Hi everyone. I'm Rohit Garewal, CEO of Object Edge. And today we're gonna answer the question that everybody wants to ask but is a little worried about asking. How much does an eCommerce implementation cost?
Now, while I'm going be focused on eCommerce for some of the larger businesses. Say, companies doing about $300 million on up in revenue. There's gonna be something in here for everyone.
In fact, to get all the info in I'm going to be breaking this up into two videos.
In the first, we're going to look at all the main factors that impact the cost of an eCommerce implementation. And then what you should expect to be paying for it for consumer sites, mid-market sites, mid-tier sites, and enterprises.
In the second video, we're gonna dive a little bit deeper into the hidden costs of eCommerce implementations and what it actually takes to maintain a site so that you can see a return on your investment.
All right, let's go!
How Much Does an eCommerce Implementation Cost?
What are the hidden costs of implementing an eCommerce solution, and once you're live, how can you optimize your spend?
Transcript, Part 1:
All right, so what are the actual factors that affect an eCommerce implementation?
Now look, there could be lots, but let's focus on some of the big ones.
Number one, it's gonna be your licensing cost.
You're gonna pick a platform and you gonna have to pay that platform provider or that software provider some sort of licensing fee.
The next thing you're gonna have to decide is are you gonna spend money on a custom design and customizing the user experience? Or are you gonna use some of the out-of-the-box templates or out-of-the-box widgets that the platform's gonna provide you?
How many integrations are you gonna have to go through?
And what kind of payment gateway and security measures are gonna be taking?
That's really the high level.
Those are the big things that are gonna impact your eCommerce implementation.
Now obviously what kind of solution provider or partner you choose, your system integrator is gonna make a difference, how much experience they're gonna be bringing.
There are gonna also be costs after you go live.
You're gonna have to register your domain name. You're gonna have to host the software potentially. You're gonna have to do your marketing and SEO efforts to drive traffic.
There's gonna be ongoing maintenance, support, but those things come after the implementation.
Let's focus on those first three I spoke about, those first four that I spoke about, and really talk about what it takes then to implement an eCommerce solution.
So the first thing you're gonna do is choose a platform.
There's the big ones out there, there's Shopify, there's Salesforce Commerce Cloud, there's Magento, there's WooCommerce, there's a whole bunch out there. You're gonna have to pick a platform. Now this video's not gonna be about how to pick a platform. We can go into that a little bit later.
But let's say you picked your platform.
The first big decision you're gonna make when you pick a platform is how customized do you want your eCommerce experience?
Now, a lot of times what people think about eCommerce experience, you guys are thinking about the design. What does my website look like? Actually, that's the cheaper part of actually customizing your website.
Here's how I want you to think about it. Every website has an out of the box user experience. Every website or every platform has an out-of-the-box set of features.
What we often confuse is what does an out-of-the-box feature mean versus what an out-of-the-box experience means.
So for example, every single platform that I've mentioned today is gonna have a login, is gonna have a forgot password flow, is gonna have a checkout flow, it's gonna have search.
When your business users, or when your business is saying, hey, I want my checkout to look a certain way. I want it to offer a specific type of experience. It's usually a combination of functionality and features and the actual user experience.
The more customized and the more unique this becomes for your brand, the more expensive it's going to be. So your website design and customizations are gonna be one of your first major expenses.
When you're there, you're looking at anywhere from $25,000 all the way up to $500,000 to a million dollars to do a full user experience design and study.
That includes user research, designs, often can be over a six month project.
Or you can just use the out of the box, which oftentimes can cost you as little as $25,000 because you're just gonna make small tweaks. Some CSS to get your colors on there and you're gonna use your out-of-the box template.
Now, which one's right for you?
You know, that's a very personal question for your business. I'm always a big believer in start with the simplest, out of the box that you can.
Understand where your clients are getting impacted the most, understand what your clients are asking for more, and then spend the money to really optimize that experience.
So website design and customization, there's a whole range of things that you could be doing. Cost you anywhere from $25,000 all the way up to a million dollars and always remember that you have to think about the differences between functionality and user experience design.
Those are two different things, but they often get confused.
Alright, the next big cost that often keeps our clients awake at night is integrations.
You've gotta integrate some really basic concepts and really what we call basic objects or basic business entities into your eCommerce website.
I'm gonna name some of 'em off. You gotta your get your product in there, right? You gotta get all your inventory in there. You got your pricing in there, you've gotta get your promotions in there, you've gotta get your customers in there, you've gotta get your orders out of there.
All these things and more have to get integrated with your eCommerce solution.
Now, what does an integration actually mean?
In the simplest sense, we've gotta get data from one of your core systems into your eCommerce, and we've gotta get data out of your eCommerce into your core systems. That's all it means.
Now, you could do that as a one time load. You could upload all your customer data, all your product data, all your pricing data, all your inventory, everything as a one time load, as a CSV. This is obviously the cheapest way to do it.
Oftentimes what your partner will say is, hey, why don't you just get me everything, in an Excel file or a CSV, a comma separated file, and I will go ahead and upload that into let's say Salesforce Commerce Cloud for you. And then all of a sudden all your data is there.
What's the problem there?
Obviously the data is static, it's never changing.
Your business, especially if you're a larger, $300 million plus business is always changing. Your inventory, your pricing, what products you're offering, the content for your products is always changing.
So what they wanna often do is have an integration between a source system and a target system. And when we say source system, it could be a lot of systems but we always recommend creating the right architecture so that you have the right system of record.
So when you're looking at integrating, now you're talking about a different level of cost. And integration costs are some of the hardest ones to define because it's really the biggest cost in integrating between let's say your ERP, and your new system, let's say Salesforce Commerce Cloud, is gonna be how clean is your data, and what type of experience do you wanna provide downstream?
Now, in a general rule of thumb, I would, if your data is relatively clean and you're doing a relatively simple website implementation where you're, one in automated integration with all your catalog data, customer data, order data, pricing data, but your data is not very complex.
You could probably get by with an integration cost of somewhere between $50,000 to $150,000.
The major chunk of this is time and having the right integration architecture you're gonna have to have schedulers, i.e. when is my pricing data gonna get updated? Is it gonna get updated in real time?
So if your ERP updates, are you gonna instantly push that data to your system? Probably not, that could be quite expensive from a performance standpoint. Most likely you're gonna have this on a schedule, maybe every night, or twice a day or four times a day.
Again, work with your system integrator to figure out what's right for you.
That integration architecture, getting that all set up is what really takes time. And then setting up the definitions between what are your source elements. i.e. you might call price PRC, and your target system might call it PRICE.
So you've gotta do that source to data mapping but then you also might have business rules that if my price is this way, then you need to do this. If my price is that way, you need to do that.
Those business rules need to get understood.
So the biggest cost in integrations is:
- Is your data clean and
- Doing the source to target or the target to source mappings and making sure that all the business rules on the data mappings are understood.
The actual implementation of the integration is probably 30% of the cost.
So again, for a simple implementation you're looking at anywhere from $50,000 to $150,000, for more complex implementations, it could go way up.
And again, if your data's not clean you might actually have a master data, a master data project on your hands before you actually have an eCommerce implementation on your hands.
- Payment gateways and security
And then finally your payment gateways and security measures.
Thankfully, nowadays there's a lot of this stuff that comes out of the box. If you buy a lot of the more enterprise-grade platforms they'll have a lot of security measures already implemented because they'll own the hardware that's hosting, they'll have all of the security protocols necessary to make sure that your data is secure in their servers.
And then your payment gateways are typically charging you anywhere from 2% to 4% or maybe 2.5% to 4% of your order total to process an order.
Now if you're a B2B organization and you're often gonna be implementing things like punch out or you're gonna be accepting payment terms, like net-30, net-60, net-90, obviously those costs are directly dependent on what your processing firms are charging you.
But typically rule of thumb for your payment gateways and security measures, anticipate anywhere from 3% to 4% of your order totals to have that going.
So what have we got?
You got your platform selection costs, you got your website design and customization costs, you've got your integration with existing systems costs, and you got your payment gateways.
The bottom line
Now platform selection is obviously one price that's gonna vary by platform.
Your website design and customization anywhere from $25,000 up to a million dollars.
Your integration with your existing systems anywhere from $50,000 to $150,000, your payment gateway costs are anywhere between 3% to 4%.
And then when you add this all together with the cost of actually bringing in your system integrator do this work.
Here's how I'd break it down.
For your do-it-yourself platforms. If you're launching a Shopify basic site or a WooCommerce site and you're building a relatively nice site, that Shopify has a lot of great out of the box templates, I think you should be able to get by with anywhere from $5,000 to $25,000 for Shopify Basic.
Now mid-tier platforms, Shopify Advanced, BigCommerce, I think you're looking at anywhere in that $50,000-$150,000.
Now, enterprise level platforms like Salesforce Commerce Cloud, Magento, where you're looking to really drive serious revenue from your eCommerce site, flexibility, performance, complex pricing, complex configurations, you're a manufacturer/distributor that's looking to support your distributors or support your end business buyers, you're probably looking somewhere around $300,000 to $500,000 to do an implementation.
And this should get you everything. This should get you your website design and customization, but more on the out of the box side.
You should be able to do all your integrations to all your core source to target systems. And those should be automated integrations with proper security implementation of a middleware platform like MuleSoft, so that you can manage those integrations.
You should have your payment gateway all set up, and then all your content, all your imagery, everything should be set up from soup to nuts.
That includes requirement capture, it includes all the design work, it includes the implementation and includes testing.
So for an enterprise-level platform, somewhere in that $300,000-$500,000 range. Now of course we've done implementations that we've seen have cost our clients north of 5, 7, 8, 9, 10, 12, 15.
We've seen projects run into 50 million. We've never done one of those, but there are some really, really large implementations that take a lot of different things into account.
It could go up there, but if you are a company, again, $300 million and up in revenue that's looking to launch an enterprise class platform, $300,000-$500,000 should give you a fantastic opening experience on say something like Salesforce Commerce Cloud, something that you could really be proud of, something that'll form the foundation.
But again, your goal is to generate a return on investment and you should be looking at, hey, what are the challenges that this implementation is going to solve for me?
Is it gonna make my sales reps' lives easier?
Is it gonna make my buyer's lives easier?
What are they gonna be able to do? And what are the results that that's gonna get you? So if you're gonna be spending $300,000-$500,000 on implementation, I'm looking for at least a 10x return on investment.
If your partner cannot show you how that's gonna generate $3 to $5 million to your bottom line over the course of the next 12 to 36 months, there's something wrong.
If you're gonna spend that much money, you should be able to level up the $3 million to $5 million added to your bottom line and definitely make that worth your time and worth your investment and worthwhile the money that you're putting into the experience of launching that platform.
Alright, so we've gone over the factors affecting eCommerce, we've gone over the cost ranges for different eCommerce solutions from consumer basic sites, to mid-tier platforms, enterprise platforms, and we've gone over what we think are the right things to look into when you're looking to generate a return on investment.
In the next video, we'll look at the hidden costs, why do projects 70% of the time go over budget?
We'll also be looking at tips to optimize eCommerce implementation costs once you've gone live in maintenance and support.
Again, thank you.
This is Rohit Garewal with another video on answering your questions around digital transformation, and if you have any questions leave a comment below and we'll be happy to see if we can make a video to answer those questions directly for you.
Transcript, Part 2:
Now, last week, what we talked about was implementing a new eCommerce solution. And we talked about what it takes to implement for a medium-sized business, a small business and a large business and enterprise.
Today, what I wanted to talk about is really what happens after you go live.
Now, before we go into that, in case you missed it last time, everything I talk about today is really kind of premised on this foundation and I think we have to align on that foundation in order for any of this to really resonate.
And that is this belief that a technology implementation is really a solution. It's not the problem in and of itself.
So, I think what we always need to keep in mind is this basic philosophy in terms of where I'm coming from when I'm talking about these costs, because your costs are gonna be driven in terms of what you're looking to do.
And that is this, is that ultimately, you've got a business problem, and you've got what happens when you solve that problem is some results.
Business problem, solve the problem, get results.
The implementation of an eCommerce solution is there to solve very, very specific business problems or business desires.
So, I'll give you an example like what we talked about last time. Ultimately, you might have a corporate level initiative:
- I need to increase my conversion rates by 20%.
- I need to boost my top line revenue.
- I need to cut costs, whatever that might be.
And then, ultimately, in order to execute that, to boost conversion, you're gonna be looking for where are the friction points between your sellers and buyers in B2B.
And you're gonna try to introduce digital experiences potentially to help solve those problems and make less friction between your buyers and sellers.
When you do that, you're solving a problem and you're expecting some sort of return.
And so, your investment is in the solution.
So, every time after you've gone live now with your site, what you really wanna be looking to do is what are the very specific problems I'm trying to solve and what do I think I'm gonna get when I solve those problems?
So, we'll break this into just two high level parts.
One, the hidden cost of implementing an eCommerce solution.
And two, once you're live, how can you optimize? How can you optimize your spend? And for me, optimizing spend doesn't mean how do I spend less. Optimizing my spend is how do I get the most for every dollar I spend - How do I maximize my ROI?
All right, so let's jump right into it.
The Hidden Costs
- Subscription costs
So, hidden costs to watch out for are, and this is now on the more consumer-grade platforms like Shopify, is understanding what your app and plugin subscription costs are.
So, understanding if you're doing a revenue share, what that's gonna be if you scale, if you're trying to add applications or try to add plugins, what are the prices of those?
So, a lot of times, when you go into a product discovery, you're gonna see a lot of "gee-whiz" features, maybe some chat agents and whatnot. And most of the time, those aren't included in your actual software subscription costs.
You're gonna have to pay extra for the app and plug in. Now, usually, those aren't too overly cumbersome, but it is a cost to watch out for.
- Transaction and payment processing fees
The other piece is again, more on the consumer side sites, transaction fees and payment processing fees.
Now, everyone's gonna have to do this if you're collecting a credit card, but if you haven't traditionally done a credit card business, if you've been more of a purchase order and a Net 30, Net 60, Net 90 payment business, this might be something new for you.
So, you have to factor that into your gross margins and your net margins.
- Experience and customizations
Then, what we really get into the hidden cost of eCommerce is this concept that we discussed last time, and it impacts your implementation, but it also impacts after implementation. This concept between functionally out-of-the-box and experience out-of-the-box.
And the example we gave last time was you can have a checkout out-of-the-box.
So, if you were to do a platform discovery, you'll say, hey, do you have a checkout? And most every platform will have an out-of-the-box checkout functionality, whatever that might mean.
And it'll also have an out-of-the-box checkout experience.
However, you might not like the out-of-the-box checkout experience.
So, yes, there'll be a payment button. Yes, there'll be a checkout flow. Yes, there'll be the possibilities to add or remove from cart, but you might not like the way that the experience happens.
You might want a multi-screen experience, you might want a single screen experience.
And you're gonna have to most likely, pay on the design side to actually design the right user experience and the right user interfaces, and then customize your platform in order to get there.
And that gets me to the next hidden cost is every time you deviate from what's called the out-of-the-box experience and the out-of-the-box functionality, you're adding to the long-term maintenance costs of your platform.
And this is not necessarily a bad thing. It is just what it is. You are taking a piece of clay and molding it.
Now, some platforms already have a pre-made mold for you.
And if you're happy with that mold, if it does what you need it to do, which I hope actually most of the time, it does, then your standup costs are gonna be lower.
And the more and more that you can leverage those out-of-the-box functions, the more cost-effective your solution's gonna be.
Therefore, maximizing your ROI. The more that you have to customize, because there's something that you think you need, the more you should be aware that it's gonna increase your long-term costs and obviously the implementation costs.
And then, finally, and this is a good thing again, scalability costs more as you grow your business.
So, depending on your licensing structure, you might be paying by order, you might be paying on revenue, you might be paying on the number of server nodes, whatever it is.
The more volume and traffic that you put onto a platform, the more that you're gonna have to pay for it.
So, just factor that into your long-term cost analysis that as you grow your revenues, up to a certain point, beyond that point, you're also gonna be growing your cost, not at a linear level ideally, but it is still a scalability of cost.
So, app and plugin subscriptions, transaction fees and processing, design and customization experiences to make the functionality, the experiences that you want. And then, the additional cost of scalability.
How to optimize spend and increase ROI
So, what can you do to optimize those costs? And again, not drive the cost down fundamentally, but how do you maximize your return on the investments that you're making?
Well, number one is I think, you should start with a minimal viable product.
And I know that goes back to the implementation side, but oftentimes in B2B, we are introducing digital experiences to remove friction points between sellers and buyers in analog experiences.
And we're all taking a guess in terms of what that digital experience needs to be.
So, for example, your customers might be coming to you and saying, hey, I would love to get my quotes within 30 minutes. And your sales reps are saying, well, I can't, because it takes me three days to get the right pricing, because of all these things that I have to do.
And in the back end, technology is saying, well, of course it takes three days, because we've got all these complex rules in our ERP, et cetera, et cetera, et cetera.
So, at the end of the day, whatever the legitimate reasons are, the customers are saying, or the buyers are saying, hey, I'd love to get a quote within 30 minutes. And your guys are saying, well, it's gonna take me three days.
I'm just giving an example.
So, what's going on there? We will then say, what does better look like?
What we wanna do is we wanted to be able to deliver quotes within 30 minutes.
Now, what does that experience in itself look like? Well, now, you're taking a guess.
So, rather than spending a whole bunch of money in customizing the experience of what a quote looks like, leverage the out-of-the-box flows of your solution that should have a quoting flow and say, hey, this is an MVP. Try this out. What do you think?
And you're gonna think it's ugly. You're gonna think that it's not what you want and it's probably yes and yes. It might not be too pretty and it might not be what you want, but so what? It's better than what you had.
And fundamentally, you're doing a trial with your customers and saying, hey, before, it used to take you three days to get a quote. Now, it's gonna take you three hours. That's a big improvement from three days. What do you think? How can we improve?
Make them a part of your journey.
So, start with the minimal viable product, leveraging as many out-of-the-box features and experience as possible. Then, heavily prioritize your next essential features.
And this is where product planning comes in. You can almost think of your eCommerce channel as a product now.
And what you're doing is you're taking your user feedback and you're saying, hey, I wanna optimize and prioritize my essential features.
How do you prioritize? It's not because of the loudest yellers, it's what's gonna drive you with the most return on that investment.
So, if your smallest customer, that's the biggest pain in the butt, keeps on telling you that I need feature X and that's gonna cost you $50,000, but your biggest customer is asking for feature Y and it's gonna cost you $10,000, you're gonna do feature Y.
Don't worry about just the loudest customer complaining. Do what's gonna drive the most revenue for you.
Leverage existing work and assests
Then, leverage any existing assets that you might have.
So, when you're launching your MVP, for example, try not to pay for a whole redesign upfront.
Try to leverage your existing style sheets, your existing style guidelines.
A good partner will be able to incorporate those into an “out-of-the-box experience" for a really, really minimal fee.
When you're investing in your platform, make sure that you understand what it is that you think you're gonna want to get to and that your platform is scalable to get you there.
So, we talked about how scalability is actually a cost, but scalability is a cost and it's not linear with your revenue, because ultimately, as your cost grows on scalability, your revenue should be doing this.
It's a linear growth and scalability cost, but a hyperbolic growth in revenue achieved.
And so, what you don't want to have happen is that you pick a platform that isn't able to scale to where you want.
And kind of on a technical note, don't build all your features and work around your platform to get to the features that you want.
In this day and age, if you are a typical B2B organization doing between $300 million to let's say $5 billion in revenue, you don't need to heavily customize any solution.
Even if you might say, I've got really complex product sets or I've got really complex flows.
Today's platforms like Salesforce [Commerce Cloud], they're able to handle those flows, leveraging not heavily custom code, but leveraging the configurations.
And I'm not saying nothing is customizable, and yes, configuring the platform takes time and money, but try to not customize the platforms as much as possible upfront.
You're gonna have to customize down the road most likely, but upfront, don't heavily customize.
And then, my last piece of advice in optimizing your eCommerce cost is measure.
There's an age old adage that you can't manage what you can't measure. And it's an adage, because it's true.
Too many times, people will go with an out-of-the-box Google Analytics implementation and they'll just put in a Google tag and they'll say, okay, let me see what I get.
That's not nearly enough to be able to understand where your customers need your help.
There are now solutions out there where you can actually legally, leveraging clickstream data, build a map of where people are clicking all over your site, so you can understand where people are confused.
You can understand what pages are loading slow and which ones aren't.
You can collect feedback on the site.
You can do so much more stuff than just look at Google Analytics reports.
And that small investment upfront will lead to a large ROI down the road, because it'll give you a lot more data to manage your solution and to measure your solution in which then you can manage your solution.
So, tips to optimize implementation costs: Start with the MVP.
No matter how much pushback you get, it's so critical that you don't overspend on your initial release, because you're gonna have to redo a lot of stuff.
Prioritize essential releases based on ROI and ideally, which customers and your best customers are getting impacted.
Leverage existing assets were possible.
A good partner should be able to integrate your brand assets to make your out-of-the-box experience look like yours, your brand.
And this in a scalable platform, you don't wanna have to reimplement, because you invested in a platform that was cheap upfront, but then once you hit a certain level of scale, can no longer scale, and it's taking 10 minutes to load a page.
And you wanna be able to, you wanna invest in your monitoring upfront, so that you can measure what's going on. And then, that way, you can manage.
I’ll leave you with one other thing.
Four areas in which to plan your investment
When you're going to be spending on maintaining your platform, you should break your spend up into four concepts.
The four concepts that, the four areas that you wanna plan your investment on is of course support.
And it's really meaningful here that the people that are gonna be doing your innovation, the people that are gonna be doing your support are gonna be fundamentally different people. And that's just a function of the market.
- Support and maintenance
Your cost to support your platform are gonna be lower than your cost to enhance and modernize your platform.
So, have a bucket of spend reserve for providing support, eight by five, seven by five, seven by eight, 24 by 7, whatever you might need.
Just plan for that you're gonna have to have a budget for supporting your platform.
And that is gonna be developers who are generally newer, lower cost of ownership.
If you're looking at offshore rates, you're looking at that $40 to $45 an hour. If you're on something like a Salesforce Commerce Cloud or a commercetools or a Magento, if you're looking nearshore, you wanna be in that $75 to $85 an hour range and onshore kind of ranges $125 to $175.
Then, you're gonna have your enhancements bucket of work. Enhancements are gonna require architecture. They're gonna require some sort of project management. That's gonna be your next tier developer. And depending on how complex your enhancements are gonna be, you're gonna want an architect on there as well.
Development prices there, offshore in a hot market like Salesforce, you're looking at $50 to $55 bucks an hour, maybe $85 to $100 bucks an hour in nearshore and anywhere from $150 to $250 onshore.
- Measurement and analytics
The third bucket of area that you wanna invest in, and you might have this in-house, is the ability to read your data well.
So, having someone new that's never looked at a Google Analytics report or the right tagging of a Google Analytics report or a Tableau report and trying to just guess is a big waste of money.
Now, if you want to, if you don't have anyone in-house, get a partner that has the ability to do that work and then pair them with somebody internally.
Someone just needs to be taught what data to look for.
So, when you get a partner, make sure that you put one of your own internal people on there, so that they can learn and understand how to read eCommerce data.
And the fourth place that you wanna invest is an internal expense, is invest in your stakeholders to be committed to the platform, so that they can understand and give you the time to understand what are the next quarter's releases.
So, there's four layers of cost here.
Support, enhancements, analytics, and the ability to read your data. And then, finally, the internal stakeholders that can help decide and define based on priorities.
And they have to donate their time now to really define what are the next quarter's worth of releases.
All right, so with that, thanks guys for listening.
Really appreciate it. If you have any other questions, just drop us, comment below.
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