May 16, 2012, 3:34 PM

A growing software vendor doubles down on e-commerce

NetSuite bids to become a viable option for midsized e-retailers.

NetSuite Inc. has been growing steadily—first quarter revenue was up 30% over a year earlier. But it’s made its name, and attracted 12,000 clients, mainly as a provider of the core accounting software companies of all kinds use to manage their businesses. It’s had an e-commerce module, but it didn’t allow much customization of a retailer’s web site and consequently hasn’t been a strong contender among retailers focused on growing online. The company is out to change that, which likely will mean a new, viable option for midsized e-retailers in particular.

The company has given e-commerce a lot of play this week at its annual client conference, SuiteWorld in San Francisco. In the keynote address yesterday, CEO Zach Nelson outlined its new e-commerce system, called SuiteCommerce, designed to make it easier for retailers to design their site down to the last pixel and to plug in specialized applications from other vendors.

The company’s pitch is that retailers will be able to integrate all the data they collect online with all the customer, inventory, pricing and other data they store behind the scenes in their NetSuite accounting and planning modules. NetSuite’s main selling point has always been this tight integration of accounting with other business functions and the fact that the NetSuite system stores a single version of a retailer’s data.

Take inventory, for example. All the data resides in a single data store that’s accessed whenever something happens to inventory: more goods are received, an item is sold, the price changes, and so forth. Data about each customer similarly is stored in a single location, and accessed whenever there is new contact with the shopper.

In today’s keynote address, NetSuite chief technology officer Evan Goldberg explained how the dynamic merchandising features NetSuite is now building will take advantage of that information. As a consumer goes to check out, the system will make recommendations for other products based on an array of data in the NetSuite system: it will check to see what other consumers have bought along with the item the shopper has in his cart, what this customer has bought previously, and which items the retailer has too much of and would like to move. Based on all that, the system will recommend additional products. As Goldberg put it, “This will improve your business and improve the satisfaction of your web store customers.”

NetSuite is playing catch-up in offering these sorts of merchandising features for e-retailers. But its executives argue that, once they’re available through NetSuite, they’ll be more powerful and easier for retailers to maintain than other systems because NetSuite software will provide all the basic functions to run a business and maintain all a retailer’s data in one place. No need to cobble together applications from different vendors.

Whether that proves to be appealing to many e-retailers remains to be seen. But there’s no doubt NetSuite is investing in e-commerce. The company plans to hire nearly 100 more staffers this year for its e-commerce team, Andy Lloyd, general manager for e-commerce at NetSuite, told reporters yesterday. He also noted that the company already runs plenty of e-commerce: 2,800 sites that generate $1.2 billion in annual sales, Lloyd says. But he recognizes that most of those sites are run by smaller retailers.

NetSuite is aiming higher, Lloyd and his colleagues made clear this week. They’re going after competitors like Demandware and Magento that are making headway among leading online retailers. Demandware boasts 16 clients in the Internet Retailer Top 500 Guide and Magento eight, compared to only four for NetSuite. Some participants at this week’s SuiteWorld event also believe NetSuite can make a good case to the mostly smaller retailers that use Yahoo for their e-commerce platform. There are 19 of those in the current Top 500 list.

NetSuite executives contend growing e-retailers will be attracted by its fixed pricing—$3,999 per month and up for the Enterprise edition of its SuiteCommerce software aimed at retailers with large product catalogs, and $1,999 and up for the Mid-market version. Some competitors take a percentage of a retailer’s sales in fees, which NetSuite argues makes their software increasingly expensive for e-retailers that prosper.

That pricing model, combined with the comprehensive nature of NetSuite’s software and the fact that NetSuite hosts it so that a retailer doesn’t have to maintain a large data center, may well make NetSuite a strong contender for midsized online retailers. That’s especially true now that big retailer chains are hiring e-commerce staffers at a rapid clip, making it harder for smaller e-retailers to retain or grow their staffs. Having a vendor do the heavy I.T. lifting may become an increasingly attractive option.



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