E-commerce grew 20% for Costco in fiscal 2015—20 times faster than store sales.
Flexible is in and rigid is out as retailers upgrade their e-commerce platforms.
It took a big acquisition and a year of heavy-duty systems integration, but Market America Inc. now believes it has an e-commerce platform with the flexibility it needs to one day achieve its goal of generating $1 billion in annual web sales.
The move to a new platform was a major project for Market America, a direct seller of health, beauty and other general merchandise. The retailer first developed an e-commerce site in 1996, and operated its own platform for 15 years, upgrading the system over time with commercial applications such as a better site search engine from Microsoft Corp. and customer reviews from PowerReviews Inc.
But to help make the leap from an online retailer with annual online sales of about $332 million to one that can reach its goal of $1 billion in e-commerce sales within several years, Market America needed a more flexible platform that could quickly accommodate new applications for mobile commerce and social media. It also needed a platform with advanced technology that could handle an inventory of millions of new products and better ways to deliver personalized coupons and other incentives to web shoppers.
Buy vs. build
"We had to have an e-commerce platform that could scale quickly and handle a lot of change," says Market America chief technology officer Michael Brady. "Our old technology just wasn't flexible enough to get us to where we needed to be."
Market America moved to acquire more sophisticated e-commerce technology in December 2010 when it purchased shopping comparison site Shop.com for an undisclosed price. The company has used Shop.com's advanced features such as faster site search and better content management and order management systems to develop a more integrated and advanced platform that provides the flexibility the retailer requires.
Today, after more than a year of work that included doubling the size of its full-time e-commerce programming staff to about 15 employees, Market America's new e-commerce platform can support an inventory of 30 million products. The new platform also includes new social commerce applications, mobile commerce and improved customer promotion tools. "There are so many new ways that our customers and distributors want to do business with us that we needed a better e-commerce engine to make that happen," Brady says. "Our platform is now a lot more nimble and able to implement changes in technology quickly."
Market America learned that its outdated and inflexible e-commerce platform couldn't keep pace with consumers that want to use their web-enabled smartphones and tablets to make a purchase anytime and anywhere, or to connect with shoppers who go on Facebook and Twitter regularly to share their shopping likes and dislikes with family and friends.
Updating an older e-commerce platform with more advanced and nimble technology is becoming a priority for other online retailers as well. Just a few years ago, before consumers in the millions embraced web-enabled mobile devices and social networks like Facebook, a retailer could make do with an e-commerce platform it overhauled or replaced only every few years, say industry e-commerce technology analysts. Retailers also might have been able to get by with an e-commerce platform equipped with only basic applications such as a shopping cart, product catalog, site search engine and systems for content and order management, says Brian Walker, vice president and principal analyst for e-business and channel strategy at Forrester Research Inc.
But these days e-commerce platforms need to be flexible and able to change or roll out new applications or web site features quickly and easily. An agile e-commerce platform also must be tightly integrated with other back-end applications that communicate with suppliers and track customer history along with other information management systems in order to support new initiatives such as mobile commerce and social marketing, Walker says. "We're entering the era of agile commerce," he says. "The next five years will see a significant evolution in how consumers use mobile commerce, their in-store experiences and even interactive web TV to shop online so retailers will need flexibility in their core platform to adapt to the many new ways consumers will be engaging with them."
To update their e-commerce platform and make their infrastructure more flexible, some web retailers such as Market America are purchasing companies with better technology. But other retailers and consumer brand manufacturers, such as boot maker The Frye Co. and online vitamin and health products retailer Vitamin Research Products LLC, are first taking stock of their current e-commerce platforms and then defining what new capabilities and priorities they need. Next they are updating their e-commerce platform with better commercial applications, developing new features, functions and programs in-house or looking for a new e-commerce platform provider.
As they plan and implement a better e-commerce infrastructure, web retailers first need to take into account how their customers want to research and buy online, Walker says. "Web retailers should focus on making their sites accessible and usable across all devices and browsers," Walker says. "Tablets and smartphones will continue to accelerate in the share of web traffic and many sites are largely unusable across those devices still today."
Making its outdated e-commerce system flexible enough to handle new, advanced features was a top priority for Frye, a maker of boots, shoes and accessories since 1863 and an online retailer since 2001. For a decade Frye used an internally designed e-commerce platform that included a basic shopping cart and an order management system that supported an inventory of about 1,200 products. But the platform's content management system was outdated, its site search engine rudimentary and there was no easy way to roll out social media or advanced features such as product recommendations, says Frye digital director Andrew Tarica.