ecommerce platforms - magento...
TRANSCRIPT
July 18, 2013
Magento Webinar
Measuring the Business Impact of Your eCommerce Platform
• Introduction
• Market Overview
Peter Sheldon, Forrester Principal Analyst
• The Total Economic Impact of the Magento Enterprise eCommerce Platform
Michael Speyer, Forrester Principal Consultant
• Q&A
• Closing
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Introduction: Many variables as you look at re-platforming, upgrading,
or expanding your e-commerce platform
3
• Licensing
• Hosting and Infrastructure
• Initial Implementation
• Time to Market
• Maintenance and Upgrades
• Anticipated Revenue Lift and ROI
Market Overview eCommerce and technology trends to
consider as you review your plans and
investments.
Forrester Total Economic Impact A framework you can apply to assessing the
cost, revenue and ROI of your eCommerce
technology investments and the impact they
will have on your business.
Introduction: Guest Speakers
4
Peter Sheldon
Forrester Principal Analyst
Serving eBusiness & Channel Strategy Professionals
Michael Speyer
Forrester Principal Consultant
Serving Sales Enablement Professionals
© 2013 Forrester Research, Inc. Reproduction Prohibited 5
›Market Overview
› Total Economic Impact Study: Purpose and Methodology
›Key findings from the customer interviews
› Financial Model
Measuring the Business Impact of Your eCommerce Platform
In case you missed it, eCommerce
is on a tear 6
By 2017, 10% of total US retail spend will be online, hitting $370 billion
© 2013 Forrester Research, Inc. Reproduction Prohibited 7
These stories have become common place on retailer earning calls
© 2013 Forrester Research, Inc. Reproduction Prohibited 8
Two thirds of firms will increase spending on eCommerce technology in 2013
Source: Forrester Research, May 2013 Global eBusiness & Channel Strategy Professional Online Survey 9
Worryingly however, many retailers are
running the show with legacy or home-
grown eCommerce solutions
Almost a quarter of eCommerce sites are powered by home-grown technology
Source: Forrester Research, May 2013 Global eBusiness & Channel Strategy Professional Online Survey 11
Omni-channel, mobile and content mgmt are top priorities for retailers in 2014
Source: Forrester Research, May 2013 Global eBusiness & Channel Strategy Professional Online Survey 12
The online channel today influences 40% of offline retail spend
Source: Forrester Research, May 2013 Global eBusiness & Channel Strategy Professional Online Survey 13
The right ownership model for platform ownership often depends on online revenue
© 2013 Forrester Research, Inc. Reproduction Prohibited 14
There are pros and cons to consider evaluating ownership models
© 2013 Forrester Research, Inc. Reproduction Prohibited 15
© 2013 Forrester Research, Inc. Reproduction Prohibited 16
›Market Overview
› Total Economic Impact Study: Purpose and Methodology
›Key findings from the customer interviews
› Financial model
Measuring the Business Impact of Your eCommerce Platform
The Forrester TEI methodology is an established ROI framework focused on impact beyond costs. Framework and Components
Benefits
• Quantified value
• Defined metrics
Cost
• People
• Process
• Technology
“Options” created
• Are there new
opportunities
created for the
future?
Uncertainty
• Impact of assumptions
Total
Economic
Impact
RISK
Source: August 4, 2008, “The Total Economic Impact™ Methodology: A
Foundation For Sound Technology Investments” Forrester report
Approach And Methodology
Perform due
diligence
Conduct
customer
interviews
Construct
financial
model
Write
case
study
Benefits
(Impact on Business)
Costs
(Impact on Budget)
Flexibility
(Options)
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© 2013 Forrester Research, Inc. Reproduction Prohibited 18
›Market Overview
› Total Economic Impact Study: Purpose and Methodology
›Key findings from the customer interviews
› Financial Model
Measuring the Business Impact of Your eCommerce Platform
© 2013 Forrester Research, Inc. Reproduction Prohibited 19
Interviewed five merchants with online revenues ranging from $10 million to $100 million
› A retailer of equipment, tools, and supplies.
› An online-only novelty fashion accessories retailer serving the
US and EU markets.
› An online retailer of high-end furniture and home accessories
products.
› A fashion jewelry and accessories merchant that offers
collections curated and designed by in-house stylists.
› A retailer of luxury apparel, gifts, and accessories.
Magento Enterprise Edition adoption driven by shortcomings of current solutions
Revenue loss and downtime
triggered by high traffic
Inability to support sophisticated
online marketing activities
Unfavorable economics associated
with adding new functionality and
updates to existing platforms
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© 2013 Forrester Research, Inc. Reproduction Prohibited 21
The composite organization used for the TEI analysis
› TEI analysis based on a composite of the interviewed companies.
› Characteristics of the composite organization are:
• Operates both brick-and-mortar stores and an eCommerce website and had $40
million in online sales.
• Challenges with its pre-Magento eCommerce platform are:
› Inability to scale to handle large spikes in traffic, resulting in instability and
downtime.
› Lack of features and flexibility necessary to support more sophisticated and
frequent digital marketing efforts.
› Inability to quickly make changes to site content.
New eCommerce platform requirements and attributes
To meet growing online traffic
volumes Scalability
Easy integration
Rapid deployment
Flexibility
To easily and rapidly create
custom landing pages, perform
catalog updates and other
management tasks
With back-office systems and
external marketing services
providers
To begin growing their online
businesses
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© 2013 Forrester Research, Inc. Reproduction Prohibited 23
Qualitative benefits of Magento Enterprise Edition experienced by the interviewed merchants
Increased scalability and stability
“ … to support increases in average daily orders from 2,000 per day to 10,000 per day”
Flexibility to enable a broad range of functional requirements
Integration with 3rd party marketing providers
Enablement of custom business processes
Rapid time-to-market Deployment times of 6-9 months.
Variations due to project scope, resources used, scope changes.
Increased levels of marketing activities
Allowed the merchants to support more diverse and frequent marketing tactics
Major contributor to the overall revenue uplift
© 2013 Forrester Research, Inc. Reproduction Prohibited 24
›Market Overview
› Total Economic Impact Study: Purpose and Methodology
›Key findings from the customer interviews
› Financial Model
Measuring the Business Impact of Your eCommerce Platform
The financial model
› Accounts for all costs and benefits reported by the interviewed
customer
› 3-year forward looking analysis
› Uses a 10% discount rate for Present Value and Net Present Value
calculations
› All costs and benefits are adjusted for variance, uncertainty and risk
as described in the TEI methodology
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Costs included in the financial analysis
License fees $98,206 for three production
servers and one nonproduction
server
Professional services $324,000 for initial deployment
$537,150 for ongoing support
Internal labor $476,732 for initial deployment,
ongoing maintenance, upgrades
to back-end systems
Hosting services
$337,632 for bandwidth,
server hosting, load balancing,
content delivery network
(CDN), and a firewall
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Benefits included in the financial analysis
eCommerce uplift
attributable to the
Magento platform
$3,960,893. 20% of total
revenue uplift is attributed
directly to the Magento platform
Costs avoided
$147,719 for prior platform
software license maintenance
$350,533 for prior platform
maintenance and upgrades
$135,001 for software
development when using pre-
built extensions from Magento
Connect
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Risks and drivers of variance in costs and benefits
› Incremental revenues will vary with each merchant’s ability to
effectively utilize Magento Enterprise Edition’s features, its marketing
effectiveness, and other activities that stimulate purchasing activity.
› The percentage of total revenue uplift attributable to the Magento
platform also affect the final return on investment (ROI) value.
› Costs avoided for licensing and maintenance fees associated with
the prior platform will vary with the type of platform used and the
scale of the prior implementation.
› Magento licensing fees will vary with the number of servers and the
level of support purchased.
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Three Year Risk Adjusted Cash Flow
($420,960) ($537,802) ($544,282) ($551,086)
$1,413,400
$1,801,760
$2,422,672
$1,000,000
$500,000
$0
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000
$4,000,000
Initial Year 1 Year 2 Year 3
Costs
Benefits
Payback
Initial Year 1 Year 2 Year 3 Total PV
Costs ($420,960) ($537,802) ($544,282) ($551,086) ($2,054,130) ($1,773,730)
Benefits $1,413,400 $1,801,760 $2,422,672 $5,637,832 $4,594,156
Net Benefits ($420,960) $875,598 $1,257,478 $1,871,586 $3,583,702 $2,820,426
ROI 159%
Payback Period 5.8 months
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Measuring the Business Impact of Your eCommerce Platform
Q&A
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Magento Enterprise Edition eCommerce Platform and Ecosystem
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Solution Partners
Hosting Partners
Industry Partners
Magento Enterprise Edition eCommerce Platform and Ecosystem
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Thank you!
• Download the full TEI study
magento.com/TEI
• Talk to a Magento Sales Manager
magento.com/product/enterprise-contact
Or call 1-877-574-5093