The Quiet E-Commerce Renaissance
November 30, 2010 § 2 Comments
E-commerce has undergone dramatic change in the last two years. Zynga has cracked social gaming and virtual goods wide open, producing enormous transaction volume. Groupon has crushed local service group buying and created a multi-billion dollar cash machine. Gilt has pioneered invite-only branded high end flash sales. All three of these companies have pioneered new e-commerce models in a matter of months, have been locked in the tech news spotlight, and have spawned hordes of fast-followers trying to get in on the action.
However outside of the consumer spotlight, there are several companies that have been revolutionizing web based e-commerce tools available for businesses. Shopify, AvantLink, Shopatron, AdRoll, and FeeFighters are each dedicated to helping their customers sell more and sell better online. They don’t receive the public fanfare of their consumer facing brethren like Zynga, Groupon and Gilt, but all have offerings that create unique value and some are growing at a similarly furious pace.
Shopify, based in Ottawa, is a dead-simple yet very robust hosted do-it–yourself e-commerce platform. Largely bootstrapped, the Shopify application makes it incredibly easy for anyone to set up an e-commerce storefront. Whether you are selling car mustaches or golf cart rims Shopify can get it it done. Users have a broad range of controls over the look, feel and function of the stores they create. Inventory tracking is integrated and the Shopify application store has an ever increasing number of useful tools from 3rd party providers which can be integrated into any Shopify store. There are currently over 60 applications, including QuickBooks integrations, user review platforms, email marketing integration, and to drop ship service integrations. E-commerce platforms have been around for a long time but Shopify has made it easier than ever to get up and running. A notable difference from past customizable e-commerce platforms is thatShopify is fully hosted so merchants don’t have to worry about servers or databases. Shopify is also incredibly cheap. The entry level package is $25/month with a 2% transaction fee. Bigger packages scale down transaction fees and up on monthly fees. Shopify prices out drastically cheaper than unhosted competitors like Magento ($250/month unhosted) and Miva Merchant ($60/month unhosted). Centrally hosted, Shopify can move fast and update their platform at any time, allowing them to move forward more effectively than their installed competition. Shopify definitely a company to keep an eye on over the next couple of years. They are certainly very profitable today.
AvantLink, based in Park City UT, is a innovative affiliate marketing technology platform. I have been working in and around affiliate marketing for some time and firmly believe that affiliate marketing will be massively disrupted within the next five years. There is huge room for innovation in the space and AvantLink is leading the charge. Online stores use affiliate marketing platforms to track people that buy on their sites and pay commissions to affiliates that send them good traffic. Affiliate marketing platforms provide web stores with a platform to host their affiliate program and provide 3rd party cookie-based tracking technology that monitors site traffic and purchases. Merchants then allow publisher sites to join their affiliate program and pay affiliates a set percentage for converting traffic. As an example, you can see Liftopia’s affiliate program landing page on AvantLink here . I have worked with AvantLink on the merchant side with Liftopia and could not be happier with their tools or their service. I have also worked with AvantLink from the publisher side with GearBurger. In both cases have I not only incredibly happy with the tools and service AvantLink provides, I have also been shocked at how antiquated the incumbent players’ tools are. Simple tasks like creating links to merchants and getting inventory datafeeds are at times literally impossible with the larger players in the space like Commission Junction and Share-a-Sale. These affiliate incumbents are firmly entrenched, with large pools of merchants and publishers. They aren’t innovating much and are very difficult to work with. In the next five years, someone is going to come along and blow up the affiliate marketing status quo. Google has been making moves in the space recently but their tools and services are still not up to snuff. AvantLink spun out of Backcountry.com several years ago and has been moving fast ever since.
Shopatron, based in San Luis Obispo CA, helps manufactured product brands balance branded e-commerce sites and brick-and-mortar distribution. I have written about Shopatron in the past. Shopatron solves a unique problem for brands that want to sell their products to consumers directly on branded company sites while at the same time selling through brick-and-mortar distribution partners. A company like Smith Optics wants to sell sun glasses at Smith.com but also sell in sporting goods stores around the globe. Shopatron links distribution partners with the brand e-commerce site and gives resellers the opportunity to fulfill nearby orders placed on the brand site. This is not a problem that seems obvious to an outside observer but is truly a large one. Brands want to sell as much product as they can, capturing online traffic and maintain strong relationships with brick-and-mortar distribution. This is where Shopatron helps. Shopatron is growing like a weed, with a historical focus on the outdoor industry but recently branching into many different manufactured product verticals. Interestingly, Shopatron recently announced a partnership with AvantLink that will provide Shopatron powered brands with an AvantLink powered affiliate marketing platform.
AdRoll, based in San Francisco CA, helps merchants advertise to customers that visit their site but leave before making a purchase. This type of advertising, known as “retargeting” or “remarketing” is somewhat controversial and has privacy advocates up in a tizzy. Sites that retarget place cookies in user browsers upon arrival to their site. These cookies allow for ads to then be targeted at that user elsewhere on the web after they leave. If you have noticed that you consistently see banner ads from a couple of companies, you probably visited their site in the past and your are probably being retargeted with ads. I find this to actually be an enjoyable experience because these ads are from companies that I’m actually interested in and I’m happy to have those companies vying for my business. Given that only 2% of traffic to an average e-commerce makes a purchase, retargeting allows merchants to follow up with the 98% that leave without buying. Retargeting has been around for nearly 10 years but only recently did large ad networks like Google start allow for cookie based targeting within their display networks. This change swiftly brought retargeting mainstream and companies like AdRoll have been running with the ball ever since. AdRoll is unique in that it allows merchants to easily cookie all the site visitors and then target them in the most efficient manner possible. This is accomplished in two primary ways. First, merchants can use AdRoll to reach their customers across many different display ad networks like Google, OpenX, AdBrite and Yahoo simultaneously. This equates to more available pageviews and lower costs to the merchant. Second, AdRoll places cookies on merchant sites using a “smart pixel” which dynamically reads the URL of the page a user is visiting and places cookies accordingly. This is a must have for a merchant trying to grow multiple retargeting lists on many different pages. The alternative to AdRoll is hard coding multiple pixels into the bodies of specific pages: a hugely manual, error prone process that is difficult to modify, particularly for a bigger site. Disclaimer: I used to work at AdRoll.
FeeFighters, based in Chicago IL, helps merchants reduce the transaction costs associated with doing business online. FeeFighters is the youngest company of this group, launched only a few months ago, but they are tackling a huge problem. Negotiating the waters of transaction processing is a huge headache. I have written about this issue in the past. There are so many layers with so many different types of fees it is nearly impossible to determine the best course of action for your business. The FeeFighters platform allows merchants looking for transaction processing services to put their business up for bid, forcing transaction processors to fight for the business. I hope that FeeFighters will find a way to keep transaction processors honest and force them to disclose all elements of a bid as part of the process. The headaches I have gotten in the past when dealing with transaction processors is that there is not “one” rate that you will pay to process a transaction. Depending on the customer, merchant and card type, some transactions are “qualified”, some are “non-qualified”, some are high risk, etc. The fee that is often pitched is not the fee that you will end up paying. For FeeFighters to be effective they will need to find a way to force transaction processors into structured disclosures that are easy to compare against others. Transaction processors are very comfortable with paying on a CPA basis and pay fat fees for signups so a transaction processing comparison shopping site like FeeFighters could be a great way to capture these referral fees. I hope FeeFighters can pull this off but if they can’t I sure hope someone else can because it would eliminate a lot of headaches.
Who did I miss? Who else is shaking things up with innovative web commerce tools? Let me know in a comment!