E-COMMERCE PLATFORMS & SOLUTIONSAny company choosing an e-commerce platform is faced with a bewildering number of choices.Determining which of these solutions best fits your needs is no longer as simple as having yourlocal Internet providers develop a Web page with navigation and some type of shopping-cartfunctionality.E-commerce solutions have evolved to include core functionality for navigation, shopping cart,checkout, shipping and handling, and taxes and some level of integration to an ordermanagement system (OMS), an enterprise resource planning (ERP) system, or a warehousemanagement system (WMS). Then there are the Web 2.0 options: rich media with audio andvisual tools, customer product reviews, social networking, and blogs. Newer technology alsoprovides functionality for options such as mouse-over (move the mouse over an image and thedescription will display without the users having to click on the image), drag and drop (simplydrag the item to the shopping cart without leaving the current page), and one-page checkout.Given this array of possibilities, how do you determine the best e-commerce platform for yourbusiness? Here are a few guidelines:Treat your search as a system selection project. Too often companies have viewed e-commerce as a separate part of their business. In reality e-commerce has become integral tomultichannel marketers. Today multichannel companies report that on average 35%-45% oftheir business comes through the Web.You should view your search for an e-commerce platform the same way you would a search fora new OMS or WMS. Spend time up front to understand what the e-commerce solution shouldprovide, determine the project team, and develop a budget and a timeline.Develop your vision. Before you can determine what the e-commerce platform should provide,you need to know what you want your Website to do and how you want to use it from aconceptual standpoint. The project team needs to have a clear vision of how the site shouldlook and function, what the growth objectives are, and who the target customer is.To develop the conceptual vision, youll need to involve user management from alldepartments, including the contact center, merchandising, and the stores in addition tomarketing, IT, and online. As a management team, what is their collective vision for theWebsite and how it should serve the customer? How do they want your customer to view thebusiness? If you have stores, do they want site visitors to feel as if theyve entered one ofthem? What types of marketing efforts need to be included? How do you want to display
merchandise? These are just a few of the questions that go into developing a vision for an e-commerce platform solution.Define your requirements. This is a natural extension of developing your vision. What do youwant the site to do? What type of functionality do you want? Everybody has shopping-carttechnology — is there anything in particular that you need yours to do, such as personalizationor cross-selling? What sort of Web analytics features do you need?Determine the degree of customization and flexibility you may want. Customization may takethe form of something as simple as the ability to change promotions — offering a specialdiscount on a given day, for instance. Or you might want to be able to change elements such assite navigation. How flexible does the solution really need to be? Dont get mired in jargon andfunctional possibilities. Concentrate instead on how your new site will produce sales or increaseinquiries that lead to sales.Keep integration requirements in mind. Implementing an e-commerce platform with all thebells and whistles will fall short if your OMS or ERP system cant effectively communicate withthe site.Decide whether you want to build or buy. Building your own e-commerce platform historicallyprovided a competitive advantage in the marketplace, as packaged e-commerce solutions wereexpensive and basic. Many companies viewed their online business as different from anyoneelses and thought their uniqueness required a homegrown platform.Times have changed, however, and companies now realize that the real differentiator for theirWebsite is the look and feel, the effectiveness of its onsite search, and its merchandising (thepresentation as well as the actual goods). Today many e-commerce platforms offer similar basicfeatures and functionalities.While the build solution ultimately offers custom fit and control, using resources to build basicfunctions such as product catalog management, merchandising features, campaignmanagement, and shopping-cart functionality can put a company at a disadvantage because ofthe amount of time needed to develop the underlying technology layers for functionality andthe integration points to your existing systems. It commonly takes 12-24 months to design,develop, and build an e-commerce solution from scratch. Then theres the matter of finding andkeeping experienced staff to build the solution. The question arises whether your company is
better off using its resources to support its core competency rather than to develop a solutionthat already exists.As the second generation of e-commerce evolves, more marketers are opting to buy packagedor custom software. Platform programs generally encompass features such as visualization(product rotation and zoom), merchandising (marketing products based on customerpreference, past history, or best-sellers), and personalization (offering the customer marketingopportunities based on purchasing patterns). Vendors have built more functionality into theirplatforms to handle the basic online selling features for product catalog management,merchandising, campaign management, and shopping-cart functionality. Another advantage tousing a packaged solution is that the vendor provides upgrades to the core functionality.Some vendors are incorporating Web 2.0 features into their solutions while at the same timeoffering integration to third-party software (best-of-breed solutions) that can handle a more in-depth customer interaction. Buying an e-commerce platform that provides all the required corefunctionality as well as the ability to use best-of-breed applications and custom services isgenerally considered the optimal solution. The goal is to achieve a balance between the e-commerce solution and the number of best-of-breed applications, since maintaining multipleapplications for the long term can increase maintenance costs.If you decide to buy, choose between a licensed solution or software as a service (SaaS). Withlicensed software, you purchase the e-commerce software package and host the solutioninternally or externally at an outsourced hosting facility.Licensing for a packaged software solution is normally structured on a per-user or per-CPU basisand typically requires an up-front investment of $400,000 and up. Annual maintenance costsusually fall in the range of 15%-22% of the license cost. The license model also requires aninvestment in server hardware and database software.Vendors offering packaged e-commerce solutions have built core features and functionality intotheir solutions but provide the flexibility to customize a Websites look and feel. The licensedmodel is typically used by midsize and large multichannel companies wanting absolute controlof their e-commerce platform. Benefits include the ability to make changes as required,reduced time to introduce new features, and the ability to integrate with best-of-breedtechnologies.
Purchasing licensed software is the more common solution. The SaaS, or on-demand, model isgaining in popularity, however, especially among businesses that do not want to commit thelarge up-front investment required by a licensed model. This is particularly true of small andmidsize companies that dont require complete control of their platform.An on-demand e-commerce platform provides a company with the use of a vendors solutionfor a flat monthly fee or a percentage of revenue. The vendor owns and hosts the software,which may exist on a shared or non-shared environment. In a shared environment there is oneversion of the software, and all clients share the code and server resources. In the less commonnon-shared environment, the resources are dedicated to a particular client.Up-front setup fees for an on-demand solution can range from $50,000 to $400,000, dependingon the complexity and size of the clients business. The flat-fee or revenue model is typically setup with a tiered structure based on online revenue, site visits, or order volume. Fees aretypically 1.5%-3% of sales.Look at the pros and cons of hosting and managed services. Hosting means that you buy asolution and the necessary hardware and pay the vendor to put the hardware in its facility,where it will reside. In the managed-services model, you buy the hardware and the software,the vendor hosts the hardware, and you contract with the vendor to maintain the operatingsystem and e-commerce software application.Before you decide which model you want to use, you need to understand the vendors conceptof maintenance and updating; you also need to know your IT staffs ability to support hostingthe solution internally or externally.Seek a vendor you can partner with. When youre researching e-commerce companies, youwant to find a vendor that will work actively with you. Its crucial to have that kind ofrelationship in order to be sure that you will have the support and maintenance you need.Six Tips for Avoiding Common PitfallsPut your requirements in writing. Too often e-commerce solutions are built or customizedbased on verbal agreements — but what the vendor provides and the customer expects dontalways match.
Conduct a request for proposal (RFP) process. This identifies to the vendor what yourrequirements are and establishes initial pricing.Develop a three- to five-year budget scenario with up-front or startup costs, initial yearinvestment, and subsequent years investment. Include annual maintenance fees for hardwareand software support. Its important to understand the total investment to determine whichsolution is best for your business.Define a schedule or timeline. Many companies underestimate the time it takes fromestablishing requirements to implementation.Formalize a project plan.Be sure to schedule status updates on regular intervals.