Retailers shift their ad spending from TV, radio and print ads to digital ads.
(Page 2 of 3)
Additionally, the retailer's conversion rates have gone up by 8% to 20%, depending on the web site, which Hickey attributes to improved checkout and marketing tools available to him through Magento. For instance, Online Stores uses an extension from e-mail provider Bronto Software Inc.
Another e-retailer moving off the Yahoo platform is PureFormulas.com, which sells health supplements and has grown significantly in recent years, generating $30.8 million in sales in 2012, up about 54% from just less than $20 million in 2011. The retailer had been having problems on a regular basis getting payments processed by Yahoo, and during Cyber Monday, the Monday after Thanksgiving, transactions were so backed up that PureFormulas.com ended up charging customers manually for more than 5,000 orders, says chief information officer William Perez. As of mid-December, the e-retailer was still dealing with backlash from customers who had placed multiple orders that day after the first attempt didn't appear to go through, he says.
In anticipation of such problems, PureFormulas months earlier had begun the process of moving the site to a new e-commerce platform from Oracle, says CEO Jose Prendes. Cyber Monday confirmed it was a good move. "Yahoo is wonderful for a certain size of business, but there's a point where businesses just can't handle it," he says. In contrast, Oracle has successful clients in both the midmarket and the top-tier of retail. "The barrier to growth is usually your technology—we've taken that risk out," Perez says. "We know that we can grow with this software."
Yahoo acknowledges that a "small percentage" of its merchants may have experienced a short delay in non-transactional activities on Cyber Monday but says they were unrelated to its storefront order processing. Moreover, it adds that its platform is "highly reliable and scalable" and serves clients of all sizes. Yahoo's e-commerce platform is used by 34 e-retailers ranked in the 2013 Second 500 Guide, making it the second-most popular vendor among North American e-retailers with less than $18 million in annual sales. It is used by 15 e-retailers in the Top 500 Guide, where it ties for sixth in popularity.
PureFormulas.com chose Oracle because it offered the most built-in personalization features, Prendes says. For instance, the new software will allow the e-retailer with a few clicks to highlight children's products for shoppers who browse mostly in that category, or to display a prominent banner enticing a customer who isn't in the rewards program to enroll.
With implementation costs factored in, experts say Oracle can cost tens of thousands to millions of dollars. Although that's significantly more expensive than Yahoo, Prendes says the investment is necessary.
While PureFormulas.com moved to a more expensive software provider, personalized gifts retailer Things Remembered moved in the opposite direction—from one of the largest vendors to one targeting midmarket clients. It switched from IBM's WebSphere e-commerce platform to Micros Systems Inc.'s Fry e-commerce platform in 2010 because it didn't have the internal resources to handle the extensive development work WebSphere required, senior vice president and general manager Tony Chivari says. "[WebSphere] is great if you need to highly customize everything or if you're very large and going to do a lot of your programming," he says, but "we needed a retail package with 90% of the features we use already built into the platform."
Micros' web site software includes site search, search engine optimization, product recommendations, personalization, social sharing and social login tools, order management, customer relationship management, merchandising and analytics, the vendor says. It also supports mobile commerce and connects web and physical stores via Micros' point-of-sale software and hardware. The platform starts at about $250,000 annually and the total cost of ownership—including implementation and maintenance fees—is about half that of IBM WebSphere's, according to Forrester. "For our size and our focus, it was a better solution," Chivari says.
For all of commercial platforms' advances, however, some mid-tier e-retailers still believe that building and managing their e-commerce platform in-house makes it easier for them to get the features they want and to make changes quickly.
For example, gift cataloger Hammacher Schlemmer & Co. Inc. built functionality to keep track of orders customers place on its web site after viewing a product in the print catalog. The retailer does that by printing a product number in the catalog that's slightly different from the online product number; when the consumer types in the catalog number, the site takes her to the corresponding product page and attributes that sale to the print catalog, says Henry Coleman, director of e-commerce.
"That isn't standard," he says. And finding an e-commerce platform that provides that feature, Coleman says, likely would mean spending too much money. Of the vendors he has considered, most had extra functionality that he could neither strip out of the contract cost nor out of the software itself, which makes it unnecessarily bulky and hard to work with, he says.
Other retailers say they can't find commercial e-commerce software with enough functionality at the right price. Rex Creekmur, director of marketing at mid-sized e-retailer Rugs Direct, says his company evaluated several vendors, including Demandware Inc., Magento and Microsoft Corp.'s Commerce Server, and none could deliver what the retailer could build in-house. "Most of the platforms we considered would do 70% to 80% of what we needed but, for the price, we would want 100%," he says.
When calculating cost, you also have to consider the extra time it takes to work with a vendor, says Jennifer Rademacher, chief information officer for wall decal merchant Fathead LLC, a midmarket retailer that handles its own platform. "We focus a lot on the opportunity cost—what things are we accomplishing in a few minutes that would take days of communication and review with an outside contractor?" she says. "The cost savings are endless."