Gearing Up

The housing market, like much of the economy, may continue to struggle, but Russell Ackner, president of web-only home furnishings retailer Home Perfect, figures it’s a good time to relaunch his e-commerce site.

“We saw a decline in sales last year, but I don’t anticipate a decline this year,” he says. “We have a new site on a new platform, and things can only go up. I’m ramping up now for my busy season in the spring.”

But Ackner is taking nothing for granted. Before deciding on a technology that would support expected growth with a strong online shopping environment, he scoured the market of e-commerce platform options. Deciding to move away from his former licensed platform, which had often tied his hands with technology projects, he opted for a software-as-a-service platform from Venda Inc. that would leave him free to focus on his core skills in merchandising and marketing.

Focus on customers

2009 may turn out to be a better year than last for Home Perfect, but growth will demand his full attention in serving customers, Ackner says. “I don’t want to have to worry about the technology platform. We’re planning to break into multiple home décor categories this year and I need to focus on engaging with customers and providing them with the best service and products possible.”

Like other merchants looking to upgrade or replace their e-commerce platforms, Ackner took a hard look at his business goals and needs, then decided on a platform that met his expectations for growth—and at a steady cost of $12,000 per month, the amount Venda charges per web site.

Ackner’s peers at other retailers have traveled similar roads of discovery of late, but depending on their unique set of demands may have opted for other types of platforms, including build-your-own, licensed and hosted/on-demand versions. Each type comes with functionality ranging from basic shopping carts to a full set of e-commerce and back-end enterprise applications that can cover everything from customer orders to ordering new inventory.

“It is a great time to invest in implementing a new platform solution,” says Brian Walker, senior analyst, e-commerce, at Forrester Research Inc. “Many of the platforms have developed into well-rounded and stable solutions, and the prices have moderated.”

At the same time, the capabilities of different types of e-commerce platforms have come closer together, providing retailers with more options, several experts say. In the past, for example, on-demand or software-as-a-service (commonly referred to as SaaS and pronounced as a single word rhyming with lass) platforms were criticized for lacking customizing capabilities.

But now more SaaS vendors, while still providing relatively low start-up costs, are providing effective tool kits that let retailers better control their online merchandising displays and backing their technology up with service, says Bernardine Wu, CEO of FitForCommerce, a consulting firm that helps retailers choose e-commerce technology vendors.

Some licensed software vendors, meanwhile, have begun offering more flexible payment terms along with a mix of licensed and SaaS technology applications. And improvements in web services and other web-based integration technologies make build-your-own still a strong option for merchants with particular needs for highly customized platforms.

Deciding among the options, however, requires a high degree of due diligence, starting with identifying a retailer’s goals and available resources. “It seems such an obvious thing, but many retailers don’t a good job of it,” says Brian Beck, chief operating officer of OvernightPrints.com, a personalized products retailer that is migrating from an in-house to a licensed platform to support major growth.

Beck knows about due diligence better than most. In the past several years, he has also served as a senior executive at two other retail organizations that have made or considered major changes to their e-commerce platforms.

CostumeSuperCenter.com, for which Beck is a former chief operating officer, had operated on a licensed e-commerce platform with a separate order management system. The entire platform was hosted on a third-party web server farm.

But that configuration didn’t support the retailer’s need to integrate its front-end order process with back-end inventory management. When it set out to consider other e-commerce environments, CostumeSuperCenter.com worked with FitForCommerce to match its particular business processes with available technology platforms. It drilled down to the retailer’s need to not only automatically update inventory records as customers ordered items, but to also trigger replenishment from particular warehouses or suppliers whenever stocks fell to a certain minimum level.

A good job

After considering a number of vendors, the retailer chose ProfitCenter Software, which provides an e-commerce platform within an integrated enterprise resource planning system delivered in a SaaS environment. As with any migration to a completely new platform, there were bugs but the new platform did a good job of handling order volumes during its first peak season, Beck says.

Distribution Video and Audio, a DVD retailer and wholesaler that operates on the web at DVA.com, tried operating in several technology environments before settling in 2007 with NetSuite Inc., which also offers a complete enterprise suite as well as an e-commerce platform in a SaaS environment.

DVA.com launched in 2000 with e-commerce functionality integrated within the enterprise application suite of a major enterprise software vendor, which had offered an unusually low introductory operating price, says DVA co-owner and CEO Brad Kugler.

But after the first year, after realizing the high cost of hiring software programmers to provide the functionality DVA wanted to support online retail sales as well as bulk sales to wholesale customers, the company tried other platforms.

One e-commerce/enterprise application suite that had launched with great promise wound up costing nearly twice the original implementation price to make it function properly, and it was difficult for Kugler’s staff to learn basic things like online merchandising. “It was a nightmare, I couldn’t sleep at night,” Kugler says.

Things have gone more smoothly since DVA re-launched on a SaaS platform from NetSuite, which cost less than $40,000 to implement and has provided strong integration between front-end customer order management and back-end inventory management, supporting both retail and wholesale operations.

Kugler admits there are limitations to operating on the NetSuite platform. He figures he could get more sophisticated imaging on a more customized licensed or build-your-own platform, but the NetSuite platform suits his needs for merchandising DVDs and routinely offers automated upgrades of platform functionality that can be vital to his business. For example, the platform offers a simple means of creating direct links from his inventory management system to eBay.com whenever DVA wants to move extra merchandise through the world’s largest e-marketplace, Kugler says.

Even more important, he adds, has been his staff’s ability to quickly learn how to use the NetSuite platform for managing vital functions like online merchandising, marketing and inventory updates, he says. “We have no full-time I.T. staff, but this e-commerce platform is intuitive, so an average worker making $30,000 or $40,000 a year can figure it out on his own,” he says.

Even retailers with large I.T. staffs, however, are taking a harder look at options for deploying an e-commerce platform. OvernightPrints.com has a large I.T. staff, and until now has operated a highly customized platform built in-house. Competing in a personalized products market dominated by VistaPrint, OvernightPrints also emphasizes the development of a highly interactive web site with sophisticated product configurators.

But it has decided to migrate to a licensed platform to better keep up with the latest technology and best practices in operating a retail e-commerce site, says Beck, who wasn’t free to name the new platform vendor.

The combination of an established e-commerce platform and a strong I.T. staff for modifying it supports the best technology strategy as OvernightPrints.com grows “and we learn who our customers are and what they need,” he says.

In-house plus SaaS

Jelly Belly Candy Co., meanwhile, is taking still another approach by combining in-house resources with outside vendors. After spending six months exploring technology options, including licensed and SaaS platforms, the retailer and wholesaler of candy products decided to build a new site in house—the fourth time it has taken the build-your-own route.

It chose to stay with the build-your-own option because it requires a platform that can handle a lot of back-end integration among inventory records and trading partners, e-commerce marketing manager Jason Marrone says.

The new site was custom-coded in Microsoft Corp.’s .Net development environment, which uses web services and other forms of web-enabled technology for integrating consumer-facing front-end applications as well as connecting with inventory and other back-end operations.

Nonetheless, realizing the in-house tech team could not do it all, Jelly Belly also brought in outside expertise for crucial areas where it wanted the latest proven technology. For rich media, Jelly Belly deployed technology from Fluid Inc. For site search, it went with a hosted application from SLI Systems Inc.

“These features definitely make it easier for our shoppers to find what they want, while making our products look better online,” Marrone says.

The strategy has already paid off. For the 2008 holiday shopping season, Jelly Belly recorded an 18% year-to-year rise in conversion rates and a 51% surge in retail sales at JellyBelly.com, Marrone says.

To produce that kind of performance, however, retailers need to first do their homework to match available technology options to their e-commerce goals. “Online retailers need to work with e-commerce platform and solution providers who live and breathe e-commerce—and understand the business and consumer expectations,” Forrester’s Walker says.

paul@verticalwebmedia.com

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