Benchmarking the Costs of B2B eCommerce for an SAP IBM Websphere Shop

Written May 30th, 2013 by
Categories: CEO's Blog
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This post started when I saw a job solicitation for a Director of B2B eCommerce over at West Marine.  It’s actually a fantastic job description and I hope all of our clients, and prospective clients, study it carefully.  The responsibilities of this person are spot on:

“Responsible for the growth and visibility of portsupply.com sales through improvement of the customer experience, optimizing site operations, project management, setting a robust marketing/promotion calendar and adding key site functionality.  Will develop an aggressive yet attainable business plan, annual budget and set the goals and KPI’s for portsupply.com and its supporting team. This position reports to the Vice President of eCommerce with a strong dotted line to the SVP of Port Supply.”

This person is being asked to be the perfect blend between sales, marketing, operations, finance and technology, with skills in process improvement and project management.   They will have Senior Executive Sponsorship for their efforts.  My initial reaction is that none of our clients has a single person that looks like this…and in fact, I’m not sure I’ve met too many people that fit the bill in the 15+ years I’ve been building B2B ecommerce websites for SAP Manufacturers and Distributors.  But it would be great if people like this existed (we’ve got a few at b2b2dot0 :-))

Then I decided to dig a little deeper.  I wanted to know who this enlightened company, West Marine, was and what their eCommerce story was.

First question was…is West Marine an SAP customer? A quick google search confirmed that they were since SAP invited one of their Execs to speak at their SAP for Retail conference SAPforRetail2013Agenda earlier this year.  I then wondered who built their website.  Looking at their urls told me that they were an IBM Websphere client.

Then my curiosity really got the better of me, because West Marine is in our target market and by all accounts should be a client of ours…even though we’ve never heard of them and I’m certain they’ve never heard of us.  But that doesn’t prevent me from fantasizing…I mean, doing market research.

Then I hit the jackpot.  West Marine is in the unfortunate position (from a reporting perspective) of being a public company.  Their books are open for inspection and I inspected…at least I read their 2012 Annual Report.  Here is what I learned:

  1. They grossed $675M of revenue in 2012
  2. 90% of their revenue came from their company owned Retail locations
  3. 10% of their revenue, $68M, came from their eCommerce websites with 6% ($40.5M) from their B2C website and 4% (or $27.5M) from their dedicated B2B website (portsupply.com).
  4. They spent $3.2M in information technology and infrastructure for their eCommerce website.  That’s 4.7% of eCommerce revenue spent on technology and infrastructure.

Holy Moly!  Go IBM!  Way to set the high water mark for investments required to operate an eCommerce infrastructure!  And I don’t even think that there are any personnel costs in that $3.2M number.

By contrast, if you take a look at our entire client base in 2012, they processed over $1B of revenue.

Collectively, they spent a little over $1M with us…in TOTAL.  For all of our clients.  To process $1B worth of revenue!

That’s 14X the revenue that West Marine processed for less than a third of the cash outlay.  That’s a spread of 44X the value!

Why would anyone pay a multiple of 44X what a comparable and proven solution could cost you?

  • I guess because no one ever gets fired for buying from IBM?
  • Or…when you’ve got over $100M in the bank to cover your mistakes, you don’t have to be too careful with your money?
  • The analysts that you pay a lot of money to will only recommend the suppliers that buy consulting services from the analysts?
  • You have a large in house technology staff that likes to secure their jobs by buying complicated technology that only they can understand and support and can make careers out of when they leave you?
  • eCommerce is a strategic buzzword in your organization but you don’t really feel any pressure to get anything into production quickly.
  • You didn’t know the solution existed when you set your technology decision?

I can’t fix the first five reasons why organizations like West Marine overspend.

I’m working real hard to let people know that they have an alternative to the big investment, big project, long timeframe offerings in the market.

Sam

P.S. – Their new CEO issued this financial guidance in West Marine’s Q1 2013 Results call:

As a result of the lower than expected sales results in the first quarter, we are lowering our previously-issued earnings guidance for fiscal year 2013. We now expect pre-tax income in a range of $24.0 million to $27.0 million, approximately $1.5 million lower than our previously-communicated pre-tax income guidance.”

Maybe they could have benefited after all from saving money on their eCommerce expenditures? :-).