Commerce Services Start to Take Hold

Hosted commerce services make a lot of sense for companies that have not developed online retailing as a core competency. These automated service provider (ASP) services offer a very attractive solution for companies that are just entering the realm of online selling or that view e-commerce as only a complementary aspect of their business.

Consider for a moment the amount of resources needed to start selling online. First, you need a support organization. Second, you need to figure out the fulfillment process. Third, you need to contract or build your own e-commerce infrastructure. Finally, you need to address internal issues related to credit authentication and payment. It doesn’t take much to determine that outsourcing your e-commerce operations might make sense if e-commerce is not a primary revenue stream. Here are a few factors to consider.

Commerce Service Providers to the Rescue

If your company is looking to extend its sales channel online or if your costs of managing an online sales channel exceed the revenue it brings in, you might want to consider outsourcing your e-commerce operations through a commerce service provider, or CSP.

CSPs offer a variety of services that are geared to lowering the capital investment needed to support an e-commerce operation. In exchange for a monthly fee or service charges, CSPs will host an e-commerce system, manage its maintenance, provide customer support, oversee fulfillment, and settle payments. From a cash-management perspective, CSPs can offer a sensible alternative to building your own infrastructure from the ground up.

Now the downside to many CSPs is that functionality delivered through these “outsourced” electronic sales channels is slightly below the capabilities of a custom-developed storefront. However, many CSPs have come a long way and now deliver advanced commerce technology, such as personalization and dynamic content management.

Criteria for CSP Services

As with all services, performance can vary widely among vendors. Here are some criteria you should consider when evaluating CSP services:

  • Technical infrastructure — do they use contemporary commerce technology in the areas of content management, merchandising, or personalization?

  • Strength of service partnerships — many of these companies rely upon third-party logistics companies, call-center management groups, electronic-settlement companies, and security firms to handle the details of their service. Understanding a CSP’s partnership network is as important as evaluating its core services.
  • Case studies — evaluating case studies relevant to your industry can be the best way learn about the quality of a CSP service.
  • Client services — some companies may want to sacrifice some functionality and support in exchange for partnering with a company that will consult or walk them through an implementation. A collaborative partnership may offset any shortcomings in functionality.

Choosing a CSP Vendor

If you are seriously considering contracting a CSP, the selection process can be daunting. With the growing demand for hosted e-commerce solutions, the number of new entrants into the market is growing rapidly. Here is how I stratify the vendors:

    Network affiliates. Companies like Affinia and Pop2it aggregate, host, and categorize affiliate programs from a network of large online retailers. In turn, they provide companies with a hosted environment to create and tailor an affiliate channel that targets a company’s customer needs.

    CSP originators. This category represents the largest number of companies in the CSP market. Companies like vCommerce, Escalate, Vitessa, Iconomy, and iVendor provide hosted e-commerce infrastructures for midsized and large organizations. Born and raised around e-commerce, these vendors specialize in developing robust storefronts for their clients.

    Supply-chain experts. Many third-party logistics companies or catalog-warehousing specialists are extending their services into the e-commerce realm. Companies like Fingerhut Business Services or Modus Media specialize in many of the support operations related to online selling, such as call-center support, shipping, and settlement.

    New Age CSPs. If your company is looking for industry expertise, e-commerce technology, and solid back-office support, you may want to evaluate new-breed CSPs that focus on supporting specific industries or merchandise. Digital River has proven very beneficial for manufacturers in the consumer packaged goods industry. Aquaduct has a nice track record hosting e-commerce channels for high-technology companies. And ReleaseNow focuses on hosting e-commerce infrastructures for software or digital asset sales.

More Information on CSPs

Contracting a CSP can be a complicated process. Depending on your business, you may require the support of a systems integrator to automate processes. In addition, some of your resources may need to be trained in the area of content management or personalization. Either way, these investments may pay greater dividends to your company if you are looking for a fiscally responsible way to create an online sales channel.

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