Groupon says its focus is on the bottom line, rather than top-line growth.
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Frye's biggest priority was replacing its five-year-old internal infrastructure with a new commercial e-commerce platform. In particular, Frye wanted an e-commerce platform that could utilize web services, a technology that lets disparate applications, often from different companies, communicate without a lot of custom programming. Frye also wanted to make better use of custom application programming interfaces, or APIs, the connectors between applications, to roll out social media, richer site content and more tightly integrated systems. After eight months of working with its new e-commerce platform provider, CreateThe Group, a New York e-commerce application development and Internet marketing company with expertise in the apparel and accessories market, Frye rolled out an overhauled platform in August.
The new e-commerce platform features advanced site search that lets consumers narrow their product search by style, size, color or heel height, and a product recommendations tool that targets shoppers with specific types of merchandise based on their past shopping history and other relevant data. More important, Frye's new e-commerce platform is now better integrated with the company's other information systems: its enterprise resource planning software for accounting and other business functions, and its warehouse management, customer relationship management and call center systems.
Better e-commerce technology enables Frye to quickly post new promotions to its Facebook page, lets shoppers share their product comments and wish lists with friends and family using Facebook and Twitter, and send personalized pre-order and back-order e-mail messages to shoppers. "A better e-commerce platform means we can now communicate with customers across a host of touch points," Tarica says.
"We have the ability to add social media and really target the shopper with our deep understanding of the Frye brand or with personalized promotions," Tarica adds. "As an online retailer, we are no longer hindered by an outdated e-commerce platform."
The new system has led to a big jump in several key e-commerce performance categories, Tarica says. Since the new platform went live, the number of monthly visits year over year to Frye.com has increased by about 200% to 1 million from 333,000 and monthly gross web sales have increased by 90%, although Frye wouldn't disclose a specific amount.
But those gains come at a cost. Updating an outdated e-commerce platform isn't cheap, and there is an array of commercial applications using newer technologies such as web services or APIs that retailers need to evaluate in order to find, implement or build a new system that best suits their needs, e-commerce analysts say.
On the high end a big web merchant such as a national retail chain that handles millions of transactions annually and carries a vast array of products online can spend anywhere from $750,000 to $1 million just for the initial software license for an installed platform. Additional fees may be required to cover systems integration and maintenance based on the complexity and size of the retailer's business, says Gene Alvarez, research vice president for customer relationship management and e-commerce with Gartner Inc.
For other smaller retailers with annual revenue of $5 million to $15 million that choose to install a new e-commerce platform that is hosted by a vendor, often software-as-a-service offerings that the vendor maintains and that connect to the retailer's data center via the web, the upfront costs can run from $150,000 to $175,000. Ongoing monthly fees can range from $10,000 to $25,000 or more per month depending upon web site traffic and other metrics, Alvarez says.
Selecting the right mix of new technology from a commercial applications developer or making the decision to build a more flexible and integrated e-commerce platform internally is a very complex decision, especially given all the new ways that consumers interact with retailers, Alvarez says. "The building blocks of e-commerce have grown from specialized technologies that support business-to-business and business-to-consumer transactions to a single set of services-based building blocks with dozens of potential applications that support all types of commerce," he says. "Keeping current on all the new changes happening with e-commerce platform development can be a tough and ongoing challenge."
As they evaluate any new platform technology, retailers should first review their business requirements, develop a list of the pros and cons of the different types of available commercial applications, and then develop a timeline and budget, Alvarez says. "A best practice web retailers can use to evaluate their e-commerce platform is to break down each front- and back-end application and develop the specific business and technical requirements they want each program to achieve," he says. "By doing this type of evaluation, retailers can prioritize their initiatives, guide how they will develop and spend their budget and better analyze what they want their platform to do going forward."
Blueprint for growth
Vitamin Research Products LLC, a direct marketer of vitamin, health and nutritional supplements, is an example of a company carrying out that kind of evaluation. Vitamin Research needed a more flexible and advanced e-commerce platform to better integrate its four e-commerce sites and grow beyond its current base of about $15 million in annual web sales, says vice president of e-commerce Jason Roussos. Vitamin Research recently hired Roussos, formerly president of Living Direct Inc., a web retailer of niche appliances and related products with eight e-commerce sites, to rebuild the company's e-commerce infrastructure.
Roussos aims to launch a new, more flexible e-commerce platform by the summer of 2012. His first step was to spend three months assessing Vitamin Research's current platform, summarizing and ranking new technical requirements and writing new business objectives. "What we have now isn't very integrated and we can't easily launch a new channel such as mobile commerce," Roussos says. "We've been limited to what we can do."
Preparing a detailed requirements plan and drafting a new technical blueprint also convinced Roussos and Vitamin Research Products that the fastest and best way to build a better platform was to work with a vendor rather than build the system in-house. Vitamin Research Products is currently evaluating outside e-commerce platform developers that can provide the retailer with a hosted infrastructure, such advanced features as a single shopping cart consumers can use across multiple sites, a more sophisticated order management system, mobile commerce capability and product reviews.