February 2002

Whether you want a budget do-it-yourself Web storefront or a high-end, hosted service, there's an option to suit your needs, says Marcia MacLeod in this second part of our new e-fulfilment series. The real trick, she says, is pitching it right and integrating it with a proper fulfilment capability

As the Internet matures and people start to make money selling online, the temptation to join the growing band of e-tailers becomes irresistible. But selling online is not just about putting a bit of information on the Web and taking credit card details; it starts with designing a suitable Web site and then transforming it into a store front.

The transactional part of the site, the storefront, is the hardest to administer, but there are a number of ways to go about it. Easiest among them is to outsource the entire process, from initial Web design through to order and payment processing. Those worried about losing control can insist on close cooperation between outsource service provider and internal staff.

 

There are certain steps required to reach the final Web storefront. Neil Lamont, senior consultant of Antiva Creative, an e-tailing consultancy, gives a useful overview. "First," he says, "merchants have to identify which products they want to sell online; then they have to choose a design, and predict the types of audiences that will come to the site, so it can be tailored to that market. Functionality has to be provided along with the design - the shopping cart, order processing and so on. A prototype should be built, demo server set up, and download speeds and so on evaluated before the final site goes live. And remember to build for the future; there should be enough capacity to cope with growth over six to twelve months."

If all this sounds complicated, it's no wonder many companies opt for one of the numerous storefront software packages which control the shopping cart, order and payment processing and other transactional elements. Leaders of the storefront pack include Shopcreator, Intershop and Actinic, but an already long list of suppliers is growing to include people like WorldPay, which started out in the payment processing arena, and Sage, the accounts software company.

Most of these packages offer more than one version, enabling merchants to choose from various approaches, which include building a basic storefront themselves using templates developed by the software supplier; picking a more sophisticated self-build option; or letting the software company do it for them. They all have links to one or more of the major payment processing systems; some also include a basic CRM module.

Shopcreator, for example, has a self-build product, Storefront Magic, in which e-tailers upload product data from their databases, using standard file format transfers, on to screen-based forms fit into templates. "Part numbers, descriptions and so on are pulled from the company's databases on to the forms," explains chief executive Andy Kitchener. "Images can be uploaded, too. Then the forms are fitted into the templates which we provide which determine the layout of the site. We offer a number of 'look-and-feel' options within the templates.

"You don't need IT skills to do this - but if you simply don't want to tackle the job yourself, you can always take our tool to a Web developer, or let us build it for you. For our highest-end customers, such as the Daily Mail's Mailshop, we can also provide portals that group different companies together."

Intershop works in a similar way. For very small organisations it offers a product called E-Pages; for the average merchant there is Intershop (now on version 4); and for B2B vendors there's a wide-ranging new system, Enfinity. Actinic also has a B2B product, Actinic Business, but is best known for its Actinic Catalogue, which enables merchants to build their own system, again using templates, or let a third party company design the system (through Actinic if desired).

Sage, WorldPay and Equology all offer similar options, providing a very basic storefront for small companies and another, more sophisticated, version with additional features for more complex operations, which can include B2B. Take Sage, for instance. Its Web Trader "adds 'buy now' functionality to an existing site," as Andy French, business manager, explains. "It can also be linked to Sage Line 50 or Sage Line 100 to enable users to download orders into their accounts software. Web Trader Pro adds two-way information flow, so data on stock availability, customer history and so on can be uploaded to the Web site." A Web catalogue product enables catalogue creation to be carried out using data held in Sage accounts packages.

Back office links

One storefront vendor with a difference, Web Fulfilment, offers a product called Instant Shop because it had trouble supplying its core business - e-fulfilment - to customers whose storefronts did not provide adequate links to back office systems.

"We are a fulfilment house," emphasises chief executive Iain Davie. "But we got fed up with storefronts that were not connected to the back office. It is a nightmare to integrate third-party storefronts into systems for stock availability, order processing and so on; it costs a lot and the result doesn't work properly. So two years ago we launched Instant Shop, using templates to enable merchants to provide product information, pictures, delivery specifications, pricing and so on. We do the graphic interface to the back office; users don't need any Internet or HTML experience to build their site, although we can do it if the customer prefers."

Instant Shop was developed by a small systems house, Ambrit, which also offers it independently through its Web site. But the link with Web Fulfilment has given the system extra exposure and marketing clout, and it is pitched very much as a Web Fulfilment product.

Integration is a thorny issue for storefront suppliers - and for their customers. "Ninety-five per cent of our customers don't integrate storefront with back office," admits Nick Kington, marketing director of Actinic. "The cost of integration is so high, and most of our customers are small businesses that do not really require integration. The level of transactions doesn't justify the expense."

Instead, Actinic users bolt on an order processing module, re-key orders manually, or buy Actinic's latest product, Actinic Link, which connects the storefront with accounts packages that so far include Sage Line 50, Intuit and Exchange Enterprise. This allows order information to be transferred to the accounts package's order processing application, update customer details or upload product information to the site.

Stock levels are handled separately from any other inventory system. A certain amount of stock is allocated to the Web site; then once that stock allocation is used up, orders are refused. Many of the storefront products work in a similar way. Shopcreator users either allocate stock to the Web or use direct XML feeds between the back office inventory and the storefront.

WorldPay launched its Click and Build two years ago because, like Web Fulfilment, it "found most products didn't deal with the plumbing very well," but offers some data transfer, rather than full integration. David Sear, chief operating officer, explains: "Payments, tax and shipping, stock levels, warehouse management were all of secondary interest. We provide an upload of files from the back office, but cannot provide real-time integration as it is too expensive for small customers. So with our Web stock allocation, if an item is sold, it is deducted from the Web inventory and when that drops to a pre-determined level, an email alert is sent to the merchant."

WorldPay, like Equology, also offers tax and shipping calculation to any destination, based on the rates the vendor has negotiated with its preferred carriers or on the carriers' printed tariffs.

"The larger the volume of sales, the worse the service gets - unless front and back office are integrated," emphasises Peter Prior, marketing and sales director of QED, which provides bespoke storefront solutions. "If it takes longer to fulfil an order electronically than through traditional means, or if the merchant receives a lot of complaints, it is time to integrate."

What shopping carts cost - and the hosted alternative

Prices for storefront software vary tremendously, but at the lower-cost end, Actinic Catalogue costs £349 for a software licence, rising to £3,000 to £5,000 if Actinic builds the site from scratch. About half its customers do their own design. Neil Lamont of consultancy Antiva Creative thinks users wanting a more powerful solution should expect to pay something closer to £15,000 - with another £15,000 for total cost of implementation - but admits cheaper solutions can be had for £3,000. A bespoke solution, which for instance Antiva can provide, is surprisingly not that expensive, starting at under £10,000.

But purchase prices are fast becoming irrelevant where Web storefronts are concerned, as a large and growing percentage of vendors only offer their products as hosted solutions. "A site is complex in terms of the need it poses to ensure security and allow applications, databases and so on to work together," explains Kumar Mehta, technical director of Paraspar, which provides bespoke hosted solutions. Mehta claims bespoke storefronts also help maintain brand image, whereas off-the-shelf products make each site look like everyone else's site.

While Paraspar works with Intershop, it found that "at some point our customers need to do something the software doesn't do, and couldn't be modified to do efficiently." It developed Elite Market Server as a framework to create storefronts for companies such as Field and Trek and Choc Express. But it's not cheap: £40,000 upwards for development costs and from £10,000 a year for hosting charges, using EasyNet or Host Europe.

Shopcreator costs a lot less: from £450 to £100,000 per annum, with an average annual self-build rate of £3,500. Systems Union E-Business, which links into Opera, the accounts package from sister-company Pegasus, builds a solution on Intershop or Actinic at a cost of £5,000 to £50,000 and charges from £50 per month for a shared server, £500 for a dedicated one.

Thus offers Demon Showroom, a basic Web storefront on shared server, from £25 per month, Demon Server Hosting, a dedicated server storefront solution, from £250 for set-up and £275 per month, and a bespoke server with dedicated hosting, Advanced Server Hosting, at a higher price.

Intershop's package starts at £50,000 for the first year, including integration to back office. "It's a good test to see if someone is really committed," says John Masters, UK managing director. "If they fall off their chairs at that price, they're not serious in terms of a dedicated e-commerce strategy."

But a lot of small e-tailers would indeed hit their head on the floor at the thought of such an investment. For them, Sage can do it at £500 purchase price and £2,000 per year for Web Trader Pro. Building the storefront can run an extra £500 to £1,250. Equology, which launched its Xtend hosted storefront service specifically for the SME market, charges £39.95 per month for a fully functional off-the-shelf e-commerce solution; the service is sold through PC World and other resellers because it helps reach e-tailers that other hosting companies will never reach.

WorldPay's Click and Build is even cheaper: £30 per month including software licence and hosting, more for Web design.

But there's another way to save money for those with the right product: host the site offshore. Foreshore, a Jersey-based company, offers Web hosting for organisations wishing to take advantage of VAT legislation. Products retailing below 30 euros - for instance CDs, DVDs and contact lenses - can be sold online minus VAT, making them much cheaper than competition sold in mainland Britain. The problem is that the goods have to be held on Jersey and distributed from there, making it suitable only for small items easily posted.

Hosting - how should it be done?

Those wishing to outsource the Web hosting can either take space on the host's server, with the e-tailer providing all maintenance to its own site, or opt for a fully managed service, in which the merchant need do nothing other than change its own content. Managed services can be either client-server, in which users can access their site through software sitting on their desktops, or through an ASP, in which the software sits on the server and the user has to download it to control the content. Some people, however, criticise the ASP approach, claiming merchants have to dial up every time they want to make changes and find it difficult to obtain help. "Desktop solutions place control in the merchants' hands," says Kevin Grunball, Actinic's chief executive.

Then again, some ASPs, like Equology, say it is easy for customers to change their own content. "We take all the hassle out of getting an e-commerce service up and running," insists the company. Certainly any kind of hosting has the advantage of ensuring the site is available 24 hours a day and relieving the e-tailer of any maintenance headaches.

To decide whether to outsource hosting or not, merchants must identify the kind of peak loading they expect; high traffic volumes mean slower speeds, but a hosted service provider has the capacity to increase space as required. Or, as QED's Peter Prior says, "if you get to a volume of transactions that you can't cope with, it is time to get the site hosted."

The ultimate decision depends on the size and type of business, how many items the e-tailer wants to sell online, the expected transaction volumes, and the company's operational strategy. "Setting up an online presence is a business issue," emphasises Nick Kington of Actinic. "You have to consider the costs and income, and approach it and market it in the same way as you would any other business."

Case study: Co-op

The Co-op developed its Co-op Drinks To You site last October off the back of its previous online grocery service. It used Unipower's basic shopfront software, with extra features, such as wine maps and search "wizards", provided by Logica in a bespoke system. The site is hosted by Logica, which makes any functional changes required. The Co-op controls its own content, including text and images.

"We considered running the site ourselves, but opted for an ASP service because our IT department wanted to outsource as much as possible," explains Jinny Heatherington, business development manager.

Now that the site has been operational for a few months, the Co-op plans to make some changes, including re-designing the home page to "sell" the benefits of the site and make negotiation easier.

Case study: Medisave

Medisave, a nursing and residential home supplier of medical equipment, began operating a mail order business a year ago, adding an information-only Web site soon after. When it saw Actinic Catalogue, it decided to sell online, with the help of a friend who designed the site cheaply in order to use it to promote his Web design business.

"We got the whole catalogue - over 500 products in 20 categories - up and running within two weeks," says Melissa Lowe, a director of the company. "Now we offer 800 products online. One of the major benefits of the site is that it has allowed us to reach private consumers, which we could not have done without the Web. Around 75 per cent of our orders now are online - 240 per month and growing.

"Actinic is so easy to use, we don't need any IT skills to change it. All of us can change prices and add or remove products in minutes. We host it with Easy Space, paying for up to 60MB of space per year."

Medisave has not integrated the site into its back office, but plans to link to Sage in order to provide real-time stock availability.