Reducing eCommerce total cost of ownership for retail ... · Reducing eCommerce total cost of...

Reducing eCommerce total cost of ownership for retail, manufacturing and apparel industries

Flash sales, outlets and other online opportunities for apparel retailers 2

01. IntroductionOnline commerce is one of the fastest growing sales areas for organisations selling to consumers and businesses alike. According to IMRG, the total value of the UK online retail market was £78 billion in 20121 and this has been further improved and emphasised by the figures for the first six months of 2013.

The monthly KPMG and British Retail Consortium (BRC) Retail Sales Monitor has found that each and every month of 2013 has seen an increase in online sales when compared with the same month in 2012, indicating that the industry is growing rapidly.

January saw a growth in online sales of 10.1 per cent2, followed by a 10.9 per cent year-on-year rise in February3. The trend continued into the final month of the first quarter of the year, with a 6.6 per cent increase in online commerce in March4.

April and May were no different as the organisations recorded sales rises of 8.3 per cent5 and 11 per cent6 respectively when compared with the same months last year, while sales were up 14.1 per cent in June when compared with the same month in 2012, when they had risen by 12.1 per cent7.

These rises indicate just how important eCommerce has become for businesses in today’s modern landscape. Speaking about the importance of online platforms to businesses, David McCorquodale, Head of Retail at KPMG, said:”To some extent retailers had their bacon saved by online sales, underlining the growing importance of the digital channel.”

Kingpin research has indicated that 55 per cent of apparel companies already have an eCommerce presence, alongside 46 per cent of manufacturers and 56 per cent of retailers.

While these brands are already embracing digital sales, many are looking for something else from their online platform, with cost savings named by each sector as a key issue.

In today’s difficult economic climate, it is perhaps not surprising that cutting costs is a significant driving factor for companies looking to re-platform and add to their digital offering. As online retail has grown so have eCommerce firms. This means that many are now faced with large, complex, and often outdated websites, which may require additional bolted-on services and be costly to keep up and running.

Kingpin research has indicated that cost is something firms in all industries are looking to cut back on, with 27 per cent of respondents naming price as a reason they are operating the way they are at the moment and 26 per cent saying further savings would motivate a change in the way they carry out their digital sales.7

Another thing apparel, manufacturing and retail businesses are looking for is an increase in the features offered by online platforms. Of course, this is a fine balancing act and it is important to find the best features for a price that suits each individual company.

Jan 10.1%

10.9%Feb

6.6%Mar

8.3%Apr

11.0%May

14.1%June

0% 10% 20%

Source: BRC


02. Variable Cost model v Fixed Cost model

“Webstore’s fee structure is designed around an Amazon model. We believe that when our customers are successful, we will be successful, making it a performance based model.” Anna Collins, General Manager of Amazon Webstore.

Clearly cost savings are important to eCommerce firms in all sectors. A quarter of retailers surveyed by Kingpin indicated they are looking to cut outgoings, with 24 per cent of apparel firms and 28 per cent of manufacturers looking to do the same.8

Once online businesses have begun looking to move away from an in-house operation and re-platform in a bid to cut costs, they have two main options; a fixed cost model and a variable cost model. Both offer something different for organisations looking to make the most of eCommerce, but can be very different when it comes to cutting down the costs associated with re-platforming.

Amazon Webstore’s variable cost model is key when it comes to creating a cost-effective digital model for businesses looking to sell online, minimising investment and cutting back significantly on business risk.

This sees businesses looking to re-platform pay a set percentage of their transaction fees, depending on the service they receive. The fact that the structure aligns client objectives with those of Amazon Webstore is something of a win-win situation.

With the online success of clients and Amazon Webstore linked, it is in the interest of the platform to provide the best services possible. This will in turn boost sales, as consumers enjoy their shopping experience and trust Amazon’s fulfilment and security measures.

Anna Collins, General Manager of Amazon Webstore, said: “Webstore’s fee structure is designed around an Amazon model. We believe that when our customers are successful, we will be successful, making it a performance based model.”

This takes the shape of a small subscription fee, with the remaining costs associated with performance,

so as sales increase, so do the related fees. This is a positive for businesses as it means they do not have to pay large upfront costs for a project that may not work as they had hoped, reducing the risks they face dramatically.

Long-term contracts are often a bugbear of businesses. You can never be sure of what the future holds, but these are notable in their absence with Amazon Webstore. This allows businesses to cut ties at any time, reducing business risk dramatically.

This is something that appealed to SPI when it launched UNIONBAY in 2011. Danna Ramberg, SPI director of IT, explained that the firm was worried by operational risk, the upfront costs and managing certain aspects of an online business. She added: “The ability to walk away any time was a great bonus.”


Unlike a variable cost model, fixed cost structures require a comparatively large upfront investment, which makes the risk of this model greater as it could take some time for a seller to recoup the capital spent on its online platform through sales.

The Amazon Webstore platform is provided at a small fee, with a wide feature set available at one price. This offers flexibility and scalability where necessary as add-ons can be brought into play at any time further down the line, without extra outlay and with very limited disruption to sales and business continuity.

Many retailers, apparel companies and manufacturers have found in recent years that they are adding extra elements to their online presence as time goes on, something that can cost a significant sum and reduce the speed and efficiency of a website drastically.

Successful businesses can grow at a rapid rate, particularly online, and it is important that companies have a range of features ready-to-go, out-of-the-box to limit downtime and capitalise on demand.

As businesses expand they tend to need additional software, hardware and data storage to keep them running smoothly online. This is all supplied by Amazon Webstore, through its reliable cloud computing offering, Amazon EC2.

This enables capacity to be increased or decreased rapidly. Traffic spikes can be dealt with as and when they crop up, there is no need to invest in datacentres or manage the servers and Webstore pages load quickly.


03. All inclusive v tiered model

“Total cost of ownership is reduced as there are no servers, and operating systems to buy up-front. It is really intended to combine ease, speed and the expertise Amazon possesses to help sellers to be successful in their online business.” Anna Collins, General Manager of Amazon Webstore.

It is hard to read what the future holds for individual businesses, but one thing that appears to be almost certain is that eCommerce is set to grow in the coming months and years, particularly if recent trends continue. With uncertainty around the future for companies it is important to have every base covered.

Amazon Webstore provides a wide range of dedicated features designed to improve the online presence of organisations and to create a smooth, hassle-free process for consumers.

Each and every one of these aspects of the feature set is available to companies using the platform from day one, should they require them. Equally, they can be added as and when they are needed. Elements like fulfilment and marketplace integration, and things like APIs, which can be used to easily update or delete product information, create unique deals and batch import a catalogue, among other things.

The major benefit to come out of this model is cost savings, as the many and varied features such as

checkout, fulfilment, payments and security do not need to be paid for at a later date and can be added easily.

The all-inclusive nature of the service is why it is described as a technology and services platform, as it is a lot more than just the software and technology required to build an eCommerce site and start trading.

Ms Collins added: “It’s actually the entire feature set, which are capable of everything from payment processing, to security, to identity management, to even the integration of fulfilment services through the addition of FBA.”

The fact that features are available from day one can reduce the complexity associated with re-platforming and the fact that everything runs on Amazon’s infrastructure makes it reliable and secure.

She added: “Total cost of ownership is reduced as there are no servers, and operating systems to buy up-front. It is really intended to combine ease, speed and the expertise Amazon possesses to help sellers to be successful in their online business.”

The features provided through Amazon Webstore are something that Kevin McCann, Vice President of Sales and Marketing for the Online Bakery, used to the advantage of his business.

He said: “The flexibility of the platform is a major reason why we selected Amazon Webstore. It has all the features our bakery needed to attract new customers, to easily connect our customers with products, and to keep our online business running smoothly.”

This is not always the case with a tiered model. This process of adding new elements as time goes on is often dependant on the level of sophistication a website has. Therefore, it may require a significant investment in development, software or hardware in


order to bolt-on features desperately needed by a company looking to boost eCommerce.

Often a tiered model means that companies end up dealing with a host of different providers. This can be both time consuming and end up costing a great deal of money.

This is something that impacted Two Cool and its brand Cold One. Robin Goodwin, Founder and Chief Executive of the firm was dealing with an internet service provider to host his site, a company that managed the shopping cart process, another that took care of authorising payments and a fourth that finally collected funds from customers and transferred it to the business.

Cutting costs was a key aim of the business, which was struggling to deal with the economic downturn, and the solution they turned to was Amazon Webstore. By eliminating this tiered and confusing infrastructure and dealing with one platform they cut expenses dramatically and improved the website as a whole.

Mr Goodwin said: “Amazon has significantly reduced the amount of accounting we have to do in regard to all these back-end expenses that kept showing up.”


When it comes to re-platforming, costs and features are important elements in the decision, but a more pressing factor is time. Any solution needs to be easy-to-use and quick to get up-and-running.

Amazon Webstore’s service is ready-to-go straight out-of-the-box. There is no need to install, host, manage or pay for infrastructure, which frees up time.

This time can be spent using the customisable templates and widgets that can help to create the perfect look and feel for a brand in the manufacturing, apparel and retail sectors.

A number of other factors are also taken care of, as it is not necessary to create a separate merchant account for payment processing. Costs are cut throughout the process, with no extra charge for handling traffic spikes and no need to commit for the long-term.

All of these elements come together to create a solution that means it is simple and easy to re-platform.

Shannon Burley, Seattle Storm Vice President of Marketing, said: “We asked them to get us up-and-running by using the Amazon Webstore platform, and 20 days later, on December 10th, our new site was live.”

This helped the company recoup around 60 per cent of its initial costs by the time Christmas rolled around, indicating just how quickly the platform and technology is ready to go and start working for the client, boosting sales and helping profitability and the bottom line.

The fact that Amazon Webstore’s platform is ready to go is a key element for established companies looking to re-platform, but the addition of features during the process is an added bonus.

Integration with Amazon’s marketplace means that millions of potential customers shopping on the site can already see the products a company offers.

“We asked them to get us up-and-running by using the Amazon Webstore platform, and 20 days later, on December 10th, our new site was live.” Shannon Burley, Seattle Storm Vice President of Marketing

04. Ready to go, right out of the box

The ability to list products quickly and easily, manage the Webstore and Amazon channels from one interface and list products in the wide range of categories offered will increase sales levels.

Jeanette Keyes, Website Commercial Manager at Marks and Spencer Outlet store, said using Amazon Webstore allowed the firm, which has a rich history in retail, to “quickly and efficiently get our product to a load of customers”.

Checkout options can also be accessed through the platform, which can boost conversion dramatically, as it allows customers to make use of their existing Amazon details, such as the credit card and shipping address already held at Amazon.

This element can be company branded and lets organisations control the customer experience from


start to finish, while keeping the brand at the forefront of the site.

Payments and fulfilment can also be handled through the Amazon Webstore platform, which means that everything from the process of collecting money, protecting customers and the business, picking, packing and dispatching orders.

All of these features are available from the beginning of the re-platforming process, meaning that businesses cut down dramatically on cost. These features do not need to be added at a later date and as they are cloud-based, they will not have a detrimental impact on the speed of the site.


“We’ve gone from zero to 51 stores in 12 years, and now we wanted to get an online business as quickly as possible. Working with Amazon Webstore, it’s allowed us to get there a lot quicker than if we’d grown more organically.”

05. Speed to marketSpeed is important for any site, but it is also crucial when it comes to re-platforming and getting the new online portal up-and-running quickly. Particularly in today’s always connected consumer market, as people want to buy goods whenever they like, so any downtime can be a major issue for them and therefore any online sellers.

An outdated and slow online presence can be just as frustrating, so it is imperative that businesses looking to freshen up their digital platform can do so rapidly, while maintaining business continuity.

With all the functionality built in already, the Webstore eliminates the need for further custom development, so it can be quickly deployed by businesses looking to improve the online sales offering they have, while keeping costs down.

The M&S Outlet was one site that took advantage of the rapid deployment of the Amazon Webstore platform. The store was up-and-running online in under three months and experienced three-times more traffic than expected on day one.

William Gill, Head of Buying and Merchandising at the retailer, explained that Amazon Webstore was the obvious company to deal with when looking to reach its aims.

“We’ve gone from zero to 51 stores in 12 years, and now we wanted to get an online business as quickly as possible. Working with Amazon Webstore, it’s allowed us to get there a lot quicker than if we’d grown more organically.”

Amazon Webstore provides a solution for overstock sales, one-off, flash and seasonal events as it can deal with any spikes in traffic, through a cloud hosting solution. This means customers will not be left disappointed by not being able to access discounted products. This ability to deal with rapid and often unexpected rises in visitors is something that appealed to M&S.

Ms Keyes noted that the sites can cope with “any press or any unplanned marketing we get”, as has occurred frequently since the site was launched. “We know that Amazon Webstore is more than capable of dealing with these fluctuations in traffic. It’s huge. We can do anything and we know it’s going to be fine.”

The ability to deal with rapid spikes in traffic means that companies can perform marketing miracles and know that their site will not crash. This unlimited bandwidth is all part of the service and will not result in a rise in fees, cutting costs once again, as this can be expensive when using an in-house system.

Speaking about the experience, Mr Gill added: “The whole journey from end-to-end has been fantastic. Launching the online business has had a halo effect on our [physical] retail presence.”


06. Key takeawaysBusinesses involved in the apparel, manufacturing and retail industries must move fast to tap into the ever-growing eCommerce market, all the while focusing on reducing costs and limited outgoings. Figures have indicated that online sales are growing month-on-month and year-on-year, so it is vital that brands are in a position to capitalise.

Continuing to run an up-to-date and successful in-house eCommerce site can be both expensive and time consuming. Amazon Webstore’s turnkey solution, which can be implemented quickly, is cost efficient, scalable, flexible, agile and easy to implement.

At every turn the solution has been designed to reduce business risk and reduce the total cost of ownership dramatically. From the fact there are no long-term contracts, so companies can reduce risk by being able walk away if eCommerce does not work for them, to the fact that firms pay a share of their revenues and just a small fee for the feature set.

The experience of working with major brands such as UNIONBAY and M&S Outlet proves that tapping into the knowledge and know-how of the platform can provide businesses with everything they need to be successful online, while keeping the associated costs and fees low.

Firms looking to get their products to market quickly will also not be disappointed. Amazon Webstore’s solution can be easily implemented, which means that it can be used to meet seasonal demands, such as the holiday rush.

Getting an eCommerce platform in place ahead of a rise in demand is just half the battle, as a website needs to be able to cope with this. Through Amazon Webstore’s elastic computing, unlimited bandwidth, high availability and content delivery network businesses can be sure that their site will deal with anything thrown at it by a rise in demand.

All of this is available for a variable cost, which of course cuts down on the level of up-front costs and also investment later in the process as the company continues to grow. However, perhaps the most important element when it comes to cutting outgoings is the fact there are no long-term contracts.


07. Appendix – Sources1. http://www.imrg.org/IMRGWebSite/user/pages/homepage.aspx

2. http://www.kpmg.com/UK/en/IssuesAndInsights/ArticlesPublications/NewsReleases/Pages/BRC-KPMG-Retail-Sales-Monitor-January-2013.aspx

3. http://www.kpmg.com/UK/en/IssuesAndInsights/ArticlesPublications/NewsReleases/Pages/BRC-KPMG-Retail-Sales-Monitor-February-2013-strongest-sales-growth-for-three-years.aspx

4. http://www.kpmg.com/UK/en/IssuesAndInsights/ArticlesPublications/NewsReleases/Pages/BRC-KPMG-Retail-Sales-Monitor-March-2013.aspx

5. http://www.kpmg.com/UK/en/IssuesAndInsights/ArticlesPublications/NewsReleases/Pages/BRC-KPMG-Retail-Sales-Monitor-April-2013.aspx

6. http://www.kpmg.com/UK/en/IssuesAndInsights/ArticlesPublications/NewsReleases/Pages/BRC-KPMG-Retail-Sales-Monitor-Good-Sales-Despite-Topsy-Turvy-Temperatures.aspx

7. http://www.brc.org.uk/brc_news_detail.asp?id=2470&kCat=&kData=1

8. Kingpin Research: Amazon Webstore Research FY13

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