Online Stores Inc. grew up on Yahoo Inc.’s Yahoo Stores e-commerce platform.
But about two years ago, the operator seven specialty web stores, which booked roughly $30 million in web sales in 2012, decided that it needed it needed more feature-rich software and more control over it, says CEO Kevin Hickey. “What’s important for us is efficiency and being able to customize things,” he says.
Online Stores Inc. went with eBay Inc.’s Magento platform. Magento’s software is open source, meaning that retailers can customize it to their needs while also choosing from 7,300 add-ons built for Magento by developers around the world.
“It seemed to have pretty much every feature we wanted and we liked being able to extend the functionality of the product ourselves by using the open-source architecture,” Hickey says. “Magento also had the fastest trajectory for enhancements.”
Cookie cutter is out for mid-tier online retailers—a category e-commerce consulting firm FitForCommerce defines as web retailers generating $20 million to $75 million in annual online sales. To compete with the likes of Amazon.com Inc., those smaller retailers need to offer web site features that will keep shoppers coming back. While more than a third of mid-market retailers still rely on their own personnel to provide that level of customization, others are turning to the growing number of software vendors offering feature-rich e-commerce platforms at increasingly affordable prices.
“Midmarket retailers desire all the functionality that the larger markets want, but they want it faster, simpler and cheaper,” FitForCommerce senior consultant Kerry Martin says. “While this is a challenge for some providers to deliver, it certainly tends to differentiate the providers who are accurately targeting and supporting the midmarket retailer.”
Of the 251 e-retailers with 2012 online sales in the range of $20 million to $75 million, according to the 2013 Internet Retailer Top 500 Guide, 94 rely on in-house staff to build and maintain their e-commerce platforms, the software that typically handles such tasks as managing product descriptions and prices, processing orders and handling payments. The remaining 157 retailers use technology from 41 providers.
Online Stores is already seeing payoffs from its move to the Magento Enterprise edition software, which it runs on its own servers.
Magento Enterprise starts at $15,500 to license annually, according to the vendor. Since completing the switch to Magento in September, Hickey says Online Stores has reduced its headcount from about 130 to 80, in turn reducing overhead costs by 30-40%. With Magento able to provide live inventory updates and automate customer service e-mails and drop shipping, the office staff was able to downsize from 30 to 15 people. Another 15 people were cut from the web site maintenance staff, because the work to manage products across all seven of the retailer’s sites dropped by 75% with Magento, Hickey says, though he did hire four full-time developers to work on the platform in-house. The rest of the staff cuts were in the warehouse, unrelated to the platform.