Calculating the Total Cost of Ownership of an Ecommerce Site
Choosing a new ecommerce platform is a lot like buying a new car: You have the initial expense of the car (or platform) but ongoing maintenance costs. The total cost of building a new ecommerce site or replatforming an existing online store goes far beyond the platform license or subscription fee.
Critical Components of the Total Cost of Ownership
The total cost of ownership (TCO) is the sum of all costs and expenses associated with implementing, maintaining, and optimizing your ecommerce solution and online store. The initial costs may include the licensing fee for the ecommerce platform, hosting, extensions, third-party apps and integrations, feature development, design, user testing, and ongoing maintenance.
Platform licensing fees vary between one-time payments and monthly or yearly subscriptions. In some cases, licensing fees change as the online business grows. It’s best to ask each potential ecommerce platform provider upfront what their pricing structure is and how it evolves as online revenue increases.
Don’t assume that the cheapest option will lower the TCO in the long run. Opportunity cost plays a critical role in calculating the TCO, which measures potential loss when choosing one solution over alternatives. One platform may be cheaper, but it could have a history of going down, the inability to scale as online traffic grows, or it may need costly customizations to fit your business’s exact needs.
Calculate Your 5-Year TCO
To help brands and retailers determine the 5-year TCO for their online store, we created the Total Cost of Ownership Tool. The Total Cost of Ownership Tool enables companies to make informed decisions when choosing a new ecommerce platform. Calculating the TCO for each potential ecommerce platform will help you stay on budget and minimize hidden costs further down the process. The TCO will be based on your specific data, including projected revenue, third-party modules and vendors, and license fees, and can easily be shared with key stakeholders.
Get our Total Cost of Ownership Tool, or keep reading to learn more about choosing an ecommerce platform and calculating the total cost of launching and maintaining an ecommerce site.
Understanding Your Ecommerce Platform Options
Ecommerce platforms typically fall into three categories: On-Premise, Cloud, and SaaS. Each one requires different maintenance costs and resources, affecting the TCO.
On-Premise Platform: Ecommerce platform is installed locally on your company’s hardware system. Ongoing costs include 24/7 maintenance and support, data storage, security, backups, and software updates.
Cloud Platform: Platform vendor hosts and manages the software and customer data in the cloud while maintaining the infrastructure, distributing upgrades and bug fixes, and developing new features and enhancements.
SaaS Platform: SaaS, or Software as a Service, is a software licensing and delivery model where a third-party hosts and maintains the software application. You typically pay a yearly or monthly subscription fee.
When choosing an ecommerce platform, we recommend including all key stakeholders, such as team members from the ecommerce, marketing, technology, sales, operations, and fulfillment teams, at the beginning of the process. Working together will help you outline the project strategy, platform requirements, and integration needs—minimizing unforeseen issues down the road.
Questions to Ask Platform Vendors
As you meet with potential vendors, these questions will help you narrow your choices:
- How does the platform scale for future growth?
- What are the native out-of-the-box (OOTB) features?
- If needed, can the platform accommodate heavy customization to meet our business requirements?
- What is the support offering?
- How does the platform handle peaks in online traffic?
- Can the platform meet the business needs of both B2B and B2C markets?
Complete Your Technology Stack with Third-Party Integrations and Business Systems
It takes more than an ecommerce platform to run an online store. There are various business systems, applications, and integrations you’ll need to deliver a customer experience that meets both your business needs and your customers’ needs.
- Enterprise Resource Planning (ERP)
- Customer Relationship Management (CRM)
- Customer Data Platform (CDP)
- Content Management Systems (CMS)
- Product Information Management (PIM)
- Order & Inventory Management
In addition to the major business systems you’ll likely need to integrate with your ecommerce platform, there are other integrations to consider to enhance the overall customer experience. From email marketing, site search, and customer reviews to tax calculation and payment gateways, each come with their own unique costs. Payment gateways, as an example, often have no upfront costs but will charge a percentage or fee for each online transaction. You can also expect additional fees if you need to customize any of the integrations.
When to Use Third-Party Integrations vs. Native Functionality
We often see brands seek third-party integrations, or reuse the same third-party integrations from their original ecommerce site, without understanding what native functionality comes with an ecommerce platform. In reality, it can be more expensive to integrate or try to replicate the same applications in a new ecommerce solution.
If you have an existing online store that you’re replatforming, start by evaluating which third-party integrations you need based on how much revenue each one drives. This will help you determine which applications to drop, consolidate, or replace. If you don’t have the in-house expertise, a certified solution partner can help you understand which native features to use versus replacing and how those will impact the TCO. Keep in mind that evaluating your third-party integrations is an ongoing effort. Ecommerce platforms evolve, and you want to make sure your integrations don’t overlap with native functionality.
How to Choose a Certified Solution Partner
Launching a new ecommerce site or replatforming an existing site requires a unique set of skills, such as strategists, project managers, frontend and backend developers, business analysts, data scientists, and UX/UI design experts. To accurately calculate your TCO, you’ll need to determine if you’ll bring these skills in-house or hire a certified solution partner.
Working with a solution partner has its benefits. Solution partners that specialize in specific ecommerce platforms will have certified developers with extensive platform and third-party application knowledge. Effective partners have proven processes that help keep clients on time and budget. And lastly, many solution partners have years of experience working with brands and retailers across industries and digital maturities that they can leverage to offer technical and strategic guidance.
Similar to platforms, choosing a solution partner solely based on price can cost you more in the long term. As you’re vetting partners, ask the right questions:
- Are they a platform certified partner?
- Can they meet both your immediate and long-term requirements?
- Have they worked on projects similar to yours?
- What’s their typical timeline?
- Can they share case studies?
- Where are their resources located?
- What types of quality assurance and testing do they do?
If you want to have an in-house ecommerce team but don’t have the time to train a team on a new ecommerce platform, you can use staff augmentation to fill frontend and backend developer, project management, and analytics roles. Staff augmentation allows you to hire experienced staff that can quickly ramp up and immediately add value to your project. No matter which option you choose, your TCO will be affected.
Post-Launch Expenses to Consider
Re-launching or launching an ecommerce site is only the initial part of building a successful online store. If you don’t already have the in-house resources, you’ll need additional skills and tools to maintain and optimize the digital customer experience. This includes A/B testing, performance optimization, new feature development, security patches, and system updates.
Get our Total Cost of Ownership Tool here and start making informed decisions, or reach out to our team if you need help building, optimizing, and maintaining your ecommerce site. We’ve helped brands like Le Creuset, Lovesac, and Michel Design Works launch revenue-driving digital experiences.
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