From "Brick and Mortar" to the Web: Making e-commerce Work for You

Taos Professional Services Team

Many conventional “brick and mortar” businesses have found themselves entering the e-commerce world either proactively, to gain a leg up on their competition, or reactively, to avoid losing out to their competition. Regardless of motivation, there is far more to becoming an “etailer” than creating a website with a shopping interface. The planning process for introducing an online sales presence needs to include everything from understanding the potential business opportunity and developing an online marketing strategy, to understanding the online strategy of both your conventional and dotcom competition, to evaluating and converging the desires & perspectives of various internal business units, to scoping and scaling the electronic infrastructure to support expected online transactions, to developing an appropriate order fulfillment infrastructure, customer support channel, and an effective alternative to legacy salesperson assistance.

Taos has been involved in a number of projects over the years in which the client wants to expand and enhance their business by entering the online commerce world. Our involvement is primarily on the technical and project management side, as opposed to the business side. In this article I’d like to expand on some of the issues involved, and to offer two Case Studies which should give you some feeling as to what’s actually involved in real-world efforts to develop an effective e-commerce ability.

Last year, over $60 Billion was spent in B2C (business to consumer) electronic commerce¹, and for many conventional businesses “online” is no longer just another marketing channel: customers demand and expect to be able to access your offerings online. Just saying no is no longer an option. The flip side is that once online the universe of potential customers is multiplied, potentially to the whole world without opening any more storefronts or signing up any local distributors. Every industry is unique, but in each there will be winners and there will be losers, and the intelligence with which one goes about developing an online presence is going to be key to determining which of those your business becomes.

This article covers some of the business and technical issues need to take into account when planning an e-commerce site.

Business Issues

One of the most powerful business benefits to e-commerce is that websites are available to any consumer anywhere on the Internet. The only limiting factors are ensuring that people can find you and your website infrastructure’s capacity limitations. That means that increasing revenues through e-commerce sales becomes dependent upon marketing and customer mindshare rather than expensive capital investment in “brick and mortar” stores.

The first step to determining whether an e-commerce site is right for your business is to develop a cost model. Cost models for business fulfillment depend on the business type. In some cases businesses find it less expensive to have one e-commerce website than having a network of physical stores. A great example of this are companies that can deliver their product electronically (music, software, etc.). Other businesses find that the additional cost of shipping items in small quantities or law around shipment of items overwhelms e-commerce’s business advantages. An example of companies where the cost model and ROI must be examined closely are companies selling federally regulated products such as alcohol or products with low margins such as computer peripherals. In these cases the delivery model must be examined in detail so that an accurate ROI can be developed. Planning for things like how inventory is managed and shipped become critical and can make the difference between profit and loss.

Once you have determined the cost model you will have an idea of some of the key information that you will want to capture and track. Examples of this information can be business data such as the number of orders, gross dollars, number of products sold, and estimated margin. It can include web data such as the number of hits, page views, visitors, and new account signups. There is system information that is important to track for capacity planning, such as load and performance. This type of data will help business managers to understand and measure the performance of the website in both business and technical terms.

Because this data drives the strategic e-commerce direction for a company it becomes critical that the data is available, preferably real-time, to management and staff. Each data type comes from a different source depending on how the e-commerce infrastructure is architected. Nowadays, there are many software packages available that can use integrated interfaces to share real-time data and allow management to run reports and compare behavior across several different sets of data and the same time.

e-commerce User Interface Issues

Companies considering creating a new e-commerce site for their business often have little web interface design experience. While individual executives may have lots of experience using websites, this does not make one a designer. We all live in houses, but we aren’t all architects.

There are two main aspects of user interface design for websites. The first is the logical design of the site layout. We’ve included some of the topics to consider below:

• What is on what page?
• How do the pages link together?
• How many clicks does it take a user to look up, and then buy a product?
• How will we track user’s information?

The second aspect is the detailed design and layout of each page. This is the most time consuming part of the design and what seems like minor decisions can have major impact. Some examples are:

• How should we layout the components on the page?
• What should the default selections be in the pull down menus?
• What color palette do we use and where do we need to consider color blindness or black and white monitors?
• What common navigation and information is available on all pages?

Each of these aspects requires a specialized skill. Logical design is the specialty of an Information Architect. The detail interface design is the specialty of a User Interface Designer.

Before designing the user interface, requirements must be defined. The company must figure out what features and capabilities they want the website to have. This can include such things as:

• Selling product
• Interfacing with other applications and organizations such as customer service, inventory management, and shipping
• Looking up product data
• Looking up corporate background and press information
• Providing self-help
• Storing customer information

Once the requirements are defined, Information Architects can start laying out the logical structure and User Interface Designers can start to design the pages.

One additional key factor in the user interface design is how involved a company’s executives and staff want to be or need to be in the design of the website. In some cases, the company may simply choose to have a web development vendor do the work with only moderate supervision and review and approval of layout and graphics. This would be called “low touch” website development. In other cases, a company and its staff may want to be very involved, have existing ideas about layout and graphics and what they want emphasized and how. These types of projects are called “high touch” projects.

The differences between a low touch and high touch project are in the areas of cost (much more consultation time and rework required for a high touch project), investment by the company of its executives time and other staff time to get involved and participate in design and review and approval, and in timescale (high touch decisions take much longer).

When a company is starting a project, it should think through the tradeoffs involved in being more active and involved in a high touch development. The schedule, financial cost, and executive time investments may be hard to justify in some cases. Project success depends both on the final product quality and on how quickly and affordably it is developed.

e-commerce Technical Issues

There are four technical areas in e-commerce websites: physical infrastructure (servers, network, storage), software (web servers, application servers or other programming environment, databases, custom developed code, etc), content (marketing materials, product pricing, product data, product images, other company information), and operations.

e-commerce Physical Infrastructure

The physical infrastructure is the first and most obvious part: as with any information technology, e-commerce runs on an IT infrastructure. This infrastructure can be one owned and built by the website owner, or can be shared capacity leased from a web application service provider. Some e-commerce site infrastructures are located at the company’s own facility, some are placed out at external hosting centers. Key parameters for the infrastructure are the sizing or capacity design, and the reliability design.

Capacity design is straight forward: the more people you want to be able to access your site at the same time, the more computer CPU power and RAM and network bandwidth you need to service those requests. Capacity requirements should come from business and revenue estimates or projections, with appropriate safety margins.

Reliability design addresses what level of confidence do you need that the site will stay operational from the customers perspective. Practical e-commerce website reliability can be designed for uptime levels of 99.5% to 99.9%. Higher levels are very difficult due to risks inherent in the Internet’s infrastructure.

What you are paying for in reliability design is not just actual reliability, but having confidence in a minimum reliability level. With good luck, even very simple websites may achieve roughly 100% uptime in a given year. The reliability design is intended to give you confidence that in bad years, your reliability should not be worse than your target specification, even if you get unlucky. As you go from 99.5% to 99.8%, costs can double or triple, and may be 4-5 times higher by the time you reach 99.9% reliability confidence levels.

e-commerce Software

e-commerce websites are typically built using what is called the Three Tier architecture, named for the three types or levels of software used.

The first tier is the webserver software: this software receives connections from web browsers and sends the web page data back to those web browsers. Web pages which are static content, a fixed page or image which is not modified for each customer, are directly served by the webserver. Typical web servers are Apache, Microsoft’s IIS, and Netscape’s Webserver.

The second tier is the application server software: this software creates dynamic pages for each web customer, with their specific information, product specific information, and other customization. App server software includes several technical solutions such as PHP, .NET or ASP, Weblogic, and Websphere. To some extent, even CGI scripts can be considered application server software.

The third tier is the database in which product and customer information is stored, and where customer orders are collected and tracked. Typical databases used for websites include Oracle, MS SQL Server, and MySQL.

Each of the three tiers has its role: static content, dynamic customized pages, and storage of data. Sometimes these are run on the same system or systems. In many cases, different sets of systems play each role.

On top of the framework provided by those off the shelf software packages, the specific code that describes your website is built. Some of this is HTML web pages, some is programming in the app server layer for customized pages, and some is database tables and structures, and the data feeds associated with them.

e-commerce Content

Website content is the product and company information that you are conveying to the customers and other visitors, including product images, descriptions, cost and ordering and inventory information etc. One key factor in content is that it changes: new products are added, costs are changed, sales and specials happen, seasons change, etc. Both the basic data and some of the wrapping visuals and information can be expected to shift in most websites.

Content then becomes not just the actual data in your website, but also your process for developing and putting that information out onto the website. That includes the policy and business decision makers, product managers, marketing, and other groups depending on the nature of the business. The website needs to be designed with a front end that can have content updates applied easily and with back end structures to create and manage those updates. Many new businesses getting into e-commerce neglect the back end systems and procedures and structure, and end up with painful operations and support as a result.

e-commerce Operations

Websites are unlike most traditional brick and mortar businesses. They are even unlike most IT infrastructure projects. Websites, in particular e-commerce websites, are by nature a 24x7 operation, and customers can and will visit at any time of day or night. While you can define maintenance windows, there’s no safe time for extended outages, such as the famous overnight shutdown and upgrade common in internal IT organizations. Failures that happen overnight or on holidays or weekends are also critical, unlike an office where there may be nobody working to be affected by it.

Website IT staff and managers need to have an operational focus. Staffing and skills and procedures need to focus on keeping the site available to customers and repairing it rapidly if it fails. Repair requires detection of fault, successful response to the detection, and rapid repairs require available on call staff with procedures and information available to them. Documentation and procedures, and simple well configured and well understood systems, are much more important than in the average IT environment.

e-commerce Costs

e-commerce projects can be very inexpensive if your business can use an Application Service Provider or e-commerce Web Hosting company who have existing software, systems infrastructure, and off the shelf shopping carts and credit card processing. They can also be very expensive if you have to develop a site which is very unique, has many business areas and many products, and has to be able to handle tens of millions of dollars in revenue.

For fully custom sites, the biggest cost is the developer time, with software costs a distant second and then system, storage, and network hardware costs below that. Note that the developer time is fairly constant no matter how much business your site ends up getting, though you will need more software and more infrastructure to support larger numbers of visitors coming to the site. This suggests a rule of thumb: if your site won’t have a lot of business, it should be as simple and off the shelf as possible. If it’s going to have a huge amount of business, tens of millions of dollars per year, then you can make it pretty much as custom as you want within your capital budget.

Most e-commerce sites won’t be that big, and one of the most important early project business requirements for the project should be working with web sales and marketing experts to find out good estimates for what your sales probably will be. With that information you can then budget your investment as wisely as possible on customized website design, infrastructure, and services.

e-commerce Projects

There are many ways to accomplish an e-commerce project. One is to hire an internal web development team and do the work within your organization. Another is to go to a web hosting ASP and have them develop a moderately customized solution for you. Moderately complex sites typically are done by a web development company, with work either done in the US or for some newer projects, overseas such as in India.

Hiring an internal team is attractive if you have a very simple site and can hire just one person to build and maintain it, or if you will have such a huge website that internal employees are the most efficient solution. Most medium sized and typical large projects are better done by an outside web development vendor, and small to medium sized projects usually are best done by a web hosting ASP.

Regardless of how you chose to move forwards, someone in your organization will have to be the coordinator and integration manager, who understands what all the pieces are and how they fit together. If you don’t have someone with website experience, you can hire an outside consultant for this role, or someone to train a manager within your company. But this job role should be separate and report to your executives, not be something you allow a web development vendor to own on your behalf.

Larger projects may need a technical lead architect, project managers, and dozens of staff. If you think you may have a larger project, it is all the more important to plan it right ahead of time, by documenting your requirements well and making sure that you have reasonably estimated the effort to achieve them before you start.

Case Studies

Two of Taos’ client projects offer good examples of how different
e-commerce initiatives can be managed and executed successfully.

We offer two contrasting Case Studies. In the first, the customer was a leading mall-based portrait studio. We had previously assisted them in the shift from film to Digital, but their competitors were beginning to offer services like the ability to order reprints (or allow Grandma to order her own!), build & print professional photo albums, or sell prints from an onsite Event photo-shoot. Moreover, they felt that they would soon saturate the best mall locations, and their ability to continue rapid growth was dependent on developing new products and new ways to grow each sale.

The second Case Study shows how far things have come in a few years. We were involved in a major video rental chain’s move to an online presence several years ago. It was a large project driven by the belief that online was coming and they wanted to continue to be leaders in their market. Curiously, while the first phase went very well, the expansion to further online services was then delayed three years as a fuller mature understanding of the online market opportunity developed.

Case Study: Customer P

One Taos customer, a nationwide portrait studio chain, lacked the internal resources and experience to plan how it would go online. A number of its staff had experience with aspects of e-commerce from prior employers, but nobody had a complete idea of how to do it and what all the issues might be. They had not had the time and resources to even gather a complete organization-wide list of the requested capabilities and requirements.

The customer knew that e-commerce offered a significant brand advantage, and could increase their sales significantly if successful. Like most companies, finding ways to increase gross revenue was a high priority for upper management.

Taos brought two staff in to assess their opportunity for building
e-commerce. One was an e-commerce experienced project manager, who was placed out at the customer’s offices to build face to face relationships with the key players across the organization, and start setting up meetings for requirements input with the functional groups. The second was an e-commerce experienced technical architect, who initially was part time on the project attending meetings and phone calls to understand the various functional groups needs, and later shifted to full time as the project moved into analysis and reporting.

Having a full time on site project manager was a key factor in the project’s success. While the customer had been interested in
e-commerce for a long time, they had never formally gotten a project going internally, and hadn’t even been able to get the key players across their groups together to talk about it. Once Taos’ project manager had the basic scope understood, he started working actively to get time with each group, to feed them basic information about e-commerce and to get from them their feature wish lists and functional requirements for an e-commerce business. In many cases, overworked staff had to be approached directly in person, as they were too busy to respond to phone or emails most of the time. Taos’ project manager being there on site and able to grab bits of ‘face time’ as the customers’ staff had breaks meant we were able to get even the busiest people involved in the project.

Meetings with each functional group and key executives eventually generated a complete set of requirements for the project. Once that was done, Taos produced a preliminary report and set to work on analysis.

There were four analysis challenges. The first was how to organize the requirements. The second was how to organize the proposed development project for the website. The third was how to look at the business benefits and costs. The fourth was how to approach the technical architecture.

Taos’ consultants first broke the project down logically into a set of subprojects. The requirements broke down into a set of common functional services and infrastructure, two separate back end projects, and six customer-facing subprojects. This breakdown let Taos analyze and present the project based on functional requirements.

Taos identified a large number of possible development alternatives including using off the shelf or application service provider sites, or a complete custom development of the site. Each was compared with the identified requirements to see how well it matched with the customer’s needs. Taos’ consultants determined that there was probably going to be so much custom work even if an ASP was used that it might as well be a full custom project, and recommended that it be done as a custom project.

The business benefits and costs analysis started with analyzing costs. Taos’ consultants believed that the majority of the cost would probably come from development labor, so once the requirements were mapped out, they began to develop a range of development effort estimates based on functional skill area for each subproject. Ten web development related skill areas were evaluated for each subproject to generate an estimate of required man-hours effort, with a range of high/medium/low estimates to account for uncertainties in final scope details.

Separately from the cost analysis, Taos’ consultants did a revenue and return on investment analysis. Revenue modeling used simple parametric estimates of the business fraction which would occur online; better estimates using marketing experts and customer surveys and focus groups are best, but take longer and more money. The return on investment analysis combined cost (development plus ongoing operations) and revenue models including cannibalization of in-store business, to come up with overall ROI estimates.

Simultaneously with the business modeling, Taos was putting together several options for the technical architecture of the website infrastructure required to run this sort of e-commerce website. The estimates from the business analysis were used to develop models of website activity and system load. Major choices that had to be considered included what platform to use, what sizing assumptions to use, and how to approach software infrastructure choices. Taos compared the alternatives and provided recommendations to the customer.

The first report to the customer was an extensive written report, laying out all the evidence and data collected, all the requirements, and the analysis and results. The report focused the key first few pages on a high level overview, and key decisions that needed to be made to proceed forwards into building this project.

The project finally ended with a detailed in-person presentation to the CEO and other key executives, laying out the total project and key options and decisions.

Case Study: Customer B

Taos consultants were also directly involved in the infrastructure development for a large e-commerce site for a video rentals company. Subcontracted to a web development company, three Taos engineers were most of the team that designed and deployed the systems, networks, and other infrastructure that the website ran on, and were the system administration operations team that maintained it initially after the site launched. Taos was not involved in the main website programming or design work, but Taos’ staff were focused on the infrastructure component.

The first area was in sizing. Taos and the web development company modeled the system load requirements based on the company’s sales projections. When the company came up with much higher load requirements, Taos consultants were key in demonstrating that the requested performance was excessive and would have cost the company far too much money. A properly sized infrastructure was then designed using the final estimates and system performance estimates. The infrastructure was larger than any similar project and that required Taos’ consultants to develop new scaling guidelines for these large systems.

Once the systems were specified and ordered, the team to build and operate them was pulled together, including 4 staff from Taos and from the web development company, under the direction of a Taos senior consultant. In order to maintain reasonable control over the eighty servers and twenty software packages involved, each project engineer was assigned to “own” a number of systems and software packages, being responsible for understanding how they worked, how they were installed and configured. Each engineer was then responsible for creating that software’s and system’s detailed configuration and operations documentation. All documentation was collected in a central directory and internal website for everyone on the team to be able to access, starting to build the operations support environment even before the systems were all delivered.

Before the systems were delivered, all activities on the systems and software and integration were built into a central project plan, which allowed team members to chart their own progress and the progress of other areas that affected their work. This also provided schedule information out to other groups such as the software development and QA teams, who were going to be “using” the systems once they were set up and running.

Despite many delays the vendors finally finished delivery of the systems and network equipment, when a last minute specification change by the customer company required a major redesign of the network for the site. Taos’ staff were instrumental in re-architecting the network to the new specification and reconfiguring the equipment on time, taking over major responsibility from vendor consultants who could not react fast enough. The final software loads went as planned, a minor software glitch was worked around the day before launch, and the site launched on schedule 8 months after its infrastructure was first designed, with over 90% of the initial target load capacity and full features.

Over the next three months, minor instabilities were removed by upgrading configurations and patching software, but the site was down for only a few hours other than planned outages. One of the unplanned outages was due to network problems at the hosting datacenter, and the other due to human error in the content build and install process. After that last failure, Taos’ consultants helped recommend process and documentation changes to avoid repeats of the bad content update.

The site operations were transferred to its owner successfully and they maintained it for several years, through a site redesign and then a hardware change and move.

As you can see from the case studies, very large e-commerce projects are complicated and expensive. They are also generally successful in the technical sense of creating a functional website. Finding a trusted advisor to help scope out requirements and sketch out a project can be the biggest first step towards success.

¹“It’s Time to Re-engergize Business to Consumer E-Commerce", Gartner Group, November 4, 2004