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An Internet Retailer survey reveals what the 87% of e-retailers planning to spend more on e-commerce technology during the next year will buy or build, and the key hurdles e-retailers face in technology implementations.
Rett Clevenger takes the same approach to his Steals.com daily deal site that punk rockers from the 1970s and 1980s took to their music: No, thanks, we don't need any help. We can do it ourselves.
Abstaining from the off-the-shelf e-commerce platform software with the same I-can-do-it better vigor used by those bands to avoid music lessons and mainstream hooks, Clevenger last month told attendees at the Internet Retailer Conference & Exhibition in Chicago about the benefits of taking an in-house approach to e-retail technology. Why suffer the headaches of doing so? For one, Clevenger, as the retailer's CEO, said he knows best what features his site needs to appeal to shoppers seeking women's clothes, baby gear and related items. Further, Clevenger said he runs a lean operation and plunking down big bucks for a suite of software and services—half of which he probably wouldn't use—violates his up-from-the-bootstraps beliefs. He said he launched Steals.com in 2008 with "no debt, no loans, no investors," and he would like to keep it that way.
Clevenger is not alone in his principles. In an exclusive Internet Retailer survey conducted last month, 30.4% of respondents with plans to replace their e-commerce platforms say they will design and deploy that technology on their own. No doubt some of them understand Clevenger's reasoning. "You always have to build, even when you buy," he told attendees, referring to the customizations that e-retailers often have to craft onto vendor software to meet their unique needs. Of course, even the most dedicated do-it-yourselfers can't ignore the world, he noted at IRCE. "If you build, make sure to use common coding languages and research best practices."
E-commerce technology may lack the popular appeal of social and mobile marketing—all those Likes, tweets and pins, and all those personalized discounts tailored to a shopper's location. But much like modern music fails without all those amps, mixers and computer programs arranging in the background to produce pleasurable sound, software and services provide the basic support for every online sale. The new Internet Retailer survey suggests that most e-retailers and B2B sellers online plan to pump up their tech spending in the coming year, and also points to the areas where those dollars might be headed.
The survey results may foreshadow the immediate future of technology spending. A Forrester Research Inc. report from earlier this year anticipated that the growth in all U.S. technology spending by businesses and government in 2014 and 2015 will outpace the growth in the larger economy as measured by nominal gross domestic product. So-called "customer-facing tech"—a category that includes customer relationship management, web content management, marketing automation and mobile applications—will equal 12% of U.S. technology spending and 17% of all technology purchases this year. U.S. technology spending will reach more than $1.3 trillion in 2014, Forrester predicts, up 5.8% from 2013.
The Internet Retailer survey—which attracted 99 respondents from a variety of e-commerce areas including web-only, B2B and retail chains over an approximately two-week period—shows that 86.6% of those respondents plan to increase their tech spending in the coming year. That compares with 9.3% who anticipated no change and 4.1% expecting a decrease.
Of those planning to increase their e-commerce technology spending, the survey finds that they are ready to spend substantially more than they were in 2012, when Internet Retailer last ran this survey:
– 4.4% say they will increase spending by 15.1% to 25%. (That compares with 12.2% who said the same in Internet Retailer's 2012 e-commerce tech spending survey, which had 114 respondents.)
– 23.3% will increase spending by 10.1% to 15%. (16.7% in 2012.)
– 22.2% will increase spending by 5.1% to 10%. (26.7% in 2012).
– 12.2% will increase spending by 25.1% to 50%. (4.4% in 2012.)
– 10.0% will increase spending by more than 50%. (Also 10.0% in 2012.)
– 7.8% will increase spending by 5% or less. (30.0% in 2012.)
Nordstrom Inc., the 24th-largest e-retailer in North America according to the Internet Retailer 2014 Top 500 Guide, stands as an example of a merchant allotting a greater percentage of its capital improvement dollars to e-commerce technology as it tries to make its online selection and experience even more appealing to consumers. "We plan to invest $3.9 billion in capital over the next five years as we focus on serving more customers through store and online growth," said Mike Koppel, Nordstrom executive vice president and chief financial officer, on the retailer's first quarter earnings call in May.
A Nordstrom spokesman says technology investments will account for about 30%, or $1.2 billion, of that investment total. That compares with about $500 million Nordstrom put toward technology in the chain's 2009-2013 capital investment plan. During that period, technology represented about 23% of the chain's $2.2 billion in capital spending.
Nordstrom's goal with its new round of technology spending is to better unify its stores and the web, a move commonly called "omnichannel"—in fact, 43.4% of respondents to the Internet Retailer survey who say they will increase technology spending said supporting "more cross-channel shopping" is a priority in those spending plans.
Indeed, e-commerce technology spending plans involve a variety of areas and systems. While deploying an e-commerce platform remains the highest technology spending priority—it was cited by 61.6% of respondents—the other top priorities show how online retailing is changing. For instance, mobile commerce was cited by 57.6% of respondents as a technology spending priority—the survey allowed respondents to select more than one answer—while social media and web analytics each attracted 34.3%.
In comments made at this year's IRCE, Udi Nir, chief technology officer for web-only apparel retailer ModCloth Inc., gave an example of why such technology can be attractive for e-retailers. ModCloth developed a feature on its iOS mobile app that allows users to swipe through products: a right swipe means "love it" and a left swipe means "leave it." Consumers can love products on the brand's web site, mobile sites and apps, but this feature isolates that interaction, making it easier for consumers to use. Since the feature launched in April 2014, consumers have "loved" 830,000 products. That represents 22% of all "loves" the brand has accumulated through its apps, mobiles sites and desktop site. "The amount of immersion and interaction you can get with a native application is a lot higher than the mobile web," Nir said.