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Will e-commerce vendor consolidation hinder British retailers?

Thursday October 13 2011

Dr Ludger Vogt, e-commerce technology expert, argues that organisational size and rapid growth by acquisition can sometimes be hindering qualities in an e-commerce partner

Dr Ludger Vogt, e-commerce technology expert, argues that organisational size and rapid growth by acquisition can sometimes be hindering qualities in an e-commerce partner

 

The flurry of e-commerce vendor consolidation activity in recent months, including the most recent acquisition of iCongo by hybris, raises questions about the suitability of these new entities to continue meet retailers' needs, according to Dr Ludger Vogt, chief officer at Intershop Communications.

 

Much airtime has been given to the relative merits, functions and features of the major commerce platforms, but how will retailers fare over the coming months? How do retailers strike the right balance between scale, service and technical excellence when choosing a multichannel/e-commerce partner and/or vendor?

 

Overcoming integration problems

 

Vogt said history and experience shows us that attempts to merge 'like with like' commerce platforms only creates integration headaches and unnecessary cost burdens on users: “Customers of an acquired technology, such as iCongo as the most recent example, may very well soon find themselves with legacy, unsupported technology that is eventually phased out. This will result sooner or later in considerable costs for migrating to the new solution. As the backbone of retailers’ commerce infrastructure, that is a serious concern.

 

“Compromises are inevitably made to keep costs under control and no doubt lenders will expect to see a quick return on their investment. It may also be some time, if ever, before online retailers are able to realise any genuine value from such mergers for their own business.”

 

Commerce vendors pre occupied with growth through acquisition and sheer size often lose sight of their customers and their needs, he added.

 

Meeting high demand

 

Yet, even conservative estimates indicate that growth in the e-commerce market remains dynamic. Demand is estimated by Forrester to be worth £12.9 billion right now, and likely to increase in the European Union and North America at a compound growth rate of 13% over the next five years.

 

“To be part of this growth, it is critical for online sellers to plan ahead and create the appropriate infrastructures to meet future challenges,” Vogt urged.

 

“This spiralling demand for multichannel commerce platforms, coupled with the wave of acquisition-fuelled uncertainty has created a perfect storm for change. Indeed, analyst research in American and Australian markets suggest that around a fifth of B2C [business-to-consumer] clients already have re-platforming efforts underway, with an additional third planning such an initiative in the next two-three years,” he continued.

 

“I fully expect that a significant number of retailers are starting to question their Frankenstein infrastructure and consider a more agile, cost-effective ecosystem of specialist partners for their e-commerce needs.”

 

Vogt said strategic alliances would be the way forward; bringing together different areas of expertise to create genuine value-add for online retailers. “There is little sense in merging direct competitors whose portfolios largely mirror each other’s. While on paper this may increase market share, it is hard to see how store managers benefit.

 

“If both parties have very similar offerings, how do they combine their solutions?” he asked. “Their technologies were developed independently of each other – technical integration doesn’t necessarily deliver double the benefit but instead requires additional effort in time, money, and resources.

 

Standardised technology ecosystem

 

“Baur Versand is good example of a sound ecosystem in action,” he said. “One of the oldest mail-order firms in Germany for fashion, shoes, furniture and technical equipment, the company recently added a Facebook store to its sales channels. The social commerce initiative was implemented by Intershop Communications AG along with partner, dotSource GmbH.”

 

The Facebook store is completely integrated into the Baur online commerce platform, allowing store managers to conveniently manage it. For example, the summer special on Facebook can be quickly followed by a back-to-school promotion.

 

“For me, the world of multichannel retailing has always been exciting,” Vogt concluded. “The next couple years however, look set for thrilling change at lightning pace.

 

“As online sellers continue to protect and grow their revenue streams, they would do well to opt for a software provider that is fully focused on enabling them to derive sustained benefits from the growth of e-commerce.”