Download - eCommerce Platforms - Magento Webinarinfo2.magento.com/rs/magentoenterprise/images/Measuring...eCommerce uplift attributable to the Magento platform $3,960,893. 20% of total revenue

July 18, 2013

Magento Webinar

Measuring the Business Impact of Your eCommerce Platform

• Introduction

• Market Overview

Peter Sheldon, Forrester Principal Analyst

• The Total Economic Impact of the Magento Enterprise eCommerce Platform

Michael Speyer, Forrester Principal Consultant

• Q&A

• Closing

2

Introduction: Many variables as you look at re-platforming, upgrading,

or expanding your e-commerce platform

3

• Licensing

• Hosting and Infrastructure

• Initial Implementation

• Time to Market

• Maintenance and Upgrades

• Anticipated Revenue Lift and ROI

Market Overview eCommerce and technology trends to

consider as you review your plans and

investments.

Forrester Total Economic Impact A framework you can apply to assessing the

cost, revenue and ROI of your eCommerce

technology investments and the impact they

will have on your business.

Introduction: Guest Speakers

4

Peter Sheldon

Forrester Principal Analyst

Serving eBusiness & Channel Strategy Professionals

Michael Speyer

Forrester Principal Consultant

Serving Sales Enablement Professionals

http://www.twitter.com/peter_sheldon

© 2013 Forrester Research, Inc. Reproduction Prohibited 5

›Market Overview

› Total Economic Impact Study: Purpose and Methodology

›Key findings from the customer interviews

› Financial Model


In case you missed it, eCommerce

is on a tear 6

By 2017, 10% of total US retail spend will be online, hitting $370 billion


These stories have become common place on retailer earning calls


Two thirds of firms will increase spending on eCommerce technology in 2013

Source: Forrester Research, May 2013 Global eBusiness & Channel Strategy Professional Online Survey 9

Worryingly however, many retailers are

running the show with legacy or home-

grown eCommerce solutions

Almost a quarter of eCommerce sites are powered by home-grown technology


Omni-channel, mobile and content mgmt are top priorities for retailers in 2014


The online channel today influences 40% of offline retail spend


The right ownership model for platform ownership often depends on online revenue


There are pros and cons to consider evaluating ownership models



›Market Overview



› Financial model


The Forrester TEI methodology is an established ROI framework focused on impact beyond costs. Framework and Components

Benefits

• Quantified value

• Defined metrics

Cost

• People

• Process

• Technology

“Options” created

• Are there new

opportunities

created for the

future?

Uncertainty

• Impact of assumptions

Total

Economic

Impact

RISK

Source: August 4, 2008, “The Total Economic Impact™ Methodology: A

Foundation For Sound Technology Investments” Forrester report

Approach And Methodology

Perform due

diligence

Conduct

customer

interviews

Construct

financial

model

Write

case

study

Benefits

(Impact on Business)

Costs

(Impact on Budget)

Flexibility

(Options)

17


›Market Overview



› Financial Model



Interviewed five merchants with online revenues ranging from $10 million to $100 million

› A retailer of equipment, tools, and supplies.

› An online-only novelty fashion accessories retailer serving the

US and EU markets.

› An online retailer of high-end furniture and home accessories

products.

› A fashion jewelry and accessories merchant that offers

collections curated and designed by in-house stylists.

› A retailer of luxury apparel, gifts, and accessories.

Magento Enterprise Edition adoption driven by shortcomings of current solutions

Revenue loss and downtime

triggered by high traffic

Inability to support sophisticated

online marketing activities

Unfavorable economics associated

with adding new functionality and

updates to existing platforms

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The composite organization used for the TEI analysis

› TEI analysis based on a composite of the interviewed companies.

› Characteristics of the composite organization are:

• Operates both brick-and-mortar stores and an eCommerce website and had $40

million in online sales.

• Challenges with its pre-Magento eCommerce platform are:

› Inability to scale to handle large spikes in traffic, resulting in instability and

downtime.

› Lack of features and flexibility necessary to support more sophisticated and

frequent digital marketing efforts.

› Inability to quickly make changes to site content.

New eCommerce platform requirements and attributes

To meet growing online traffic

volumes Scalability

Easy integration

Rapid deployment

Flexibility

To easily and rapidly create

custom landing pages, perform

catalog updates and other

management tasks

With back-office systems and

external marketing services

providers

To begin growing their online

businesses

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Qualitative benefits of Magento Enterprise Edition experienced by the interviewed merchants

Increased scalability and stability

“ … to support increases in average daily orders from 2,000 per day to 10,000 per day”

Flexibility to enable a broad range of functional requirements

Integration with 3rd party marketing providers

Enablement of custom business processes

Rapid time-to-market Deployment times of 6-9 months.

Variations due to project scope, resources used, scope changes.

Increased levels of marketing activities

Allowed the merchants to support more diverse and frequent marketing tactics

Major contributor to the overall revenue uplift


›Market Overview



› Financial Model


The financial model

› Accounts for all costs and benefits reported by the interviewed

customer

› 3-year forward looking analysis

› Uses a 10% discount rate for Present Value and Net Present Value

calculations

› All costs and benefits are adjusted for variance, uncertainty and risk

as described in the TEI methodology

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Costs included in the financial analysis

License fees $98,206 for three production

servers and one nonproduction

server

Professional services $324,000 for initial deployment

$537,150 for ongoing support

Internal labor $476,732 for initial deployment,

ongoing maintenance, upgrades

to back-end systems

Hosting services

$337,632 for bandwidth,

server hosting, load balancing,

content delivery network

(CDN), and a firewall

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Benefits included in the financial analysis

eCommerce uplift

attributable to the

Magento platform

$3,960,893. 20% of total

revenue uplift is attributed

directly to the Magento platform

Costs avoided

$147,719 for prior platform

software license maintenance

$350,533 for prior platform

maintenance and upgrades

$135,001 for software

development when using pre-

built extensions from Magento

Connect

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Risks and drivers of variance in costs and benefits

› Incremental revenues will vary with each merchant’s ability to

effectively utilize Magento Enterprise Edition’s features, its marketing

effectiveness, and other activities that stimulate purchasing activity.

› The percentage of total revenue uplift attributable to the Magento

platform also affect the final return on investment (ROI) value.

› Costs avoided for licensing and maintenance fees associated with

the prior platform will vary with the type of platform used and the

scale of the prior implementation.

› Magento licensing fees will vary with the number of servers and the

level of support purchased.

28

Three Year Risk Adjusted Cash Flow

($420,960) ($537,802) ($544,282) ($551,086)

$1,413,400

$1,801,760

$2,422,672

$1,000,000

$500,000

$0

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

$3,000,000

$3,500,000

$4,000,000

Initial Year 1 Year 2 Year 3

Costs

Benefits

Payback

Initial Year 1 Year 2 Year 3 Total PV

Costs ($420,960) ($537,802) ($544,282) ($551,086) ($2,054,130) ($1,773,730)

Benefits $1,413,400 $1,801,760 $2,422,672 $5,637,832 $4,594,156

Net Benefits ($420,960) $875,598 $1,257,478 $1,871,586 $3,583,702 $2,820,426

ROI 159%

Payback Period 5.8 months

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Thank you

Peter Sheldon

[email protected]

Michael Speyer

[email protected]

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Q&A

31

Magento Enterprise Edition eCommerce Platform and Ecosystem

32

Solution Partners

Hosting Partners

Industry Partners

Magento Enterprise Edition eCommerce Platform and Ecosystem

33

Thank you!

• Download the full TEI study

magento.com/TEI

• Talk to a Magento Sales Manager

magento.com/product/enterprise-contact

Or call 1-877-574-5093

Download - eCommerce Platforms - Magento Webinarinfo2.magento.com/rs/magentoenterprise/images/Measuring...eCommerce uplift attributable to the Magento platform $3,960,893. 20% of total revenue

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