Internet Retailer - The picture of a retailer immersed in market niches, Ritz Interactive Inc. plays a dominant role in the online retailing of cameras and photographic supplies, operating nine sites in that market. But Ritz wants to build on those niches in a big way and in recent months has moved aggressively into consumer electronics. “Adding consumer electronics to our mix of photography and camera SKUs is a natural market opportunity for us,” says Peter Tahmin, vice president and chief operating officer.

So far, Ritz seems to have hit its target dead-on. It launched its consumer electronics business in time for last year’s holiday shopping season, a move that CEO Fred Lerner says played a key role in boosting holiday sales by 35% over the prior year. The holiday surge resulted in full-year e-commerce sales of $98.8 million, up 19% from 2005—a year when sales had declined 3% from 2004.

The turnaround in sales might not have occurred, however, if Ritz hadn’t been able to extend the investment it had already made in an e-commerce platform to connect with a slew of some 15 new distributors of consumer electronics products—many of which drop-ship orders directly to Ritz customers.

Ritz says the brand extension went smoothly in part because it operates its e-commerce sites on an IBM Corp. technology platform that can effectively integrate with a best-of-breed fulfillment application—an on-demand, web-based system from Vcommerce Corp.—that connects easily with its new suppliers. “This is an opportunity for us to quickly brand a new line of business without having to build a back-end order management system from scratch,” Tahmin says. “We could have built it ourselves, but we’d probably still be building it.”

More options

Retailers who in the past wanted to do what Ritz has done might have found themselves scaling up their technology platform to accommodate the larger number of products, shoppers and relationships with suppliers. And they would also have faced the decision of going with a single source for all technology, with the resulting reliance on a single vendor, or undertaking the resource-consuming evaluation of dozens of technology providers to choose the best-of-breed solution for each application, with the resulting integration headaches.

But today XML and related integration technologies are enabling many applications to work well together. As a result, software-suite vendors have been acquiring best-of-breed applications over the last year or two to offer the best of both worlds: the advantages that a single-source strategy brings in application integration and the simplicity of dealing with a single vendor, and the advantages that best-of-breed brings in application functionality.

And so Road Runner Sports, for example, has upgraded its technology with Art Technology Group Inc., or ATG, which in recent years has acquired a number of outside applications to build on its core technology platform with built-in best-of-breed applications like coordinated site search and navigation from Primus Knowledge Solutions Inc., which it acquired in 2004. “We don’t see any limitation to what we can accomplish on the ATG platform,” says Peter Taylor, general manager of Road Runner Sports.

At the same time, however, retailers that decide to bring in third-party applications, as Ritz has done with Vcommerce and other vendors, can do so with greater confidence that outside applications will successfully integrate into their core technology platform. “With service-oriented architecture taking center stage in many retail environments, the risks associated with best-of-breed investment decrease,” says Rob Garf, director of retail research at research and advisory firm AMR Research Inc. Service-oriented architecture, also referred to as open architecture, is designed from the ground up with XML and other web-based integration technologies to enable free data flow among software applications.

Retailers, therefore, are beginning to think outside the technology box, so to speak, when deciding whether to go with a single-source provider of enterprise applications or take a more customized route. “18 months ago, retailers weren’t even having this discussion, but by now 90% of our retail client base has asked us about the future of enterprise suites in retail,” Garf says. Not that retailers still don’t need to do their homework, because there is no one-size-fits-all technology platform, experts say. “What’s important for one retailer may not be universally important for others,” says Colleen Coleman, an associate with retail consultants McMillan/Doolittle in Chicago.

Cautions Garf, “With the buying frenzy among technology vendors of the last 18 months, we’re closer to reality in having single sources of technology, but we’re not there yet.”

The right combination

While Ritz has found a combination of an extensive feature set and best-of-breed flexibility with IBM, and Road Runner Sports prefers the broad application platform of ATG, other retailers have chosen other partners that deliver the right combination of suite software, application integration, and application functionality.

For example, Musician’s Hut, which is aggressively building out its online market while integrating customer data with its retail store partner, is working with Demandware Inc., a provider of on-demand software that can bring in best-of-breed applications. Pet supplies retailer Fish Net Inc., with a need to better manage customer data for its growing web channel and a big single store with a multi-state customer base, takes a single-source approach with the software suite vendor Profit Center Software Inc. Also taking a single-source approach is MarketExpo.com, a home-and-garden retailer operating on the Venda Inc. platform.

As Ritz planned its foray into consumer electronics, it decided to add it as a category to its photography and camera sites. With much of its e-commerce infrastructure in place, it had realized that a new back-end fulfillment system would be critical for bringing in products ranging from desktop computers and DVD players to video game consoles and waffle makers.

Ritz’s ability to take a best-of-breed approach by bringing in Vcommerce stems from a decision several years ago on how to upgrade its e-commerce technology, which it launched in 1999 on the Net.Commerce platform from IBM. Having outgrown Net.Commerce and looking for something that offered the flexibility to let it add applications and handle rising volumes of sales, it checked out several platform options, but decided to stay with IBM and migrate to its WebSphere Commerce e-commerce platform. “WebSphere offered the right feature set and IBM offered staying power in the industry,” Tahmin says. In addition to WebSphere’s core e-commerce application, Ritz also uses its tools for auctions, live chat and wish lists.

WebSphere also offered the flexibility to bring in outside applications when some of its inherent features proved less than satisfactory, Tahmin says. “We could have used WebSphere tools for search and navigation, but we realized they weren’t best-of-breed,” he says. Instead, Ritz brought in a site search and navigation application from Endeca Technologies Inc.

The move quickly paid off. “We had Endeca integrated within a month or so, no downtime at all,” Tahmin says. “It paid for itself in a better shopping experience for customers and higher conversion rates.”

Choosing the leader

Ritz also has integrated other applications into WebSphere. It relies on CommercialWare Inc.’s CWDirect order management system to handle customer orders for multiple Ritz sites, Google Inc.’s Google Analytics for monitoring and analyzing customers’ online shopping behavior, and fraud-screening management technology from CyberSource Corp. “We could have built our own fraud-screening tool, but we felt it was in the best interest of our company to go with the leader in the field,” Tahmin says.

Ritz also recently went live with a customer-reviews application from PowerReviews Inc. While incorporating several best-of-breed applications, WebSphere Commerce continues to provide strong web-services-based application integration technology that Tahmin says should support Ritz as it grows. “We can scale up with what we have, which gives us another reason to go with the WebSphere platform,” he says.

Road Runner Sports, which like Ritz is running with an aggressive growth strategy, has taken more of a single-source approach to its technology needs. After a broad review of the technology market to find a replacement for its former platform, Road Runner chose ATG because it believed that ATG presented the strongest overall platform with built-in application functionality that suited the retailer’s goals, says Taylor, the retailer’s general manager. “We wanted the best of all worlds,” he says. “The best software tools to manage product merchandising ourselves, a good interface into our Oracle database, and a technology environment where we can grow.”

More specifically, Road Runner wanted something that would inject more personalization features into its retail web sites while having the flexibility to scale up with additional sites as it enters niche areas beyond its general running-shoe site RoadRunnerSports.com and its women-focused ActivaSports.com. The ATG platform offers that functionality, while providing Road Runner direct control over personalization strategy and the development of content for future sites, Taylor says. “The merchandising customization is all within our control, so we trigger product offers based on shopping behavior, and we can run multiple product catalogs out of a single database so we can continue to create additional micro sites,” he says.

ATG impressed Road Runner both with its ongoing investment in Java technology and the expansion of its hosted platform through acquisition of best-of-breed applications, including Primus site search-and-navigation and eStara for online click-to-chat and click-to-call features, Taylor says.

At the same time, Taylor adds, the ATG platform has offered Road Runner the flexibility to bring two outside applications into the core platform—Coremetrics Inc. for web analytics and Scene7 Inc. for rich media imaging displays.

Making music

Musician’s Hut Inc., an online retailer specializing in selling guitars and drum sets, wanted the high functionality of an ATG-type platform, but at less cost to stay within its targeted technology spending ratio of about 2% of revenue, CEO Eric Archuleta says. And with particular merchandising needs to help it compete while planning to grow in a tough market, it wanted a platform that would support a fast launch while offering enough flexibility to customize applications. It launched MusiciansHut.com in December 2005 on a hosted platform from Demandware, which provides software on-demand over the Internet.

“Demandware offers advanced merchandising tools not available on other e-commerce platforms for less than $100,000,” Archuleta says. “This allows us, a small retailer with minimal capital, to have the features found in the top 50 online retail sites.” He notes that Musician’s Hut spent less than $30,000 to get his new site up and running in about a month in late 2005.

Musician’s Hut has implemented several features through Demandware, including a customer wish list, e-mail-a-friend, checkout, site search and a customer reviews application. Demandware also has been particularly good at optimizing MusiciansHut.com for natural Internet search rankings, Archuleta says. When Google introduced a service for submitting site content via XML to its index, “Demandware had the tool installed within weeks, so our IT guy just has to click a button to feed our content to Google,” he says.

For all of Demandware’s features, however, Musician’s Hut also relies on third-party providers. Without built-in e-mail management as is available through other platforms, it uses an e-mail management system from Vertical Response Inc., a vendor that has proven to be effective at getting e-mail marketing messages beyond spam filters and into consumers’ inboxes, Archuleta says. And though Archuleta figures that Demandware will be able to support Musician’s Hut’s growth for years with most of its e-commerce-related applications, he figures he may have to eventually go beyond Demandware’s built-in order management and add on an order management application from OrderMotion Inc. to handle higher volumes.

Hitting home

The desire to plan for growth without worrying about having to constantly modify multiple applications drove home-and-garden e-retailer MarketExpo.com to switch from a custom-built e-commerce platform about a year ago to Venda’s hosted platform, which provides nearly all of the retailer’s e-commerce technology, says founder and CEO Denise Houseberg.

Prior to Venda, MarketExpo had operated an e-commerce platform on its own servers with a collection of applications from several vendors. But with about 12,000 SKUs from 26 suppliers and annual sales now of $1 million, MarketExpo reached the point in 2005 where it could afford a comprehensive, hosted platform from Venda, which charges a flat fee of $10,000 per site per month. “I wanted a platform that wouldn’t limit my growth, yet because I’m using Venda almost exclusively for all of our e-commerce, I can run the site now with just two employees and myself,” Houseberg says.

While Venda provides a full suite of e-commerce applications, including web analytics, site search, e-mail marketing, and fulfillment and inventory management, Houseberg complements the platform for additional functionality with Google Analytics and, for e-mail marketing management, Constant Contact Inc.

Fish story

While rich functionality in multiple applications is important to every retailer, Fish Net, operating under the brand That Fish Place-That Pet Place, has emphasized application integration as it seeks to leverage customer data across its web channel and its single store—a 120,000-square-foot pet supplies outlet that draws customers from several states to its location in Lancaster, Pa., vice president Rick Amour says. With each channel doing more than $10 million in 2006 sales and growing at 30% a year, the retailer in January migrated its technology infrastructure to a Java-based software suite from Profit Center Software Inc.

One of Fish Net’s most pressing needs was accessing customer data across channels to build personalized marketing campaigns. But though some vendors impressed Amour with its marketing system, Amour chose to go with Profit Center for its ability to integrate customer data across store point-of-sale and web order transactions. “Profit Center has great multi-channel integration,” he says. “I really wanted a complete enterprise solution, and with only two IT folks, I didn’t want to be integrating best-of-breed applications.”

The retailer now integrates online, store and contact center sales information with its back-end Oracle database to better analyze customer data and prepare marketing campaigns. One of the first results of this integration is a single cross-channel loyalty program, which has replaced what had been separate programs for each channel. “Now we can have multiple channels on the same customer loyalty program, so we can adjust loyalty marketing campaigns based on store purchasing or web or contact center orders,” Amour says.

Hybrid strategy

Profit Center provides a nearly complete suite of software applications, from the e-commerce platform (including web analytics, site search and order management) to back-end enterprise applications such as inventory management, purchasing and accounting applications. “We use Profit Center for all but payroll and human resources management, which we outsource,” Amour says.

Still, it will be a long time before retailers go to a single source for all of their software, experts say. They may rely on one vendor for most of their needs, but still bring in others for certain applications. “Over the next 10 to 15 years at least, retailers will still be operating in a single-source/best-of-breed hybrid environment,” Garf says.

The need for flexibility in infrastructure, of course, never ends—especially not for growing retailers. At Ritz, for example, Tahmin figures on continuing to build on its WebSphere platform. “We’re using Vcommerce now to expand into consumer electronics, then we’ll look at other new areas as well,” he says.

Weighing Technology Choices