Why do some solutions cost $10,000 and others $1 million?
After years of incrementalism and “band-aiding,” many large growing e-Tailers are starting from scratch and redesigning their entire e-commerce website from the ground up. Like any typical selection process, they document their vision, their requirements, their decision criteria, etc. They then go on to create a short list and begin the vendor parade.The PowerPoints decks are impressive. (Many are too large to fit in your e-mail inbox.) Like most mature software categories, e-commerce vendors tend to copy each other and end up sounding very similar. But unlike other software categories, e-commerce software solutions vary greatly and selecting the wrong vendor directly impacts the top and bottom line of a company. You can pay as little as $100/month plus 1.5% of online sales for Yahoo! Stores and up to several hundred thousand dollars per processor for the best-in-breed. The key questions: What are you really paying for?…and is that large premium in cost worth it?
I can’t say it enough: It all depends on the size of your business. You are indeed paying for quality and uptime in these high-end solutions, but you are also paying for “growth” tools. Today’s high-end e-commerce solutions include very sophisticated tools for behavioral targeting, AB testing, real-time merchandising, searchandising, managing dynamic content, analytics, collaborative filtering and many others. In fact, Omniture just paid $65 million for Offermatica, a vendor specializing in AB Testing, illustrating the value placed on just one conversion feature. These new tools can easily improve your conversion rates by 50% to 100%. A 10% increase is almost guaranteed. The question is whether this increase in online sales pays for the investment. If you sell over $20 million online, the answer is most likely yes, invest in a best-in-class e-commerce Suite. If you are much smaller, stick to a basic catalog and shopping cart.
One caution….beware of “smogging”. I happened to come across the term “smogging” while reading. In sales, it means “blowing smoke” — a hype-laden pitch that makes promises the salesperson can’t keep. You’ll get your fair share of vendors claiming they can “do it all at half the cost.” Caveat emptor…do not take short cuts in your selection process. Get your hands on the software and even do a proof of concept. It’s only then that you’ll appreciate what you’re truly investing in. It’s an outdated cliché, but in software it’s almost always the case: you get what you pay for.
