retailing across multiple channels.
In some cases, that includes the turf of what traditionally has been called multichannel retailing—e-commerce sites, physical stores and contact center-supported paper catalogs. But today the term multichannel is morphing to encompass new ways of selling, such as online retailers engaging customers via mobile devices and social networks like Facebook and Twitter—whether or not an e-retailer uses these channels in addition to bricks-and-mortar stores and paper catalogs.
The technology market, meanwhile, is responding with a wide range of choices in mobile, social and other applications, as evidenced by the more than 400 e-commerce technology exhibitors at last month’s Internet Retailer Conference & Exhibition in Chicago, where more than 6,400 attendees and vendors gathered to discuss trends in online retailing and view the latest e-commerce products and services.
“It’s a good time to be a buyer in the technology market now,” says Bernardine Wu, CEO of FitForCommerce, a consulting firm that helps match retailers with e-commerce technology vendors. “There’s a lot more solid choices for retailers.”
“There are definitely deals to be had,” adds Bill Mirabito, founder and principal analyst at consultants B2C Partners, which assists retailers in planning technology projects. “We’re starting to see vendors getting creative about providing more affordable technology solutions.”
Moreover, thanks to the improved economy, along with the need to keep up with the constantly evolving e-commerce industry, retailers this year are considering and budgeting for a broader array of technology upgrades and new applications and systems, Wu adds. “All indications point to a strong recovery and growth trajectory in the e-commerce technology market, which began in the first quarter of 2010 and continues to scale up,” she says.
Compared to last year, when many retailers limited their investments to no more than one or two e-commerce technology projects, this year it’s more common to see retailers taking a harder look at multiple areas, Wu adds.
Key investment areas include mobile commerce sites and apps; new e-commerce platforms, which typically include shopping carts and other basic web site features and tools like site search and content management systems; order management systems; web content personalization systems; and applications that enable online retailers to market, merchandise and sell through Facebook and other social networks.
The willingness to spend on technology is supported by the noticeable upturn in e-commerce sales this year. In the first quarter, online sales rose 14.4% year over year to $36.6 billion, following similar year-over-year growth in the fourth quarter of 2009, when online sales hit $42 billion, according to figures from the U.S. Department of Commerce.
The hottest new arena earning a line item in e-commerce technology budgets this year is mobile commerce, says Brian Walker, an e-commerce technology analyst at research and advisory firm Forrester Research Inc. “We see a number of things driving technology investments this year, but first and foremost is mobile commerce,” he says. “Upwards of 50% of retailers are focused on developing their strategy and beginning to execute across the mobile web and mobile applications this year.”
Walker says Forrester has also seen an increased emphasis among retailers on improving their back-end multichannel capabilities, such as integrated product information management, order management and customer service systems, which can ensure that retailers are using accurate product descriptions and pricing when presenting merchandising and marketing displays, processing orders, and answering customers’ questions.
E-commerce technology vendors are also building tighter integrations between e-commerce platforms and multiple outside applications. This is being made more common and affordable by the widespread use of web services technology, including XML and other tools that make it possible for a variety of e-commerce applications to work together.
“There is an increased emphasis on web services to support a variety of things—social commerce, mobile commerce and in-store solutions leveraging the e-commerce platform,” Walker says.
All sizes considered
And while some e-commerce technology vendors are building out their platforms to serve larger clients, several vendors that serve mid-size and large retailers are also trying to move down-market by appealing to smaller companies with on-demand, software-as-a-service applications that typically require lower up-front costs than licensed software applications installed on a retailer’s own infrastructure.
Even some vendors known for providing high-end e-commerce technology built around sophisticated toolkits for deployment by retailers with large I.T. departments are beginning to offer more services to help smaller retailers, Wu says.
In addition, some vendors are developing more flexible ways to test new e-commerce applications, such as order management or site search applications, through a web portal to help a retailer decide if a new system produces the expected results, Mirabito says.
The willingness of vendors to offer more flexible deals with retailers, meanwhile, helps vendors stay in front of merchants as they frequently check the market for new offerings that can support their growth plans. In a survey of retailers’ e-commerce technology plans released in March, Forrester Research reported that 48% of respondents either had a new e-commerce platform project already underway or planned within three years. The remaining 52% reported no plans in the works.
Mirabito, however, says his informal review of the market indicates that many retailers are nearly always within one of three buckets regarding e-commerce platform changes: Planning a new one, currently involved in a project or having just completed a new e-commerce site.
In a look at the types of e-commerce platforms deployed by retailers, Forrester offers the following breakdown:
—Homegrown, hosted and supported internally
—Commercial, hosted and supported by a third-party provider
—Commercial, hosted and supported internally
—Commercial, hosted and supported by a platform provider