Madison Reed has raised $32.1 million since launching 15 months ago.
Big technology companies are snapping up e-commerce vendors, and online retailer clients find the transition is not always smooth.
With e-commerce growing rapidly, some of the world's largest software providers in recent years have bought up other software providers, aiming to be able to fill all their clients' e-commerce technology needs. For example, IBM Corp., Oracle Corp., Adobe Systems Inc. and SAP AG all have recently bought e-commerce technology providers that filled in gaps in their product portfolios (see the chart on page 34).
These companies typically suggest that e-retailers benefit from getting all their technology from a single source, that their components work together and that they enable merchants to have only one company to call if there's a problem. It would be nice if it were true. The typical online retailer has cobbled together 15 technologies in its data center to provide all the e-commerce functionality it needs, says Gene Alvarez, vice president and information technology analyst at Gartner Inc.
In reality, vendor consolidations don't necessarily help retailers, he says. Making products built with different methods and on different code bases work with one another is no simple task and, unless one is completely rebuilt to fit the other, challenges, like bug fixes, will persist as the products change over time. Not only might the technology be imperfect, but if a retailer is already using a product it likes and another company buys the provider, subsequent changes in pricing, service, support or the product itself could be significant negatives, Alvarez says. "Acquisitions like this can make you nervous because you're not sure how this will affect the product."
Eyewear retailer 1-800 Contacts Inc., for one, switched live chat providers after the first was acquired and the quality of both its product and service took a nosedive, says Amy Larson, vice president of e-commerce. "I can definitely say it was in large part due to the acquisition," she says.
The retailer had been using InstantService for live chat when Art Technology Group Inc. acquired it in 2010 (Oracle later acquired ATG). Within two years, 1-800 Contacts left thevendor for competitor LivePerson Inc., she says.
"Historically, we were impressed with InstantService's nimbleness and aggressive product road map," she says. "However, the acquisition was a major distraction: The product stagnated—the new cool features we anticipated were put on the back burner indefinitely—and our representatives became distracted and 'sales-y'—the only time they would talk to us was to push other ATG products, not to address the product we'd already purchased."
Oracle did not respond to a request for comments. Its live chat product today is part of a suite called Oracle Live Help on Demand that also offers live video and e-mail services.
Retailers can't stop vendor consolidations from happening. Regardless of who is buying whom or what happens to a product or service after an acquisition, retailers must find a way to deal with ever-larger vendors and the changes that come with them. For some like 1-800 Contacts, an acquisition might be cause for finding another provider altogether. For others, such activity can be dealt with by changing how their in-house teams work with the product and the provider.
"There's always anxiety and hope that the things you don't like will get better and things you did like won't go away," says Angie Stocklin, co-founder and chief operating officer of One Click Ventures LLC, which operates 10 e-commerce sites including HandbagHeaven.com and Fedoras.com. "You have to look at every consolidation to make sure what you are getting will be the same, similar or better than what you had before."
One Click uses order management software from Stone Edge Technologies Inc. E-commerce platform provider Monsoon Commerce Inc. bought Stone Edge in 2011. While there were no big changes immediately, Stocklin says One Click did have a brief period when it was still learning to work with Monsoon during which things got a little rocky. For one thing, her information technology team had to adjust how it makes changes to the Stone Edge platform. The team used to ask and answer questions in Stone Edge's online forums often, enabling it to fix many issues on its own. But Monsoon hasn't been active on the forums, so the team had to wait longer to get support, she says. Also, right after the consolidation, she says One Click had some trouble getting a project timeline from Monsoon like it was used to having with Stone Edge.
"Relationships all boil down to great communication," Stocklin says. "I am sure fault lies on both sides of this particular issue, but we feel good about the future of Monsoon and Stone Edge."
She can say that because One Click was able to fix its communication issues with the vendor. In a meeting between One Click's CEO and I.T. team and key Monsoon executives, the retailer made its service expectations clear to the vendor, Stocklin says. "It was discovered that some miscommunication had taken place regarding what we needed and what they understood we needed," she says. "Once everyone was on the same page, they have gone out of their way to make sure they deliver on their promises."
Another change One Click has dealt with is a large price increase. The company's annual contract for Stone Edge via Monsoon increased 300% in 2013, following the termination of its pre-acquisition contract, she says, which reflects standard differences in how each vendor had priced its products. However, her team decided the price was still competitive and she expects that product upgrades will be more frequent and significant since Monsoon has more resources. That also gives her more confidence in the long-term viability of the product, she says. Already, for instance, Monsoon offers to build customizations on the Stone Edge platform, for a fee, which Stone Edge was never able to offer.
Personalized gifts retailer Things Remembered has long managed its customer database with technology from vendor MBS, says Tony Chivari, senior vice president and general manager of the direct-to-consumer business. The product, cost and level of service haven't changed much over the years, he says, and Things Remembered is satisfied with it.