The acquisition will add more than 300 products to L’Oreal’s lineup.
Many Top 500 e-retailers are slow to move to commercial software.
Online contact lens and accessories retailer AC Lens developed its e-commerce platform in-house in 1997, a year after launching ACLens.com. Company founder Peter Clarkson and his e-commerce team have continued to add functionality and update the platform ever since and Clarkson has no plans to replace it.
Clarkson has reasons for sticking with the homegrown technology, even as commercially available e-commerce products become increasingly robust. Contact lenses are unique in that the lenses themselves have specific metrics regarding strength of magnification and materials, Clarkson says. And checkout is more complicated than for many online retailers because contacts require prescriptions.
When AC Lens began, there weren’t any commercial e-retailing systems available to meet such needs, so Clarkson developed his own. Even if he found a system from an e-commerce vendor that could handle his requirements, Clarkson says he would not move away from the e-commerce platform he’s put so much work into. “We’re constantly improving it and we have so much invested in it that we wouldn’t consider a change. I think it stacks up against anything available commercially,” he says.
Clarkson’s hardly alone in sticking with homegrown technology for the most integral components of an e-commerce site, such as the underlying platform that typically handles basic functions such as taking orders and accepting payment and the content management system that handles images, prices, products descriptions and the like. For more specialized systems that can be added on to the foundation of the e-commerce site, such as an e-mail marketing system, retailers are more likely to buy or license software from technology vendors.
“The reason there are so many in-house e-commerce platforms is that those who made the initial expenditure seven to 10 years ago have put a truckload of money into it and it’s hard to walk away from,” says Gene Alvarez, vice president and e-commerce analyst at Gartner Inc. “Add in all the customized processes and it’s easy to see why they are still wedded to in-house systems.”
That is likely to change, he says, particularly as smaller retailers realize that they can obtain software from vendors that offers many of the features that the top online retailers have introduced in recent years.
But that process of moving off homegrown technology is proceeding slowly, according to data from the recently published Internet Retailer 2010 Top 500 Guide, which ranks North American retailers by their online sales.
AC Lens, No. 300 in the Top 500 rankings with 2009 web sales of $29.1 million, is one of 227 retailers in the Top 500 Guide that run an e-commerce platform developed in-house. Another 31 retailers in the Top 500 Guide use a combination of in-house-developed and commercial platforms, and 22 retailers did not provide data on their platforms.
220 retailers rely on e-commerce platforms from commercial providers. The top three platform providers were Art Technology Group Inc., GSI Commerce Inc. and IBM WebSphere, which accounted for 46% of the vendor-supplied technology in this category.
Content management systems also are predominantly developed internally by Top 500 retailers. 299 retailers run homegrown systems and another 29 use a combination of internal and external technology, while 106 use technology from vendors. 66 retailers’ CMS use was not identified. The top suppliers, which together represent 24% of those Top 500 retailers that use vendor products only, are GSI Commerce, ATG and Escalate Retail (tied for second), and Fry Inc.
The ratio is quite different for e-mail marketing software. Only 143 retailers in the Top 500 listing have built their own systems and another 43 have combined supplier and internally developed technology. But 314 retailers, or 63%, use provider applications or services. The top three providers are Experian CheetahMail, GSI Commerce (e-Dialog) and Responsys Inc. Together they accounted for 42% of retailers using provider-only technology.
A platform for growth
Retailers like AC Lens that have developed their own e-commerce platforms stick with them for a number of reasons. Their systems can be updated quickly, information technology employees know the system, the system is reliable and, apart from system expansion and maintenance, they’re paid for.
In the case of AC Lens, the technology developed in-house, combined with some tools obtained from suppliers, works so well that the company expanded its business to include web site hosting for two vision insurance companies and a regional grocery chain. The company’s mastery of its own e-commerce platform lies at the core of its expansion and also fueled its diversification into entirely new markets: baseball and softball equipment.
“We’ve been able to partner with other organizations and provide them with branded web sites by leveraging our systems,” says Clarkson, who also is president and CEO. “Then we looked around for a way to diversify to grow the business and leverage what we are good at: e-commerce. And that allowed us to move to totally different product sets on our Baseball Rampage and Softball Rampage web sites.”
SkyMall Inc., a retailer of lifestyle products through airline catalogs and its e-commerce site SkyMall.com, is another Top 500 retailer that relies extensively on its own technology, although it took a somewhat different route than AC Lens did.
SkyMall started in 1989 with catalogs tucked into airline seat pockets and ran its business with licensed customer relationship management technology from 1989 until about 1996, says Jay Scannell, chief operating officer. “We had swapped out our CRM system several times to get a better fit with our needs and other systems,” he says. But when the company decided to begin selling online in 1996, he says, the decision was made to develop its own e-commerce platform.
The retailer (No. 169), which had $76.5 million in 2009 web sales, according to Top 500 Guide estimates, also developed its own CRM system a few years later. Because it owns both the CRM and the underlying e-commerce platform, SkyMall has been able to achieve significant growth with very little investment in the systems in ensuing years, Scannell says. For instance, the retailer does not have to license additional seats from a software vendor as it grows. And because both systems make use of the same foundational technology it’s easy to make changes, he adds.