June 30, 2011, 12:00 AM

Mega Tech Mergers

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But not all e-retailers are as confident about their vendors becoming part of much bigger companies. At Gaiam, Allen says her contact with larger vendors, such as Adobe Systems and Escalate Retail, is inconsistent. Gaiam has a direct contract with Adobe to use its Scene7 imaging and design tools—Scene7 itself was a 2007 Adobe acquisition—and an indirect contract for Adobe's Omniture analytics tools that is managed by Gaiam's e-commerce services vendor, MarketLive Inc. She says her Scene7 account is managed by an Adobe representative locally, but a different, non-local Adobe rep manages the Omniture account, and that representative changes frequently because of employee turnover.

Since Adobe acquired Omniture after Gaiam inked its contract for Scene7, Allen hopes to use Gaiam's position as a customer for two Adobe services as leverage to negotiate a better deal when her Scene7 contract is up for renewal next year. But she isn't confident that will work because Gaiam already gets a good rate on Omniture that MarketLive negotiates on its behalf based on MarketLive's client portfolio of more than 100 web retailers, including eight in the Top 500.

Gaiam began working with Escalate Retail when the company formed in 2006 through the merger of Ecometry, which Gaiam used, and GERS Retail Systems. Gaiam uses Escalate Retail for order management and fulfillment, and Allen describes account support as mediocre, which she partly ascribes to the e-retailer using the older Ecometry version of Escalate's software.

Allen notes that Escalate did reach out by e-mail and phone to alert Gaiam to its acquisition by RedPrairie in February, although it wasn't made clear if the combined companies would support the software version Gaiam uses. "Overall, our communication isn't super strong," Allen says. "I'm not sure that the acquisition will do us any favors. We are a little concerned that they won't support the software at all or will want us to upgrade."

Allen says Gaiam is weighing whether to seek bids from other software vendors or look more closely at an upgrade with Escalate. "Not knowing if Escalate will continue to support our existing software brings up the urgency quite a bit," she says. RedPrairie did not respond to a request for comment on its support plans for Escalate Retail products.

Communication with clients about mergers and technology plans is often hit or miss, Alvarez says. "Vendors' communication to their customers as a result of this acquisition market has been low and in some cases unclear. Either they have to get in front of their customers or their customers are going to turn to others."

Given the pace of change they face, e-retailers can ill afford any such uncertainty, Alvarez says, pointing to how quickly online social networks and mobile commerce are reshaping retailing. Web retailers must move quickly in areas like that, he says, and if that means relying on vendors that provide pre-integrated services, it makes sense to go that route.

Hayneedle's Dee concurs. "We want to focus on how we allow our customers to find the product that is right for them," he says. "We're not integrators. We lose some competitive advantage when we have to focus differently."


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