What should an ecommerce site cost?

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Bob Browning
Retired at Retired

26 September 2007 09:24am
Should an ecommerce site cost £1,000, £10,000 or £50,000? There is a big disconnect between our development costs for an ecommerce site and many prospect's expectations.
- With a designer, we developed an ecommerce brand and web site (www.dotcomstore.co.uk) and used Pay Per Click (PPC) to get clients. I think it is a great site, and it seemed like a pretty good wheeze at the time. We spent a couple of grand on PPC before we gave up. Why? We got lots of leads but every one of them expected to spend £2,000 or less on their web site.
- www.firstratedirectory.co.uk is a pretty smart lead generation web site. They publish requests for information (RFI) aimed at people in our businesss. I don't believe I have seen an ecommerce RFI on the site ever with a budget of more than £5k. Mostly budgets are in the low four figures. I recall someone who wanted an ecommerce site for an auto parts business with a full bill of materials breakdown and a budget of £2k.
There is no way we can produce a web site for this sort of number. A good design by a competent designer is in the £3-6k range and even a very vanilla site will take us a week to set up. So our starting budget is around £6k and we go up to £50k for the bigger more custom sites.

Are we doing something wrong? One of our clients decided for very good reasons to use a (very) serious hosted US-based service called Netsuite. Sadly there was some confusion about who was going to skin the various functions and we ended up doing it. My programmer was on this for about four days with the HTML already cut. This stuff can be complicated.

The only way these expectations can be met as far as I can see is:
1. Use a pre-existing template married to a vanilla ecommerce system. Literally plug and go.
2. Off-shore the work.
There is obviously a market for the first approach. I have had a few leads myself from people with low level operations and a vanilla requirement who I have pointed at a templated system. However the leads I am discussing above are for people who's business model justifies something better than this, indeed won't get anywhere without a substantial marketing budget.

The other issue is that project management time is often disproportionately high for low-budget projects, simply because small clients don't have the internal disciplines of larger companies. A £2k budget could easily be eaten up in client relations.

The £64,000 question is what happens to these guys? Do they get a serious site built in India for £2,000 and then go on to make their first million or do all these enterprises disappear?

Should I be developing a templated £2k solution or stick to my knitting? If I do, how do I control project management costs?
Mark Gooding
Director at Mailvivo

26 September 2007 10:04am

Well, although now working in the email marketing field, I have several years experience of e-commerce on the other side of the fence, ie. I worked for an e-commerce solution provider.
What I would say is this. As soon as you work with anyone outside your timezone consider any time estimate and add 24 hours minimum for even the smallest request. That works both ways so the US/Canada (-5 hours) and India (+6? hours). I've worked it both ways! Bear in mind you ideally need a company with development resource in the UK. Off-shoring, I would suggest, may cost you more in time that you personally have to spend managing the whole thing more than anything else.
In terms of vanilla template type system then one size simply does not fit all in the world of e-commerce. What you need, I would suggest, is a happy medium between a supported platform (single instance ASP type solution) where you have control and one where you can get customisations done for a set cost by your provider. Now NetSuite would fit into that type of model I think but the way you get control is to do some of the web customisations yourself using their API or whatever. If that's too complicated then you need someone with experience doing the customisations.
Project management costs are the bane of most e-commerce providers as they all have different ways of measuring and charging. Personally I would get the expertise in-house and go with a professional ASP solution that is templated yet allows you editing control.
Understand their software and get your requirements spec agreed up-front to control costs. On-going get set prices for development work again with defined specs. Bear in mind that one of usual benefits of going with an ASP type solution is that new features get released all the time. The issue is plugging those features into your site and any associated costs hence the need for in-house expertise and a flexible system to work with on the API side of things.
That's a bit jumbled I know, but it is just the benefit of my experience that may be useful to you.
http://www.mailvivo.co.uk
Mark Gooding
0845 644 3730
Business Development Director @ Mailvivo
mark@mailvivo.co.uk
Bob Browning
Retired at Retired

27 September 2007 10:44am

So true. As it happens we have an ASP solution and I think we currently fit into that happy medium. But there are a lot of users out there who don't want to pay a medium price.

Another factor to consider if we developed a low-cost vanilla solution for say £2k, is how to we explain to users that even (apparent) minor customisations result in a quantum leap in price. We could end up driving customers away from our main offering.
Tim Arnold
Principal at Tarrystone Consultants

29 September 2007 10:12am
If you see this as a Marketing problem which it is then it becomes an opportunity! Then the solution is easy - manage the customer expectation.

For instance...

Offer a vanilla fixed price solution to start-ups with a menu of add-ons costed Then when it is launcehd with a report of how the site can be developed and improved as a second stage as the client grows.

It's about life time value and growing with clients isn't it?

Tim Arnold - Tarrystone Consultants www.tarrystone.com

On 09:24:39 26 September 2007 textor wrote:
Should an ecommerce site cost £1,000, £10,000 or £50,000? There is a big disconnect between our development costs for an ecommerce site and many prospect's expectations.
- With a designer, we developed an ecommerce brand and web site (www.dotcomstore.co.uk) and used Pay Per Click (PPC) to get clients. I think it is a great site, and it seemed like a pretty good wheeze at the time. We spent a couple of grand on PPC before we gave up. Why? We got lots of leads but every one of them expected to spend £2,000 or less on their web site.
- www.firstratedirectory.co.uk is a pretty smart lead generation web site. They publish requests for information (RFI) aimed at people in our businesss. I don't believe I have seen an ecommerce RFI on the site ever with a budget of more than £5k. Mostly budgets are in the low four figures. I recall someone who wanted an ecommerce site for an auto parts business with a full bill of materials breakdown and a budget of £2k.
There is no way we can produce a web site for this sort of number. A good design by a competent designer is in the £3-6k range and even a very vanilla site will take us a week to set up. So our starting budget is around £6k and we go up to £50k for the bigger more custom sites.

Are we doing something wrong? One of our clients decided for very good reasons to use a (very) serious hosted US-based service called Netsuite. Sadly there was some confusion about who was going to skin the various functions and we ended up doing it. My programmer was on this for about four days with the HTML already cut. This stuff can be complicated.

The only way these expectations can be met as far as I can see is:
1. Use a pre-existing template married to a vanilla ecommerce system. Literally plug and go.
2. Off-shore the work.
There is obviously a market for the first approach. I have had a few leads myself from people with low level operations and a vanilla requirement who I have pointed at a templated system. However the leads I am discussing above are for people who's business model justifies something better than this, indeed won't get anywhere without a substantial marketing budget.

The other issue is that project management time is often disproportionately high for low-budget projects, simply because small clients don't have the internal disciplines of larger companies. A £2k budget could easily be eaten up in client relations.

The £64,000 question is what happens to these guys? Do they get a serious site built in India for £2,000 and then go on to make their first million or do all these enterprises disappear?

Should I be developing a templated £2k solution or stick to my knitting? If I do, how do I control project management costs?
Chris Long
Director at InterWeave Consulting Ltd

29 September 2007 11:01am
I share your frustrations having spent about a year going down a similar route. I left Vodafone, where I was in charge of web development (budget £12m), hoping to carve out a market at a lower rate, but not at the level I found most of the market willing to pay, which was hundreds or if you were lucky low thousands. As you rightly say adding the fact the customer often don’t really have much knowledge of their real requirements, which increases PM costs, and this makes little financial sense.   I think this situation has arisen through the accessibility of the web, by which I mean:

a)      It is something most people use most days, and hence people have high expectations of functionality

b)      It is something that has a low technology entry point – most ISPs offer a build-your-own-website function for free. You can ‘build’ a website on Word – the fact that these are very different from what the customer needs is in the detail....

I think the only way to tackle the market is with off-the-shelf and hope to extend the relationship when people discover they need more.

So the answer to the question is £250 to £5m depending on your customer; IBM, Broadvision, Vignette can ask (and get) the latter, the rest of us aren’t so lucky – if you can find a way into the £50k-£500k market let me know!

Best Regards

Chris Long - InterWeave Consulting Ltd

Mob: 07785 576757

Fax: 08701343404

email:

web: www.iwcon.net

On 09:24:39 26 September 2007 textor wrote:
Should an ecommerce site cost £1,000, £10,000 or £50,000? There is a big disconnect between our development costs for an ecommerce site and many prospect's expectations.
- With a designer, we developed an ecommerce brand and web site (www.dotcomstore.co.uk) and used Pay Per Click (PPC) to get clients. I think it is a great site, and it seemed like a pretty good wheeze at the time. We spent a couple of grand on PPC before we gave up. Why? We got lots of leads but every one of them expected to spend £2,000 or less on their web site.
- www.firstratedirectory.co.uk is a pretty smart lead generation web site. They publish requests for information (RFI) aimed at people in our businesss. I don't believe I have seen an ecommerce RFI on the site ever with a budget of more than £5k. Mostly budgets are in the low four figures. I recall someone who wanted an ecommerce site for an auto parts business with a full bill of materials breakdown and a budget of £2k.
There is no way we can produce a web site for this sort of number. A good design by a competent designer is in the £3-6k range and even a very vanilla site will take us a week to set up. So our starting budget is around £6k and we go up to £50k for the bigger more custom sites.

Are we doing something wrong? One of our clients decided for very good reasons to use a (very) serious hosted US-based service called Netsuite. Sadly there was some confusion about who was going to skin the various functions and we ended up doing it. My programmer was on this for about four days with the HTML already cut. This stuff can be complicated.

The only way these expectations can be met as far as I can see is:
1. Use a pre-existing template married to a vanilla ecommerce system. Literally plug and go.
2. Off-shore the work.
There is obviously a market for the first approach. I have had a few leads myself from people with low level operations and a vanilla requirement who I have pointed at a templated system. However the leads I am discussing above are for people who's business model justifies something better than this, indeed won't get anywhere without a substantial marketing budget.

The other issue is that project management time is often disproportionately high for low-budget projects, simply because small clients don't have the internal disciplines of larger companies. A £2k budget could easily be eaten up in client relations.

The £64,000 question is what happens to these guys? Do they get a serious site built in India for £2,000 and then go on to make their first million or do all these enterprises disappear?

Should I be developing a templated £2k solution or stick to my knitting? If I do, how do I control project management costs?
Matt Roberts
Ecommerce Director at Digivate

30 September 2007 15:23pm
We rarely build first ecommerce sites; it's not worth the hassle. Clients who have outgrown a basic site are more appealing. They have discovered what is wrong with such a low cost approach and they have also quantified their level of ecommerce sales.
Anyone looking for a sub £10k ecommerce site should go to an individual working from home.
Lysander
www.digivate.com
On 11:01:33 29 September 2007 ChrisLong wrote:
I share your frustrations having spent about a year going down a similar route. I left Vodafone, where I was in charge of web development (budget £12m), hoping to carve out a market at a lower rate, but not at the level I found most of the market willing to pay, which was hundreds or if you were lucky low thousands. As you rightly say adding the fact the customer often don’t really have much knowledge of their real requirements, which increases PM costs, and this makes little financial sense.   I think this situation has arisen through the accessibility of the web, by which I mean:

a)      It is something most people use most days, and hence people have high expectations of functionality

b)      It is something that has a low technology entry point – most ISPs offer a build-your-own-website function for free. You can ‘build’ a website on Word – the fact that these are very different from what the customer needs is in the detail....

I think the only way to tackle the market is with off-the-shelf and hope to extend the relationship when people discover they need more.

So the answer to the question is £250 to £5m depending on your customer; IBM, Broadvision, Vignette can ask (and get) the latter, the rest of us aren’t so lucky – if you can find a way into the £50k-£500k market let me know!

Best Regards

Chris Long - InterWeave Consulting Ltd

Mob: 07785 576757

Fax: 08701343404

email:

web: www.iwcon.net

On 09:24:39 26 September 2007 textor wrote:
Should an ecommerce site cost £1,000, £10,000 or £50,000? There is a big disconnect between our development costs for an ecommerce site and many prospect's expectations.
- With a designer, we developed an ecommerce brand and web site (www.dotcomstore.co.uk) and used Pay Per Click (PPC) to get clients. I think it is a great site, and it seemed like a pretty good wheeze at the time. We spent a couple of grand on PPC before we gave up. Why? We got lots of leads but every one of them expected to spend £2,000 or less on their web site.
- www.firstratedirectory.co.uk is a pretty smart lead generation web site. They publish requests for information (RFI) aimed at people in our businesss. I don't believe I have seen an ecommerce RFI on the site ever with a budget of more than £5k. Mostly budgets are in the low four figures. I recall someone who wanted an ecommerce site for an auto parts business with a full bill of materials breakdown and a budget of £2k.
There is no way we can produce a web site for this sort of number. A good design by a competent designer is in the £3-6k range and even a very vanilla site will take us a week to set up. So our starting budget is around £6k and we go up to £50k for the bigger more custom sites.

Are we doing something wrong? One of our clients decided for very good reasons to use a (very) serious hosted US-based service called Netsuite. Sadly there was some confusion about who was going to skin the various functions and we ended up doing it. My programmer was on this for about four days with the HTML already cut. This stuff can be complicated.

The only way these expectations can be met as far as I can see is:
1. Use a pre-existing template married to a vanilla ecommerce system. Literally plug and go.
2. Off-shore the work.
There is obviously a market for the first approach. I have had a few leads myself from people with low level operations and a vanilla requirement who I have pointed at a templated system. However the leads I am discussing above are for people who's business model justifies something better than this, indeed won't get anywhere without a substantial marketing budget.

The other issue is that project management time is often disproportionately high for low-budget projects, simply because small clients don't have the internal disciplines of larger companies. A £2k budget could easily be eaten up in client relations.

The £64,000 question is what happens to these guys? Do they get a serious site built in India for £2,000 and then go on to make their first million or do all these enterprises disappear?

Should I be developing a templated £2k solution or stick to my knitting? If I do, how do I control project management costs?
Philippe Muheim
Head of Business Development at ( )pen

01 October 2007 09:19am
Our company believes that technology is the enabler. So while we supply top rated e-commerce software and all the trappings we believe in the revenue share approach. We do the marketing and if the site is not successful we do not get paid, simple. Any budget for marketing is agreed ahead of time and this is the only real investment made apart from the usual photography etc.
On 11:01:33 29 September 2007 ChrisLong wrote:
I share your frustrations having spent about a year going down a similar route. I left Vodafone, where I was in charge of web development (budget £12m), hoping to carve out a market at a lower rate, but not at the level I found most of the market willing to pay, which was hundreds or if you were lucky low thousands. As you rightly say adding the fact the customer often don’t really have much knowledge of their real requirements, which increases PM costs, and this makes little financial sense.   I think this situation has arisen through the accessibility of the web, by which I mean:

a)      It is something most people use most days, and hence people have high expectations of functionality

b)      It is something that has a low technology entry point – most ISPs offer a build-your-own-website function for free. You can ‘build’ a website on Word – the fact that these are very different from what the customer needs is in the detail....

I think the only way to tackle the market is with off-the-shelf and hope to extend the relationship when people discover they need more.

So the answer to the question is £250 to £5m depending on your customer; IBM, Broadvision, Vignette can ask (and get) the latter, the rest of us aren’t so lucky – if you can find a way into the £50k-£500k market let me know!

Best Regards

Chris Long - InterWeave Consulting Ltd

Mob: 07785 576757

Fax: 08701343404

email:

web: www.iwcon.net

On 09:24:39 26 September 2007 textor wrote:
Should an ecommerce site cost £1,000, £10,000 or £50,000? There is a big disconnect between our development costs for an ecommerce site and many prospect's expectations.
- With a designer, we developed an ecommerce brand and web site (www.dotcomstore.co.uk) and used Pay Per Click (PPC) to get clients. I think it is a great site, and it seemed like a pretty good wheeze at the time. We spent a couple of grand on PPC before we gave up. Why? We got lots of leads but every one of them expected to spend £2,000 or less on their web site.
- www.firstratedirectory.co.uk is a pretty smart lead generation web site. They publish requests for information (RFI) aimed at people in our businesss. I don't believe I have seen an ecommerce RFI on the site ever with a budget of more than £5k. Mostly budgets are in the low four figures. I recall someone who wanted an ecommerce site for an auto parts business with a full bill of materials breakdown and a budget of £2k.
There is no way we can produce a web site for this sort of number. A good design by a competent designer is in the £3-6k range and even a very vanilla site will take us a week to set up. So our starting budget is around £6k and we go up to £50k for the bigger more custom sites.

Are we doing something wrong? One of our clients decided for very good reasons to use a (very) serious hosted US-based service called Netsuite. Sadly there was some confusion about who was going to skin the various functions and we ended up doing it. My programmer was on this for about four days with the HTML already cut. This stuff can be complicated.

The only way these expectations can be met as far as I can see is:
1. Use a pre-existing template married to a vanilla ecommerce system. Literally plug and go.
2. Off-shore the work.
There is obviously a market for the first approach. I have had a few leads myself from people with low level operations and a vanilla requirement who I have pointed at a templated system. However the leads I am discussing above are for people who's business model justifies something better than this, indeed won't get anywhere without a substantial marketing budget.

The other issue is that project management time is often disproportionately high for low-budget projects, simply because small clients don't have the internal disciplines of larger companies. A £2k budget could easily be eaten up in client relations.

The £64,000 question is what happens to these guys? Do they get a serious site built in India for £2,000 and then go on to make their first million or do all these enterprises disappear?

Should I be developing a templated £2k solution or stick to my knitting? If I do, how do I control project management costs?
Janaka Fernando
Head of Ecommerce at Magicalia

02 October 2007 10:13am

Yes, I've found the revenue share approach to be a great incentive for small businesses who are not wanting to shell out more than a couple thousand for the initial setup costs. To the vendor its attractive to get a client on-board and then recoup costs if the business operates sucessfully. Of course for every client that generates income for you there are usually 3 that just break even.

One flaw though I've found in this scheme is when the client gets too successful... when they start making a large profit (and so does the vendor). Although this is what you would want, invevitably the margins have to be at a level which is within the client's pain threshold. If they are making £10000 gross profit and you are charging 10% in revenue shared commisions of £1000; by the end of the year they will want this lowered to somewhere in the region of 2% or will look around for another provider.

From my experience the revenue shared model can work but it requires a capped rate that is agreed with the client.

On 09:19:09 1 October 2007 TonyLevy wrote:

Our company believes that technology is the enabler. So while we supply top rated e-commerce software and all the trappings we believe in the revenue share approach. We do the marketing and if the site is not successful we do not get paid, simple. Any budget for marketing is agreed ahead of time and this is the only real investment made apart from the usual photography etc.
Bob Browning
Retired at Retired

02 October 2007 13:20pm

Yes, but make sure you get a good committment. We did a site on this basis, ran it for two years while the business built, and then the 'client' decided to save himself our (now meaningful) commission by getting another site built elsewhere.

Bob
Textor
Bob Browning
Retired at Retired

02 October 2007 13:24pm

Question. How many loss-making sites do we have to build to find a site that turns into significant business, rather than being snaffled by LysanderMB below who only goes after re-build business.

Bob
Textor