From DM News Special Report on E-Commerce Platforms & Software: Software as a Service Allows Continual Upgrades

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Just a few years ago, giants such as Wal-Mart, Sears and Amazon dominated online shopping. Mom-and-pop shops couldn't compete with the Amazon.coms of the world. They didn't have the buying features, breadth of product or the ease of use to be viable competitors.

Technology once again has leveled the playing field. Previously, the development of the Internet allowed the creation of online retailers who were able to compete with bricks-and-mortar stores. Today, powerful, affordable, turnkey e-commerce solutions let small online businesses compete with large, long-established ones.

Initially, merchants looking to create an online presence had two choices: build in-house or outsource. Building required a large investment of time and money for the infrastructure and resources to develop and maintain the technology. Outsourcing often meant paying a good amount of money to multiple vendors for services that were usually inflexible, low on features and difficult to integrate. Outsourcing was seen as a cookie-cutter solution.

Large retailers that developed their own technology provided customers with impressive features such as wedding registries, wish lists, credit vouchers and electronic gift certificates. However, it was difficult to maintain a competitive edge as other online stores quickly reproduced attractive elements of a site.

These early platforms, many of which were deployed four to six years ago, are being ripped out at an amazing clip.

A recent survey of the e-commerce industry by the e-tailing Group and Venda Inc. found that nearly 39 percent of companies with proprietary e-commerce solutions are unhappy with their existing technology. More telling, nearly half the merchants surveyed reported that they are looking to swap out of their existing platform within two years.

In evaluating outsourced solutions, merchants want not only cost containment and the ability to support multiple brands, but also multi-faceted solutions to better serve today's demanding customers.

SaaS Changes the Landscape

Software as a service is now available for e-commerce applications. As more flexible solutions have emerged, merchants large and small have begun to take advantage of SaaS to gain advanced functionality and scalability far more cost-effectively than before. Companies are demanding solutions that are continually enhanced to deliver new capabilities without having to rip out platforms or switch vendors.

SaaS lets small and large companies enjoy advanced capabilities and economies of scale. Innovation is being driven by aggregate demands from hundreds of merchants. Variable pricing and revenue-sharing modes are becoming a thing of the past as retailers seek more predictable, flat-price offerings.

Following the SaaS model, Kiddicare.com now gives its top competitors a run for their money. The company rolled out the same e-commerce technology as the top retailer in the space -- and in less than 10 weeks. In just months, Kiddicare.com grew from a three-person company to a thriving business with 70 full-time employees. This results partly from its flat e-commerce costs and the ability to adapt to consumer and market trends.

The Big Picture

Large retailers are looking to integrate their entire business: bricks and mortar, online, warehouse and call center. With first- and second-generation e-commerce platforms, this was a formidable task. Now, SaaS alternatives give established merchants a way to tie everything together across shopping channels.

BBC Shop, for example, took advantage of these new integration capabilities to bring its warehouse, call center and e-commerce site onto one platform. By bringing data into one environment, the warehouse, customer service and front-end marketing teams are better informed. This has led to considerable increases in sales and customer satisfaction levels.

Integration is increasingly important to catalogs, which are becoming an entrŽe to online stores. People flip through catalogs at their leisure to find the products they want, and, rather than filling out the order form, they go to that retailer's Web site, enter a code and conclude the transaction in a few clicks.

Integration between catalog and Web venues ensures that the products available in the catalog can be easily found and purchased online, providing a more convenient shopping experience for the consumer.

More Opportunity, Fewer Headaches

Xerox rolled out a SaaS solution in several countries. Its new e-commerce site is integrated with the company's content management and SAP systems. Now all technical information as well as public retail pricing is fed directly to stores, removing a common content management headache in the resale channel. By tying e-commerce to its SAP system, orders flow straight from the stores to the warehouse.

Xerox also has found that this integration provides greater control of how its brand is presented at retailer sites. Resellers now can offer products that customers previously wouldn't have known about. The pilot site, launched in January 2004, has seen a 300 percent rise in revenue.

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