magento: measuring the business impact of your ecommerce platform

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June 26, 2022 Measuring the Business Impact of Your eCommerce Platform Magento

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This presentation is from a recent webinar hosted by Magento Inc., where guest speakers, Forrester principal analyst, Peter Sheldon, and Forrester consultant, Michael Speyer, discussed the latest eCommerce industry trends impacting merchants’ technology purchase decisions and reviewed Forrester Consulting’s Total Economic Impact model as a framework for building a business case for your eCommerce implementation or expansion.

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Page 1: Magento: Measuring the Business Impact of Your eCommerce Platform

April 10, 2023

Measuring the Business Impact of Your eCommerce Platform

Magento

Page 2: Magento: Measuring the Business Impact of Your eCommerce Platform

© 2013

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

Page 3: Magento: Measuring the Business Impact of Your eCommerce Platform

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Introduction: Many variables as you look at re-platforming, upgrading, or expanding your eCommerce platform

Licensing

Hosting and Infrastructure

Initial Implementation

Time to Market

Maintenance and Upgrades

Anticipated Revenue Lift and ROI

Market OvervieweCommerce and technology trends to consider as you review your plans and investments.

Forrester Total Economic ImpactA 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.

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Introduction: Guest Speakers

Peter SheldonForrester Principal AnalystServing eBusiness & Channel Strategy Professionals

Michael SpeyerForrester Principal ConsultantServing Sales Enablement Professionals

Page 5: Magento: Measuring the Business Impact of Your eCommerce Platform

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Measuring the Business Impact of Your eCommerce Platform

Market Overview

Total Economic Impact Study: Purpose and Methodology

Key Findings from the Customer Interviews

Financial Model

Page 6: Magento: Measuring the Business Impact of Your eCommerce Platform

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In case you missed it, eCommerce is on a tear

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By 2017, 10% of total US retail spend will be online, hitting $370 billion

Source: Forrester Research Online Retail Forecast, 2012 to 2017 (US)

(US$ billions)$231

$262

$291

$319

$345

$370

14% 13% 11% 10% 8% 7%Year-on-year growth

8% 8% 9% 10% 10% 10%Share of total retail sales

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These stories have become common place on retailer earning calls

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Two thirds of firms will increase spending on eCommerce technology in 2013

How is your investment in eCommerce technology changing?

Decreasing2%

Staying about the same31%

Increasing56%

Significantly increasing10%

Base: 49 eBusiness & Channel Strategy Professionals

Source: Forrester Research Online Retail Forecast, 2012 to 2017 (US)

Page 10: Magento: Measuring the Business Impact of Your eCommerce Platform

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Worryingly however, many retailers arerunning the show with legacy or home-grown

eCommerce solutions

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Almost a quarter of eCommerce sites are powered by home-grown technology

How is your online store supported today?

Base: 49 eBusiness & Channel Strategy Professionals

The product vendor13%

Our InternalIT staff54%

A third partyservice provider

33%

Commercialapplication

49%

None of the above/don’t know14%

Full service vendor who also supports fulfillment, customer service, and marketing

2%

SaaS (on-demand) application hosted and supported by the

product vendor4%

Open Source eCommerce Platform

(i.e. Magento OSCommerce)

8%

Homegrown solutionsupported and hosted by our

internal IT staff22%

Source: Forrester Research Online Retail Forecast, 2012 to 2017 (US)

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Omni-channel, mobile and content management are top priorities for retailers in 2014

eCommerce platform

Multi-channel integration

Web Content Management (WCMS) tools

Customer Relationship Management (CRM) tools

Mobile commerce platforms

Customer Insights and Analytics Systems

Responsive design

Product Content Management (PCM/PIM) tools

Site payment, system security compliance & protection

Site Search

Back-end integration (ERP, Financial Reporting)

Order Management (OMS) tools

POS/Store Systems

Call center systems

Other (please specify)

What are your technology investment priorities for the coming year?

Base: 49 eBusiness & Channel Strategy Professionals

52%

52%

52%

50%

48%

40%

40%

33%

27%

27%

25%

17%

15%

15%

4%

Source: Forrester Research Online Retail Forecast, 2012 to 2017 (US)

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The online channel today influences 40% of offline retail spend

(US$ billions)

2011 2012 2013 2014 2015 2016

44% of total retail sales will be impacted by the Web in 2016

CAGR (2011 to 2016): 9%

$1672$1723

$1741$1771

$1780$1812

$202 $226 $252 $278 $304 $327

$1103$1206

$1320$1429

$1552$1660

Source: Forrester Research Online Retail Forecast, 2012 to 2017 (US)

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The right ownership model for platform ownership often depends on online revenue

< $5 million $5 million to $25 million

$25 million to $100 million

$100 million to $1 billion

$1 billion to $5 billion

> $5 billion

Build BuildBuy

Online Revenue

Tiers

Typical Business

Models

MarketPlace

Open Source

Custom Build

Commercial Solution

SaaS or On-Demand > Hosted Managed or On-Premise

SMB (<$25m online revenue) Enterprise (>$25m online revenue)

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There are pros and cons to consider evaluating ownership models

Application

Runtime

Virtualization

Servers

Storage

Networking

Security

Application

Runtime

Virtualization

Servers

Storage

Networking

Security

Application

Runtime

Virtualization

Servers

Storage

Networking

Security

Application

Runtime

Virtualization

Servers

Storage

Networking

Security

SaaS On-demand On-premise

Infrastructure management

Perpetual license + hosting fees

High

Single

Medium

Perceptual license

High

Single

High

Perpetual license + hosting fees

Medium

Single

Low

Revenue share

Low

Multi

Low

Typical business model*

Upgrade effort

Application tenancy

IT skillset required

Managed in-house Managed by vendor/hosting partner

Hosted / Managed

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Measuring the Business Impact of Your eCommerce Platform

Market Overview

Total Economic Impact Study: Purpose and Methodology

Key findings from the customer interviews

Financial Model

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The Forrester TEI methodology is an established ROI framework focused on impact beyond costs

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

ImpactRISK

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 interviewsConstruct financial model Write case study

Benefits(Impact on Business)

Costs(Impact on Budget)

Flexibility(Options)

Framework and Components

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Measuring the Business Impact of Your eCommerce Platform

Market Overview

Total Economic Impact Study: Purpose and Methodology

Key Findings from the Customer Interviews

Financial Model

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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

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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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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 annual 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.

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New eCommerce platform requirements and attributes

Scalability To meet growing online traffic volumes

Flexibility

Easy Integration

Rapid Deployment

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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Qualitative benefits of Magento Enterprise Editionexperienced by the interviewed merchants

Increased Scalability and Stability “Supports increases in average daily orders from 2,000

per day to 10,000 per day”1

Flexibility to Enable a Broad Range of Functional Requirements

Integration with 3rd party marketing providers Enablement of custom business processes

Increased Levels of Marketing Activities Allowed merchants to support more diverse and frequent

marketing tactics Major contributor to the overall revenue uplift

Rapid Time-to-market Deployment times of 6-9 months — Variations due

to project scope, resources used, scope changes

Low Total Cost of Ownership (TCO) 5.8 payback with 158% ROI over three years

SOURCE: Measuring the Business Impact of Your eCommerce Platform, July 2013; 2013 Forrester Research, Inc.

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Measuring the Business Impact of Your eCommerce Platform

Market Overview

Total Economic Impact Study: Purpose and Methodology

Key Findings from the Customer Interviews

Financial Model

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Interviewed five merchants with online revenues ranging from $10 million to $100 million

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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New eCommerce platform requirements and attributes

License fees

Professional Services

Internal Labor

Hosting Services

$98,206 for three production servers and one nonproduction server

$324,000 for initial deployment$537,150 for ongoing support

$476,732 for initial deployment, ongoing maintenance, upgrades to back-end systems

$337,632 for bandwidth, server hosting, load balancing, content delivery network (CDN), and a firewall

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3-year benefits included in the financial analysis

eCommerce uplift attributable to the Magento platform

Costs Avoided

$3,960,893 20% of total revenue uplift is attributed directly to the Magento platform

$147,719 for prior platform software license maintenance

$350,533 for prior platform maintenance and upgrades

$147,719 for software development when using pre-built extensions from Magento Connect

For composite merchant with $40m in annual online sales

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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

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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Thank You

Peter [email protected]

Michael [email protected]

forrester.com

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Magento Enterprise Edition eCommerce Platform and Ecosystem

Solution Partners

Hosting Partners

Industry Partners

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Contact us today to see how Magento can help you realize your eCommerce vision.

Schedule a thirty-minute personalized demo. 

We'll assess your needs and discuss how they can be met with the powerful capabilities of Magento Enterprise Edition.