Retailers buy into hosted applications

Retailers looking to execute quick, affordable IT upgrades turned to hosted software providers last year as they prepared for what turned out to be a stellar holiday season for online shopping.

In the last few weeks of the season, online shoppers responded to Web promotions in force, and the year ended well for online and multi-channel retailers, according to industry watchers. ComScore Networks reports online sales between November 1 and December 25 totaled $18.11 billion — up 25% over the 2004 holiday shopping period.

For the retailers, new technologies deployed in advance of the season helped them get the most from Web visits. In particular, many retailers went for hosted products to gain new or improved application functionality without committing to large upfront investments or complex implementations.

Salesforce.com with its hosted CRM products is one of the more recognizable players in the software-as-a-service market. But the on-demand model extends far beyond CRM. Adoption is occurring in many other IT marketplaces as well, including procurement, compliance management, document management, ERP and e-commerce, according the Gartner. The research firm predicts that by 2010, 30% of software revenue will be derived from software delivered via software-as-a-service models.

Among retailers, hosted site optimization and marketing products are a big draw.

Skechers last year chose a hosted search application, for example. The Manhattan Beach, Calif. shoe retailer uses technology from WebSideStory (gained in its May 2005 acquisition of Atomz) that lets visitors search for shoes, and then use sub-categories — such as size, color and price — to narrow down the results. Reporting features help Skechers monitor how well search results convert to transactions.

Part of the decision to go with WebSideStory had to do with time-to-market and reliability of the service, says Laura Christine, vice president of direct marketing and e-commerce at Skechers. “We’re not a search engine company, we’re a company that sells shoes,” Christine says. “It would have taken us a year to develop a product like this, and that doesn’t include optimizing or improving it along the way.”

Online shopping portal Ebates.com also chose a hosted application as it readied for the holiday rush. Ebates uses survey technology from WebSurveyor to poll online visitors and find out how they used the site and what types of promotions are most popular.

In the past, Ebates produced surveys on its own, but the tool it used was cumbersome and not flexible enough, says Markus Mullarkey, senior vice president of sales and marketing at the San Francisco company.

With WebSurveyor, Ebates no longer has to enlist technical staff or HTML programmers to produce a survey. Instead the marketing team can do it. “Putting together the survey questions and making the survey go live doesn’t take much longer than it would take you to write the survey in Microsoft Word,” Mullarkey says

Alienware depends on integration between two hosted IT applications to hone its marketing efforts. It’s one of the first companies to take advantage of a new partnership between Web analytics vendor Omniture and advertising technology provider DoubleClick that allows users to tie together click-stream data from a Web site and e-mail marketing data.

“It sounds simple and a no-brainer, but this relationship is the first of its kind,” says Bill Brown, director of e-commerce and demand generation at the Miami-based retailer, which makes PCs and accessories for gaming enthusiasts and other power users.

Integration between Omniture’s SiteCatalyst and DoubleClick’s DARTmail lets Alienware more quickly and easily measure the effectiveness of outbound e-mail campaigns, and then use the data to re-market or cross-sell customers.

For example, if visitors click on an embedded link in an e-mail promotion, Alienware can track the visits and find out if the campaign correspondence resulted in any product sales. In addition, if Web site visitors log in when they go to the shopping site, Alienware can follow up with those who don’t buy anything by sending a personalized e-mail promotion.

In past it took Alienware 36 hours to select recipients from among its lists of prospects and send a marketing promotion via e-mail. Plus maintaining the infrastructure to handle the mailing was a drain on Alienware’s IT staff.

“The technology in-house was getting very onerous to manage. We had to have a dedicated administrator just sitting on our e-mail server to keep it up and running, and it wasn’t really best-in-class software either,” Brown says.

Call handling

Hosted applications also made life easier on the call center side of retailers’ businesses this holiday season.

Catalog retailer Hammacher Schlemmer deployed a hosted service from Voxify that uses speech-recognition technology to automatically handle certain customer calls, such as those related to order status and catalog requests.

Because the software is hosted, the retailer didn’t have to invest in any on-premises hardware or complicated software development — a burden that goes hand-in-hand with many traditional interactive voice response (IVR) systems. “We just weren’t in a position to commit big-time IT resources to a project,” says Don Rogers, vice president of operations at the Fairfield, Ohio-based retailer.

In addition, Voxify only charges Hammacher Schlemmer for calls that get handled by the automated agents. The usage-based pricing model was an important draw, since so much of the retailer’s business occurs in November and December. “It’s really hard to justify big investments in technology because you need them for such a short period of time, and then they virtually sit idle,” Rogers says.

Brookstone, too, uses a hosted speech-based service to deal with the holiday rush of customer calls. It’s been using technology from TuVox for a couple of years to handle catalog requests, track order status and find store locations. In time for the 2005 holiday season, Brookstone upgraded its order-tracking options to allow customers to automatically obtain more detailed shipping information, such as the shipment’s status in the UPS supply chain.

Brookstone looked into a premises-based system before deciding to go with TuVox, says Greg Sweeney, general manager of direct business, Web and catalog at the Merrimack, N.H.-based retailer. “But it required some significant upfront expenditure. TuVox is more of a pay-per-performance model, which required less upfront expense,” Sweeney says.