When consumers started buying online in large numbers in the early 2000s, many of the largest retailers viewed the web as a sideline and turned to an outside company to build their web stores. That trend has started to reverse in recent years, as e-commerce became a bigger part of retailing, with Target Corp. moving off the Amazon.com Inc. platform and Dick’s Sporting Goods Inc. beginning to migrate off the GSI Commerce technology that’s now part of the eBay Enterprise unit of eBay Inc.
Another big retailer is following suit, as Toys ‘R’ Us Inc. announced today it will bring operation of its e-commerce platform in-house by the end of the summer of 2016. The toy retailer, has outsourced its e-commerce operation to GSI since 2006. EBay acquired GSI for $2.4 billion in 2011, and folded it and the Magento e-commerce software it also acquired into a division it calls eBay Enterprise.
Toys ‘R’ Us, No. 40 in the Internet Retailer 2015 Top 500, says its new e-commerce platform will underpin its three e-commerce sites: ToysRUs.com, BabiesRUs.com and FAO.com.
“As part of our ‘TRU Transformation’ strategy, one of our most important priorities is to optimize our e-commerce business and significantly improve the customer experience online. To accomplish this, we believe it is in our best interest to manage and control all aspects of our e-commerce platform as we move forward,” says Fred Argir, senior vice president and chief digital officer at Toys R’ Us. “We expect this will provide us with the flexibility needed to grow and expand in an omnichannel world, while allowing us to rapidly respond to changing customer dynamics and an ever competitive marketplace.”
The retailer says it will deploy the ATG e-commerce software from Oracle Corp. as the basis for its new online sales platform. 63 retailers in the Top 500 list Oracel or ATG as the provider of their e-commerce software. Oracle acquired ATG for $1 billion in 2010. Meanwhile, Toys ‘R’ Us says it will work with its existing technology provider, which it did not name, over the next year to transition to the new e-retail platform.
In moving to its own platform, Toys ‘R’ Us is following the lead of Dick’s, No. 70 in the Top 500, which announced early in 2014 plans to move from the GSI/eBay Enterprise technology to an internally developed platform by early 2017. Dick’s is starting by launching a new e-commerce site this year for its Golf Galaxy brand. Dick’s reported 28% growth in e-commerce in its most recent fiscal year, in part driven by its introduction of buy online, pickup in store in certain product categories.
GSI/eBay Enterprise is one of a number of vendors that offer a full range of e-commerce services, running a retailer’s web store and also handling fulfillment, marketing and customer service. Such vendors represent about 8% of the e-commerce marketing, according to a 2014 Forrester Research Inc. survey.
But many retailers are looking to move away from outsourcing their entire web operation, says Forrester analyst Peter Sheldon. “E-commerce and omnichannel is incredibly strategic to the future of the company and it simply doesn’t make sense to outsource these functions anymore,” Sheldon says.
“Retailers like Toys ‘R’ Us want control over their destiny,” he says. “They need to be able to make changes quicker and innovate faster. By bringing the e-commerce technology in-house they will be better able to do this—versus being beholden to a legacy platform owned, maintained and operated by GSI.
He says Toys ‘R’ Us has been planning this move for years, as are other GSI/eBay Enterprise clients, though he declines to name them. “Many of GSI’s clients have been locked into long-term, 20-plus year in some cases, contracts,” Sheldon says.
“As these contracts come up for renewal most of these retailers have undertaken a major business case evaluation to consider moving some or all of their online operations in-house.” He notes eBay Enterprise and similar vendors increasingly are offering clients the option of using certain services, such as fulfillment or customer service, and not outsourcing their entire e-commerce operation.
In fact, Toys ‘R’ Us will continue using the eBay Enterprise technology that allows the retailer to ship online orders from its stores and to allow customers to pick up online orders in stores, says Craig Hayman, president of eBay Enterprise. “We value Toys ‘R Us as a long-term client, and we look forward to providing them these kinds of modular solutions to power their evolution moving forward,” Hayman says.
EBay, which is in the process of spinning off its PayPal payments unit, also has disclosed plans to sell off the eBay Enterprise unit, which remains the provider of e-commerce platform for 21 of the retailers in the Internet Retailer Top 500. Clients include Sony Electronics Inc., No. 21; L Brands Inc., No. 28, which owns Victoria’s Secret and Bath & Body Works; Ralph Lauren Media, No. 59; and Ascena Retail Group, No. 87, which operates such retail chains as Lane Bryant, Maurices, Dressbarn and Justice.
GSI was originally known as Global Sports and got its start providing e-commerce services for sporting goods chains, such as Dick’s and Sports Authority, No. 277 in the Top 500, which remains an eBay Enterprise client. The former GSI still operates web stores for several professional sports leagues, including MLB Advanced Media, No. 145 in the Top 500; the National Hockey League, No. 364; and NBA Media Ventures LLC, No. 461.
But what had been GSI has changed a great deal since the acquisition by eBay in 2011, says Mark Kirschner, chief marketing officer for eBay Enterprise. “We’re a different company today than when we were acquired by eBay,” Kirschner says. “Our open, flexible, modular approach is resonating with the market.”
He says eBay Enterprise now offers as stand-alone options such services as fulfillment, customer serve and fraud prevention. It also offers its order management software as a product, and has integrated that software with a variety of e-commerce platforms, including Magento, hybris and Oracle. He says demand has been particularly strong for its fulfillment services. He says eBay Enterprise operates six fulfillment locations—each consisting of two or three warehouses—in North America, one in the United Kingdom and a new one that opened this spring in Germany.
“There’s a lot of demand for a company that knows how to do e-commerce fulfillment and that can provide a really high-quality customer touchpoint,” he says. He says he could not provide details on the company’s business in advance of eBay Inc.’s forthcoming earnings announcement next Thursday, July 16. A day later eBay and PayPal will become separate companies, and PayPal will begin trading as a separate company on the Nasdaq exchange on Monday, July 20.
Argir, who joined Toys ‘R’ Us in November 2012 as vice president of global e-commerce has experience with other chains that previously outsourced their e-commerce operations. He was senior vice president of e-commerce at Sports Authority from April 2011 to November 2012 and before that worked at Target.Favorite