Ecommerce replatforming is it right?

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ECommerce Re-Platforming : Is it right for your business? Market studies indicate that about 30% of online businesses plan an eCommerce re-platforming in 2014. The following attachment provides …

ECommerce Re-Platforming : Is it right for your business? Market studies indicate that about 30% of online businesses plan an eCommerce re-platforming in 2014. The following attachment provides important insights to help you make the decision that is right for your business.

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  • 1. ECOMMERCE RE-PLATFORMING Is It Right for Your Business? Share This Document 1 Ecommerce Re-platforming – Is It Right For Your Business? www.ecommercepartners.net
  • 2. Ecommerce Re-platforming – Is It Right for Your Business? Market studies indicate that about 30% of online businesses plan an eCommerce re-platforming in 2014. • Why is that so? • How do businesses decide whether or not to re-platform? • When is the right time to re-platform? • And once decided, what is the game plan for success? The following chapters examine these questions and provide important insights to help you make the decision that is right for your business. Contents: Introduction 3 Making Your Business Case 5 How to Succeed with E-commerce Re-platforming 13 What To Expect (And What Not to Expect) 16 Appendix - ROI Table Template for Ecommerce Re-platforming 18 2 Ecommerce Re-platforming – Is It Right For Your Business? www.ecommercepartners.net
  • 3. 1.0 INTRODUCTION 1.1 The eCommerce Landscape is Rapidly Evolving Ecommerce market studies are ample and frequently published. They all point to the same established and uncontested reality: Persistent growth in eCommerce volumes and channels. Businesses determined to take part in this evolution must understand the events and act accordingly in order to grow. The continuous developments in the eCommerce marketplace confront online sellers with the following challenges: Increasing Web Complexity A Multitude of eCommerce channels: Ecommerce today includes many different channels through which consumers make their purchases (e.g., mobile, tablets, smartphones, social eCommerce, variety of affiliate marketing channels). Many currently used platforms are not adaptable to multi-channel integration. Increasing number of 3rd-party solution integrations: In order to facilitate the growing trade in eCommerce, ever more system components are utilized, each of which must function independently and cooperatively with all other components on the platform. Customer Requirements Getting accustomed to all new developments, online shoppers’ expectations are constantly on the rise. Patience is running low and consumers want a smooth shopping experience across all channels. Legacy systems fail to deliver crucial functionality and performance requirements. In addition, security and standard compliance considerations become increasingly important for online shoppers. 3 Ecommerce Re-platforming – Is It Right For Your Business? www.ecommercepartners.net
  • 4. Market Pressures The wider the penetration of newly adopted practices, technologies and channels, the more businesses feel threatened about their market positions. Competitive Pressures: Whether direct or indirect, your competitors’ advantage in serving customer requirements poses a threat to your business’s long-term sustainability. This reality demands alignment of your eCommerce platform capabilities. Vendor Conflicts: After a critical mass of the market adopts the new practices, your platform vendors will in turn want to abandon the older practices (they, too, need to align with the market in order to survive and grow), dropping support for older versions or systems. At that stage they also might try to impose costly migrations, which you do not want to entertain. 1.2 The Result: How Your Current Platform Looks Inevitably, if your eCommerce operation has made it to 2014, you must have reacted in some ways to the market changes. Operating in this ecosystem requires a certain amount of ongoing adaptations. In most cases, the result is a peculiar “animal” of a platform, consisting of many customizations and work-around fixes implemented over time in various, inconsistent ways and by different people in your organization. Such a patched and stitched platform can become increasingly difficult to operate, maintain, and support. In such situations, the financial burden persists with greater overhead, while the overall performance of the eCommerce platform leaves much to be desired. With all that in mind, you may feel compelled to re-platform, and perhaps rightfully so. The web has become the “central station” of customer relations - not just for purchases, but for all customer interactions - and therefore you want to maintain a decent presence in the market. However, before you go ahead with your eCommerce re-platforming program, make an honest assessment of the best scope and timing. 4 Ecommerce Re-platforming – Is It Right For Your Business? www.ecommercepartners.net
  • 5. 2.0 Making Your Business Case: FuTuRE Ecommerce re-platforming is a serious enterprise. It’s not fast or easy, and it isn’t cheap. In order to decide wisely, you must first understand all factors involved. The basic understanding of an eCommerce business can be determined by three main elements-Capabilities, Costs and KPIs. These three elements must be understood in terms of Current, Future and Industry Standard. kPi In order to determine whether it really is time for a new eCommerce platform you need to complete the following steps: • Know Thyself • Know Your Industry CaPaBilities • Assess Your Future Self • Assess Re-platforming Program Expenditure CuRRENT Costs INDuSTRY • Discuss your Course of Action 2.1 Know Thyself – Your Current State If you don’t know where you stand, you cannot wisely decide if, when and where your business can go. Assess your current position: • Current Capabilities • Current direct and indirect costs • Current KPIs 5 Ecommerce Re-platforming – Is It Right For Your Business? www.ecommercepartners.net
  • 6. Your Current Capabilities The list below summarizes the key components of a strong eCommerce platform. Looking at your current platform and assessing its performance in each of the components will give you a general idea of the quality gap you are up against. Any serious assessment should include these two steps: • Retrieve and contrast feedback from all primary users and stakeholders in your organization on their assessment of your capabilities. • Perform usability testing procedures to reinforce the data gathered. 6 Ecommerce Re-platforming – Is It Right For Your Business? www.ecommercepartners.net
  • 7. The 7 Components of a Strong Platform: Performance Scalability • Optimization of page load time - the degree to which you are able to live up to currently expected page load times and the ability to scale as time progresses. Currently, up to two seconds per page load is considered “good.” Up to four seconds may still be considered “satisfactory.” Above four seconds: you are very likely losing a big portion of your traffic. • Stable accommodation of large number of concurrent users - shopping is mostly seasonal, and it is likely that you are experiencing peaks at holiday times and/or other specific product related seasons. Peaks can be very profitable, but only if your platform remains stable and allows a seamless user experience. Unstable performance at peak times leads not only to direct loss of income, but it also reduces the chances that users will come back in the future. • Maximization of site uptime - the degree to which you are able to maintain optimal site uptime. Even the smallest fractions of annual downtime accumulate to days of lost revenue. How much does your downtime cost you? Solid Integration The smooth functioning of all components is one of the greater challenges of an eCommerce platform. An effective platform is planned so that it facilitates the “peaceful” co-existence of multiple integrated components. These may include: • Point of Sale (POS) component • Online customer engagement tools (e.g., chat component) • Reporting and Analytics components • ERP / CRM • Fraud detection tools 7 Multi-Channel Integration Enhanced User Experience We are witnessing constant developments in customer interaction channels - i.e., the variety of ways by which customers are able to interact with the selling companies (both online and offline). This reality shifts the focus from the traditional channel-specific effort to a comprehensive operation-centric effort that must cross all available channels. In order to maintain a competitive market presence and to facilitate long-term digital relationships with the customers, your eCommerce platform must adopt the Omni-channel spirit. A strong platform should facilitate all site components needed for the enhancement of your shoppers’ experience. The required components and their specific compositions on your site vary in accordance with the nature of your product and the specific needs of your primary target audience. The common enhanced UX considerations include: • Advanced site navigation and search capabilities • User-friendly product presentation • Easy-to-use and efficient product selection and checkout process Platform Flexibility Back-end Management Capabilities Support and Maintenance The adaptability of your platform to future market needs and limitations is of utmost importance. A rigid platform, even if currently compatible with your market needs, will pose significant challenges when you want to grow and adapt. Strength is in adaptability. As Darwin said, “It is not the strongest of the species that survives… it is the one most adaptable to change.” Often neglected in eCommerce platforms is the user experience on your side of the fence. You need an efficient and flexible management panel to handle all site administration necessities. These would include: The core foundation to all above-mentioned considerations is the degree to which the platform is “alive” and evolving in the eCommerce community. Access to platform support, bug fixes, updates and upgrades by the publishers is vital to making all the rest work properly. Ecommerce Re-platforming – Is It Right For Your Business? • Content publishing and editing • Dynamic database access and management • Reporting and Analytics • Security features management www.ecommercepartners.net
  • 8. Your Current Direct- and Indirect Costs: The key components of your total cost of ownership (TCO): Infrastructure The cost of hardware and hosting environment is determined by: • Performance • Redundancy • Support Level (support hours and response time) Ecommerce Platform - technology and type of solution Whether licensed or SAAS based, your platform costs are based on the license or subscription fee per period. The fees may vary according to specific configurations and uses of platform modules. Some SAAS providers may also charge fees based on actual sales. 3rd-party Software Licensing All costs associated with the use of 3rd-party applications on your site. These may include database, chats, feedback tools, etc. Integration with Back-office Systems (ERP/CRM) All costs associated with the proper integration of your enterprise systems. These costs include any required APIs and the direct labor for system integration and maintenance. Ongoing Development All costs associated with the ongoing customization and adaptations of your platform. Staff training Often overlooked are the costs associated with training your personnel. This includes the labor time of both the trainees and the trainers. Marketing The total cost of all your online (and offline) marketing associated with your eCommerce site. Merchandizing All merchandizing costs directly related to your eCommerce site. Customer Service All expenses resulting from direct customer engagements, pre- or post-purchase, including general questions and clarifications (on all channels - phone, chat, email, etc.). Security Compliance All costs associated with general system administration. These include the direct labor expenses, whether in-house or outsourced. Depending on your business, you have to consider all relevant compliance expenses, such as PCI compliance and other security and trust certifications. Content Management Reporting All costs associated with back-end management of your entire product catalog - i.e. removing/uploading/editing product and other contentrelated data. All expenses associated with the monitoring and analysis of your eCommerce operations trends. These costs include the 3rd-party tools utilized and the direct labor time spent on the accumulation, presentation and analysis of the data. System Administration 8 Ecommerce Re-platforming – Is It Right For Your Business? www.ecommercepartners.net
  • 9. Highlighting the Opportunity Cost A tricky but important part of calculating your current costs is the understanding of your opportunity costs - i.e., how much it costs you not to have certain capabilities of a strong platform. While it is not possible to quantify everything, you still can and should focus on some key disadvantages that characterize your current platform and put some rough price tags on them. This will provide an extra dimension to the understanding of your costs. Examples of Opportunity Cost: Site downtime: This one is pretty straightforward. If you take your average daily revenue and multiply it by the number of (accumulated) days of site downtime, you can roughly determine the lost revenue. Checkout Process: If you are experiencing a high rate of shopping cart abandonment, you can try to pinpoint the bottlenecks and estimate the amount of lost conversion. Back-End Management: If new content uploads or database updates are grossly inefficient and require much of your staff’s time, then this excess labor cost should be taken into consideration. Support Hours and Fixes: Whether internal or external, the number of man-hours required to handle recurring system issues should be included in your calculation. Your Current KPIs Record and summarize current key performance indicators of your eCommerce site. It is absolutely essential that you gain thorough insight to your current position. Only if you know where you stand will you be able to make a serious judgment on the cost-effectiveness of re-platforming. Be sure to determine at least part of the following metrics achieved on your current operation: • Conversion Rate • Bounce Rate • Average Order value (AOV) • Unique Visitors • Average Time on Site (Stickiness) • Returning Visitors Rate • Cart & Checkout Abandonment Rate • Days and Visits to Purchase (multi- session measurement) • Page Load Time and Site Uptime 9 Ecommerce Re-platforming – Is It Right For Your Business? www.ecommercepartners.net
  • 10. 2.2 Know Your Industry Now that you know where you are, you want to get a sense of how others in your industry are doing. Research and determine the following: • Competitors’ Capabilities • Cost Benchmarks • KPI Benchmarks Competitors’ Capabilities Looking at your competitors’ sites and assessing their strengths and weaknesses in terms of the 7 main platform capabilities will provide important insight into the overall standards currently employed in your specific industry. This doesn’t mean that you should stay behind if you discover most are behind as well. It will, however, give you an important indication as to your relative position, which will be a crucial aid in determining the scope and timing of your re-platforming. Cost Benchmarks Much of the costs as calculated earlier is unique to your business and cannot possibly be compared to others. There are, however, some cost factors that can be compared. These include the infrastructure, platform subscription/licensing, 3rd-party licensing, general administration, etc. Note: Although the importance of efficiency in current expenses is true for every business at every stage-and regardless of whether or not they are contemplating a re-platforming program - it should indeed be emphasized in times when major expenditures such as re-platforming are considered. KPI Benchmarks KPI benchmarking will help you highlight the main quality gaps. Investigate generally accepted numbers in the market, but be sure to talk to several businesses in your specific industry to achieve maximum applicability to your purposes. When benchmarking, treat the reported numbers with caution. Remember that there is a natural variance in KPIs depending on many factors (such as your specific business model, your unique value proposition, your specific target audience, etc.). Your business will ultimately have to establish its own correct baseline over time. 10 Ecommerce Re-platforming – Is It Right For Your Business? www.ecommercepartners.net
  • 11. 2.3 Assess Your Future Self Naturally, the most challenging part of making your business case is the careful assessment of where your business can really go after completion and stabilization of the new platform. Estimating how well you can do afterward is the last element in the equation, the one which completes the picture and serves as justification (or not) for your entire case. This assessment, just like the previous ones, should be in terms of the same three components: • Future Platform Capabilities - the main changes that can drive the desired growth in your eCommerce system. • Future Costs - your costs will change. Some may rise due to higher charges on technology and others will fall due to the increased efficiency of your system. At the very least, assign an estimated cost to the factors that you think will be the most influenced. • Future KPIs - the perceived changes in your business results, due to a better platform. 2.4 Assess Re-platforming Program Expenditure Assess Overall Costs Although the actual cost of re-platforming is very tough to predict, you need to make an effort and get a sense of your ballpark. Reach out to potential eCommerce service providers with a general request for information (RFI). We outline some guidelines on how to choose suitable service providers in the next section. Try to speak with other businesses similar to yours who have gone through a re-platforming, and compare your RFI findings with them to reinforce the numbers. Identify Hidden Costs Often businesses forget to include some hidden costs when making the assessment. Hidden costs are unique to each business, and you will need to determine those based on your unique situation. However, the following examples of indirect costs are often forgotten in the assessment process: 11 Ecommerce Re-platforming – Is It Right For Your Business? www.ecommercepartners.net
  • 12. • Allocation of Internal Resources Any re-platforming program involves personnel across your entire organization. Request your various departments to estimate their level of efforts as part of a re-platforming. It is common for employees to overestimate the efforts involved because they want to avoid a later deviation from their statements, and that is understandable. Keep that in mind when incorporating those cost estimates. • Delay or Cancellation of Other Projects The cross-organizational focus required in re-platforming shifts major internal resources away from other projects. Consider the possibility of delays and/or cancellations of other business objectives. • Possible Re-design Be aware that many re-platforming programs ultimately involve an entire re-design of the site. • Temporary KPI Changes Business KPIs are known to be affected roughly 90% of the time when re-platforming. A return to normal may take up to three months and in some cases up to six months. Expect your KPIs to take a temporary hit, and understand the costs incurred by it. 2.5 Discuss Your Course of Action It’s time to summarize the data you’ve gathered and make an educated decision on if and when you should re-platform. ROI Model Your decision involves a basic ROI model (a sample template is available in the Appendix). However, keep in mind that the direct Gain vs. Cost equation is only a partial estimated picture and should serve as an added indication to your overall considerations and NOT as an absolute Go-No Go decision maker. Remember that there are many important business gains (or losses) that cannot be calculated into the simple ROI model. These mostly include the long-term effects of maintaining an industry best practice eCommerce platform. It is up to you to evaluate to what degree gains like brand exposure, omni-channel availability, customer retention, competitiveness, etc. are vital to the survival and success of your eCommerce business. 12 Ecommerce Re-platforming – Is It Right For Your Business? www.ecommercepartners.net
  • 13. Finally, look carefully at all your assumptions and try to challenge them. Remember the interdependence of all elements: try to change some of your assumptions and see how it affects your bottom line. This will provide you with very valuable insight as to where you need to dedicate your efforts most. 3.0 How to Succeed with E-commerce Re-platforming: The following list highlights important steps to succeeding, once you’ve decided to go for it. 3.1 Define Objectives List all of your desired objectives in accordance with the data reached so far. Concentrate on measurable KPI improvements such as: • Conversion Rate Increase • Average Order Value (AOV) Increase • Total Cost-of-Ownership (TCO) Decrease • New Customer Acquisition Increase • Customer Retention Increase Keep your objectives realistic. If targets are too aggressive, you will be wasting valuable resources in the futile attempt to reach them. 3.2 Prioritization Be sure to prioritize the defined objectives. Differentiate between primary and secondary goals according to the perceived benefits to your business. With the right priorities in mind, you will be able to wisely allocate the many resources required. 13 Ecommerce Re-platforming – Is It Right For Your Business? www.ecommercepartners.net
  • 14. 3.3 Requirements Specification Summarize all of your data and create a comprehensive requirements document, which will serve as main orientation for both internal and external functionaries. This will not only help you communicate your needs to outside vendors as part of your vendor evaluation process (your RFP), but will also serve as basis for any future agreement. 3.4 Organizational Focus Throughout the entire decision making process, active engagement of all relevant personnel in your organization is extremely beneficial to the process. It not only provides vital input from various perspectives but also serves to get everybody invested in the project and, therefore, assists in its success. 3.5 Assembly of Representatives Assemble a team with appointed representatives from all relevant departments. You need to create a strong cooperative team which will re-assemble at pre-defined milestones and accompany the decision making process. This cooperation will help you monitor all implementations and receive real-time feedback. The assembly will further reinforce your organizational focus and help prevent internal resistance to the changes. 3.6 Vendor Selection Don’t hire just any eCommerce partner for your program development and integration. Understand that you are choosing a long-term partner for the road ahead, and that the success of your program heavily depends on the quality of your vendor. Detailed information on “How to Select an Ecommerce Partner” can be found at: • Video - http://www.youtube.com/watch?v=eUJD1DJvnrQ • Whitepaper - http://bit.ly/13SjRoP 3.7 Managing Expectations Communicate your goals with all parties involved, internally and externally. And be sure to define success metrics so that it is clear to everyone what success looks like and how you will measure it. 14 Ecommerce Re-platforming – Is It Right For Your Business? www.ecommercepartners.net
  • 15. 3.8 Roadmap Know where you’re headed. Construct a roadmap that addresses all required processes to achieve objectives. Develop a phased approach so that you can focus your efforts over time and prevent doing everything at once. This will also help you to deal with changes in scope that are very common among re-platforming programs. 3.9 Budget and Timetable Have a clear budget and timetable, but allow for some flexibility where possible to account for unknown constraints and necessities. 3.10 Technology to Fit We believe business differentiation is an important matter, but mainly in the value proposition of product and customer support, not on a custom-made platform. Understand that there is no one perfect platform. Choosing the technologies which best fit your requirements is essential to fulfilling business goals. The vendors you evaluate should be able to help you in that decision; be sure to require that they substantiate their recommendations. 3.11 Proof of Concept No matter how intuitive you may be, it is always a good idea to test at least part of your functionality and technical assumptions with your target audience before development begins in order to gain feedback. 3.12 Agility Plan and implement in a way that maximizes your agility. Adjustments may be necessary due to new insights and discoveries. An agile implementation will also prolong the lifespan of your new platform, as you will be able to adapt to the rapid developments in the eCommerce market. 3.13 Planning When to Launch Consider the best time to launch based on season and sales cycles, as KPIs are known to be temporarily affected by re-platforming. 15 Ecommerce Re-platforming – Is It Right For Your Business? www.ecommercepartners.net
  • 16. 3.14 Ongoing Testing and Analytics Conduct comprehensive testing (performance, UX, front- and back-end, 3rd-party solution integration) on all implemented elements to verify consistency with planned objectives. Consider A/B and multivariate testing methodologies, and utilize analytics tools for consistent optimization. 4.0 What To Expect (And What Not to Expect) 4.1 Expect KPIs • Business KPIs are known to be affected roughly 90% of the time when re-platforming. • Nearly 50% of affected businesses claim it has taken up to three months for KPIs to return to pre-program levels. Others report six months or more. Expect your KPIs to take a temporary hit, and plan program integration accordingly Delays • Industry studies indicate an average re-platforming delay of three to four months. You may have to endure some delay as well. Plan accordingly. Scope Reduction and Modification • Nearly 40% of companies end up reducing scope in order to stay within budget and timeline. • Re-platforming program scopes often change during the process (regardless of budget and timeline) when requirements are refined. 16 Ecommerce Re-platforming – Is It Right For Your Business? www.ecommercepartners.net
  • 17. 4.2 Do Not Expect Time to ROI Projecting ROI immediately - or a few months - after re-platforming is a sure recipe for disappointment. Your re-platforming program is meant to take your business toward a multi-year growth, and realistic ROI should be measured in one to three years rather than months. No Lifetime Guarantee With the growing pace of technological evolution, you should perceive a re-platforming program to serve your business for a number of years. Don’t expect a new platform to fit your needs until 2025. Clean-Slate Fantasy A too-common false expectation is for an eCommerce platform to “save” the business merely because it is NEW. Businesses erroneously rush to re-platform just for the sake of a fresh start. A new cooking set does not make you a better cook; it is merely an enhanced tool that needs to be utilized wisely. The same is valid for an eCommerce platform. Your organization must also change and adapt with the technology. Author: Asi Erenberg Managing Director, ECommercePartners Looking for a reliable partner on the way to your next generation eCommerce platform? Still unsure if replatforming is right for your business? We specialize in end-to-end eCommerce solutions. Contact us to find out how we can help your business reach its eCommerce goals. 212-334-3390 sales@ecommercepartners.net www.ecommercepartners.net This document contains general information based on the experience and research of ECommercePartners. The information contained herein is by no means presented as substitute for professional advice and services by qualified service providers such as ECommercePartners. Any and all use of the information contained herein is therefore strictly on the user’s own risk and ECommercePartners shall bear no liability for any loss, financial or otherwise, resulting from the use of this publication. 17 Ecommerce Re-platforming – Is It Right For Your Business? www.ecommercepartners.net Share This Document
  • 18. Appendix - ROI Table Template for Ecommerce Re-platforming current KPI year 1 year 2 year 3 year 4 Visits/yr Conversion Rate (%) Average Order Size ($) Revenue & Profit Total Revenue ($) Total # of Sales (Qty.) Profit ($) costs TCO Re-platforming Cost total Increased Profit ($) Total Cost ($) Total Gain ($) ROI (%) [(Gain-Cost)/Cost] 18 Ecommerce Re-platforming – Is It Right For Your Business? www.ecommercepartners.net