Ecommerce Technology

Understanding Ecommerce Website Costs and Total Cost of Ownership in 2019

Brian McGovern / 6 min read
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Understanding Ecommerce Website Costs and Total Cost of Ownership in 2019

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When staring at the reality of an ecommerce website that needs to either be built from the ground up or replaced due to any number of reasons, one of the biggest considerations for any executive is the total cost of ownership.

There are tons of hidden costs and challenges in standing up a new ecommerce environment – and not all projects are the same.

Making the right platform/agency decision can mean all the difference between a black or red number at the bottom of your balance sheet.

Types of Platforms

There will be pitches.

Whether you are well versed in the ecommerce platform landscape or just getting started learning the players, you will entertain various pitches by platform vendors.

The truth is, they will all look good in the presentation.

Understanding the differences in platform type might help you decide what platforms to consider and narrow down your initial choices.

1. On-Premise.

On-premise solutions are not one of the best web hosting providers because they are installed on gear that you have to host yourself with an added cost.

If you already have a large data center footprint and the staff to manage it, you might not want to rule out on premise.

But the costs will be higher than options like SaaS without question.

Hosting, staff, security, penetration testing — the costs will mount up fast.

Use the TCO calculator here to get a sense of the difference.

The biggest benefit of an on-premise scenario is control of your own destiny with source code — you can customize the on-premise platform to integrate to any existing business process.

In some organizations this is a big win — as mature businesses have rigid rules and systems that need to remain in place.

Installing and customizing an on-premise solution will give you a completely unique solution, specific for your business.

That’s a good thing right?

Not always.

Customizations to on-premise platforms come with two very big liabilities.

  1. Coding into a corner: The majority of the clients we see come to us from an on-premise platform are unable to upgrade to the latest version of the platform because the customizations done have left the software in a non-upgradable state.
  2. Cost: Choosing the right agency to do the customization is critical here. But be aware, agencies know this to be true and quality software customization is very valuable and therefore highly expensive.

One last thing to consider with the on-premise choice is the cost of competitive differentiation.

Offering features to your users that drive conversion is the difference between your brand and others.

In order to roll out new features that an on-premise platform provides, you have to install that version, test that version, and deploy that version throughout your stack.

This is time-consuming and packed with risk and expense.

What we see often is that businesses that have previously used on-premise are taking the software evaluation process as a catalyst to improve antiquated business processes and modernize to the point that most SaaS plays work.

It’s a natural evolution.

On-Premise Software Pros & Cons

  • Pros: Customization.
  • Cons: Additional hosting costs, security is your liability, customization, new feature adoption.

2. Headless.

When vetting platform options for either ecommerce or CMS systems, you will hear the term headless.

Headless commerce is the ability to have any platform or software gain access to and utilize ecommerce features to achieve an ecommerce experience (product view, add to cart, checkout) regardless of the CMS platform you are running.

Let’s say for example you have a marketing website that runs on .NET or a platform that is .NET based and you have .NET developers that are excellent.

And now you want to create a unified, immersive content and commerce experience, something similar to Rent the Runway, strictly for example only.

With a headless approach, the .NET developers you employ could build the experience and leverage the headless API calls of the ecommerce engine to handle:

  • Cart & pricing rules.
  • SKU combos.
  • Catalog fetching.
  • Shipping/billing/taxation validation.
  • Checkout.

Sticky security nuances like PCI compliance, credit card vaulting, and fraud detection are handled in the cloud. Since there is no native ecommerce presentation engine – the ecommerce is “headless” with the .NET code running the show.

A good example of this is Alecia.com’s use of BigCommerce APIs to enable shopping from a live, streaming video.

ecommerce cost alecia

Another way to achieve headless or semi-headless is to have the ecommerce SaaS platform completely handle the cart through the checkout flow.

In this scenario, think about the BigCommerce / WordPress integration.

A compelling CMS experience like WordPress can be intelligently integrated into BigCommerce where product, category, faceted search, and content screens can live on WordPress – and the checkout flow is bounced over to BigCommerce’s SaaS solution.

ecommerce cost bc4wp

This is a great solution and a way to integrate many SaaS plays (think microsites, lookbooks, flash sales, SEM landing pages or micro catalogs) into your existing infrastructure.

There are some pitfalls here that are strategy dependent.

  • Building out the fully headless experience is a development effort and a sizable one. If you were to go with a CMS/plugin approach as mentioned previously – that will reduce costs.
  • If it is a fully headless solution, it will not be commercially supported since it’s been dreamed up and built fully custom by your team. There’s risk in that.
  • It also reduces the impact and benefit of a true SaaS platform where features are introduced continually – by using the API alone you may miss out on some of those or have to put additional development dollars towards them.

Headless Commerce Pros & Cons

  • Pros: Ability to build immersive rich experiences, stay on the platform you know, and maintain security and PCI compliance.
  • Cons: Development cost (if fully headless), time to market (if fully headless), slow or expensive adoption of SaaS features, not commercially supported, hosting cost.

3. SaaS.

Short for Software as a Service, SaaS platforms are cloud-based, multi-tenant systems that typically offer a huge suite of features that appeal to most retailers.

The model allows for a complete customization of the front end, so look and feel can be brand specific.

SaaS, however, separates features from look and feel.

The benefit of this approach is that because the software is in the cloud, new features are rolled out continuously and hosting is already taken care of.

  • There is no wait time to adopt new features, you simply turn them on.
  • Security is offloaded to the SaaS model and lightning fast page load times is a benefit you get as a retailer participating in the scalability of the SaaS model.

This approach is the most cost effective because SaaS platforms guard against heavy feature customizations and offer easy-to-use front end frameworks like Stencil, in which typical build times are 50 days or less from start to launch.

Lower development times to stand up a solution allows you to put your budget towards integration to your fulfillment/supply chain, a component of any ecommerce system that is required no matter what platform is chosen.

One aspect of cost to specifically watch out for with SaaS is how the software fees are factored.

For instance, paying a percent of revenue to a vendor per transaction for ecommerce is a turn off for most.

That is how some SaaS software and most on-premise software is billed.

On the other hand, BigCommerce’s pricing is more straightforward: a flat monthly fee that scales up in bands and grows as your business grows.

SaaS Pros & Cons

  • Pros: Lower cost, quicker roll outs, CMS add ons bring content to the table, quicker feature addition, security and hosting.
  • Cons: Cannot customize back end, for the rare cases where that is needed.

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Finding an Agency

During the platform selection process, you will speak to various interactive agencies.

Typically, agencies are the largest cost in an ecommerce project, so it’s important to make the right decision for your brand.

Here, experience in your vertical is less important than strong references outside of your vertical.

Agencies with experience across many verticals can bring diversity to the project.

Costs are based on what services you need – for instance, strategy, design, development – and it is important to understand if your project will be built by people on or off shore.

Ask to meet the real team that will work on the project, and make sure you are not talking only to sales people.

One last note on price – look for a fixed fee contract rather than hourly.

Experienced agencies will be willing to put a line in the sand on price and offer it fixed as opposed to less experienced ones that will only work based on an hourly rate.

Your Project

Now that you’ve picked the platform and the agency, it’s time to do the real work.

As you begin to build out, additional costs often come up due to unforeseen or unaccounted-for business requirements.

Standard line items in any ecommerce business include:

But what may be unexpected are hidden items include:

  • CMS plugin costs such as Shogun.
  • Promotion plugins such as Justuno.
  • Fraud detection & prevention such as Signifyd.
  • Ongoing post-launch agency support. Most agencies offer a package based on expected hours per month to feature enhance, A/B test and ongoing improvement.
  • Data migration: When coming from another platform, you will have to go through a catalog transfer. Depending on SKY volume, there could be a cost associated. BigCommerce has free transfer tools available as well as paid options for custom catalog transfer or enormous catalogs.

Executive Summary

For nearly every traditional ecommerce scenario we encounter at iMedia, on-premise solutions are rarely adopted.

The trend is moving toward SaaS-based solutions because they offer the biggest ROI in terms of not only money but also time spend for the solution provided.

Not having to worry about hardware costs, security or scaling is a huge relief which allows online retailers to focus on what counts – more conversions and more revenue.

Partially headless solutions are also great for businesses who want to provide a truly rich and immersive content experience.

Solutions like BigCommerce for WordPress or BigCommerce’s additional partnerships like Acquia for Drupal ecommerce websites are a great way to get high value with low cost and quick turnaround.

If you are using another CMS, this is also achievable.

For instance, we released a plugin to the BigCommerce marketplace for a Sitecore CMS to BigCommerce extension that works in a similar fashion to the WordPress integration.

Keep in mind the content strategy is an important factor in this decision.

Remember, choosing the right agency is equally as important as the way your site looks or the way your supply chain functions.

Lean on your agency for help in making this decision, but keep in mind that the total cost of ownership is a P&L item only your brand owns.

Want more insights like this?

We’re on a mission to provide businesses like yours marketing and sales tips, tricks and industry leading knowledge to build the next house-hold name brand. Don’t miss a post. Sign up for our weekly newsletter.

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    Brian McGovern

    Brian McGovern

    Partner, Client Services

    As a software architect and engagement manager with over 20 years experience in developing and managing cost effective online solutions, Brian specializes in the management, development and integration of scalable CMS, mobile, social, and ecommerce platforms and products. He is the Partner, Client Services at iMedia, a strategic interactive agency that conceives, designs and produces integrated and results driven digital brand experiences.

    View all posts by Brian McGovern
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