VTEX Blog - Find out all you need to choose the best e-commerce platform!

Find out all you need to choose the best e-commerce platform!

Rafael Campos
Rafael
23 Jan 2017
Reading Time: 13 min

When you already work with virtual stores or wish to take your bricks-and-mortar premises on to the online universe, one of the key elements of your planning must be the choice of the best e-commerce platform for your business.

But the fact is that there is no such thing as the best platform, at least not the best platform for everyone. But there is the best platform for your time as a retailer, the one that will combine several analyses and give you the best value for money.

In a survey commissioned by Google itself, the growth expectations for e-commerce for the next 5 years are an enticing 12.4% per annum. If, on the one hand, this means greater security of investment in this market, on the other, it also means an increase in competition. Therefore, those already in the front line have to focus on a key aspect: conversion.

Spending time on research for choosing the best e-commerce platform is well worth it, since its quality, together with the content of your site, is a key element directly related with your company’s conversion rate.

To make the job easier, we are presenting a veritable guidebook about everything you need to know in order to choose the best e-commerce platform for your business and to stay ahead of the competition.

If you prefer, download now our E-Book: How to choose the best e-commerce platform, which was the original and unabridged content in which we go into detail on all the points in this article.

Check it out!

What is an e-commerce platform?

Similar to a physical store, an e-commerce needs a shop window to exhibit its products for sale. It also needs an inventory, a cashier, management, logistics, planning… The role of an e-commerce platform is precisely this: to substitute the bricks of a physical store with an equivalent environment in the digital world.

Simply put, an online retail platform is a set of digital technologies that allow traders to build and host a virtual shop window, so as to showcase to the public a range of products or services.

But what makes a platform “better” than the others, is just one thing: what is the platform that allows you to further increase your conversion rate, enhance the aggregate cost and produce better returns from your e-commerce? This is what should concern you.

An e-commerce platform is divided into two key parts: front-end and back-end. These are the terms used to characterize the platform interfaces and the manner in which they interact with the user:

  • Front-end: is the application with which the user interacts directly. That is, that interface of your stores that is visible to the consumer (when they browse the site, choose the products, place them in the shopping cart and finalize the orders).
  • Back-end: this interface indirectly serves as support for the front-end services. It’s the part the user doesn’t see, but it is the one in which the entire process really functions on the trader’s side, including the management mechanisms.

Types of e-commerce platform

It is impossible to talk about e-commerce platforms without mentioning the different types that exist for that purpose, each with its own resources and intended for a different business model.

There are different types of platforms available on the market, and knowing how to choose the most appropriate one for your business is a key factor, especially where conversion metrics are concerned – an essential element for successful e-commerce. When segmented using the licensing model, we can classify 3 main types. If you wish to become familiar with these different types, access our E-Book: The types of platform

Open Source Platforms

The Open Source platform type is one you download from freeware and install it through a supplier hired to carry out technical services. That is why this type of platform is known as free, because acquiring the code requires no financial investment. But to install it and prepare the servers, you will need a technician or company.

This model is suitable for those wanting control over absolutely everything, including hosting. However, when one adopts the Open Source model, e-commerce becomes the owner of the technology, and is exclusively responsible for investing in enhancement, security, servers etc.

This is the trade-off of the model: having control and being the owner of the source code generates enormous in-house costs by creating a technology area.

On-Premises Platforms

Unlike Open Source, in an On-Premises platform you need to purchase a license to use the code. Major software development companies work with this model.

After the initial investment to purchase a system user license, the On-Premises platform will closely resemble the Open Source one. You will have to undertake customizations, prep the servers and do the installation.

After the store is launched, the company is responsible for all the investment in maintenance and minor evolutions. In this model, by paying for the license the retailer will be entitled to new versions which are usually rolled out annually or every 2 years.

Because of responsibility for the technology, day-to-day costs can escalate like those of the Open Source platform.

SaaS (Software as a Service) Platforms

The Software as a Service model is the opposite of the preceding models. Here, you lease a range of services like evolution, fixing bugs, maintenance, servers and support directly from the supplier. Thus the name, software as a service.

This model is very present in our lives, but we hardly notice it. Gmail, Facebook, Spotify, Apple Music, Dropbox, etc. are all technologies in the SaaS model. In some cases, it can be free up to a certain point, after which it becomes payable.

When it becomes payable, companies usually charge an amount according to sales volume, the revenue share. At the outset, this model can be bad for you, since you will be eternally bound to the supplier. However, when we analyze the number of services provided in the monthly fee, we see that we would spend much more if we tried to develop everything by ourselves.

Are SEO requisites important for an e-commerce platform?

A survey by Connected Life shows that 74% of Brazilians do searches before making purchases on the internet. Therefore, ensuring that your products are easily found on search engines like Google can be the difference between the success and failure of a business.

The majority of SEO techniques is to ensure that the pages of your site appear, as often as possible, as relevant for the search engines for each keyword that your potential customer is using in the search. In this respect, you should have this other requisite when the time comes to choose your ideal e-commerce platform: that it is equipped with the tools needed for optimizing your site as much as possible for search engines.

Key factors of the platform for ranking in SEO

  • Navigation links: is the text that appears on your products and categories in the browser menu of your site.
  • Page titles: the text that appears on the tab at the top of your browser; and also, when a user marks a page in their favorites or saves it as a shortcut on their desktop.
  • Page URLs: the location of the page as shown in the browser address bar. Ideally, the keyword for each page should appear in your URL.
  • Meta Description: the text that appears with the list of the Google results and can influence the user’s decision to click, or not, on the link that leads to your site.
  • ALT Tags: the text added to the product image to describe it, when search engines or users cannot see it, usually because it fails to load.
  • H1, H2 and H3 Title: typically designated as the main title that appears on the category and product pages.
  • Canonical URL: the original address of a page that could be found in more than one location.
  • Integrated blog: besides having pages on your site that appear relevant to the search terms used by your potential customers, the most important factor affecting who conspicuous your site appears in the Google results is the quantity and quality of external links that point to your site. When creating content for your blog, always create hyperlinks in the text that contextualize with other content already published.
  • Social media sharing buttons: optimized icons that allow your visitors to share your site, products or posting on their social networks.
  • Automatic Sitemap in XML: a file located on your server that helps search engines to find and index your content.
  • Use of own domain: your domain can typically be the name of your own business. The possibility of using your private domain must be one of the main factors when choosing an e-commerce platform optimized for SEO.
  • Own IP address: a unique number that represents the location of your website on the internet. It is how your browser interprets your domain name.
  • 301 Redirect: a command used to redirect the browser or search engine from one URL to another.
  • Robots.txt: a file located on your server that informs the search engine which pages or sections of your site must be indexed, or not.

Financial analysis of the e-commerce platform: Payback and Break-Even Point

One of the main factors for the success, or lack of it, of online commerce involves financial commitment to the e-commerce platform. Two elements are intrinsically related in this aspect: the break-even point, also known as the point of equilibrium, and payback, that is, the return on investment.

Get familiar with each of these factors:

Break-even point of the e-commerce platform

The break-even point is the moment of the sales volume where the company is able to cover all its costs and requires no further investment. The figures are in the black.

In other words, the break-even point is concentrated on the revenues required to exactly match all expenses on a single income statement prepared in accordance with the accrual accounting method.

If you commit financially to an excellent platform that charges a lot for your moment, you will stretch your break-even point or not have one, which is much worse. Therefore, carefully analyze your growth plan to discover to what extent your margin will be compromised by the e-commerce platform.

If you are starting and believe that you won’t sell more than R$30,000 a month for the first 12 months, opt for a free platform or one with a low fixed monthly fee. Don’t commit more than 4% of your margin in platforms, and stay alert to models that restrict visitors, page views or products.

Payback of the e-commerce platform

Payback is analyzed based on how many months it will take to make a profit to pay the initial investment in the platform. Therefore, it must be analyzed along with the break-even point.

If you opt for a platform whose monthly cost is cheap, you may event reach break-even quickly. But, if you needed to make a large initial investment, known as the set-up, your payback could take months or years.

This can occur primarily with On-Premises and Open Source platforms, since an initial investment is required for some services. SaaS platforms, however, usually have no initial costs.

Once again, we wish to reiterate that if your store does not intend to have revenues of more than R$30,000 a month, opt for a platform with no set-up cost.

RFP for selecting the e-commerce platform

An RFP (Request For Proposal) is a document that serves for a company wishing to buy something to make the specifications public. This usually takes place so that several other companies can enter bids for the work, and so that the buyer can compare all the bids, whether by function or price.

Therefore, this method consists of enumerating all the demands of your business and allocating points to each positive response from your supplier. At the end, you will have a score for each supplier.

This methodology is greatly used by large companies, so that the decision-making process is as coherent as possible, without involving emotional factors.

Writing the RFP for e-commerce

The first step for creating an RFP for e-commerce is to define your business’s far-reaching and specific requirements. What exactly do you want from a supplier? How? When?

Variations exist but, basically, an RFP contains the following segments which can be modified and adapted to your business:

  • Introduction: explain to potential suppliers, as a rule, why you are issuing an RFP and the work you expect to undertake with the contractor. Summary of the remaining key points of the document.
  • Basic information: show your company’s information and the history of the project in question, detailing the requirements of your e-commerce.
  • Requisites: provide a detailed explanation of what you want the contracted supplier to do, listing the information you expect to receive from the candidates.
  • Structure of the response: present the structure of how you would like to receive the responses to your request. In this way, the candidates can send a complete and standardized document. As an example:
    • Executive summary
    • Supplier’s information
    • Proposed services to be delivered by the contractor
    • Prices
    • References from other customers
  • Selection criteria: tell the suppliers how you will select the candidate with the winning proposal. This will give you the opportunity to highlight your priorities and you will not waste the candidates’ time with useless information.
  • Schedule: specify a deadline for receiving proposals, the date when you will announce the winner and when the project will commence.

The secret of an RFP document lies, firstly, in knowing who the groups are the questions that will be analyzed. Later, give the proper consideration to each group, which will afford a clearer idea about each supplier.

If you want to save time, download now our E-Book: how to choose the best e-commerce platform to receive a ready-to-go example of an RFP for free.

Understand the aggregate cost of the e-commerce platform

Aggregate cost refers to the total cost involved in manufacturing a product, providing a service or executing a project. When we apply this concept to e-commerce, we say that aggregate cost is the cost of the platform, plus the cost of the media.

One e-commerce platform may even be more expensive than another, but, if you saw in your RFP that it has many more resources than the other, the potential for increasing conversion will probably be greater.

When this happens, your store will have a greater ROI and will consequently sell more while spending less on marketing. Let’s see an example below:

In the above example, we see that the store, Cool Shoes, has a conversion rate of 1%, while Smart Shoes has 2%. Using the data from the example, we see that one sold twice as much as the other, R$150,000 against R$300,000. It is here that the concept of aggregate cost come in.

  • Tax charge of 10% is possible with operations in tax incentive areas
  • Outsourced fulfillment: shared costs for obtaining similar scale to large retailers

Let’s concern ourselves with only 2 lines of the table above: marketing and platform.

As we can see, Cool Shoes spends a total of 16.2%, 16% on marketing and 0.2% on the platform. The 16% were accounted for by the investment of R$24,000 over invoicing.

Now, we can see that Smart Shoes invested the same R$24,000, but as it sold twice as much because the conversion rate was twice as much, the expenditure over revenue ratio is only 8%.

Now, the aggregate cost of that platform is 8% plus 3%, making 11%. In other words, even though the platform is much more expensive (from 0.2% to 3%), the potential for a higher conversion rate was so greater that the aggregate cost was better.

This is the most important factor: the e-commerce platform acts as an agent for increasing conversion rates. Therefore, in e-commerce where revenues exceed R$50,000, it is essential to carefully analyze this potential.

Some considerations about choosing the e-commerce platform

As an addition, several other important points should be taken into account when choosing the most appropriate platform for your project:

  • Analyze the functionalities you need: the way the products will be displayed in the store window, the usability of the shopping cart, integration with payment methods and the security of customer data, among others.
  • Evaluate the trade-offs: the relation between convenience and control of the platform, the ideal is a balance.
  • User experience: a platform that adds no value to user experience will certainly harm the business, because you will spend a good amount of time worrying about useless matters, instead of focusing on making money.
  • Technical support: if the initial investment includes good technical support, you will also avoid the headaches involving extraneous issues that really don’t matter to your business.
  • Integration with the mobile world: the so-called m-commerce (mobile commerce) is already a reality, and people are increasingly using portable devices like smartphones and tablets for online purchasing. Therefore, choose a platform that meets this responsiveness, so that your store is adapted to the new trends of electronic commerce.

The best e-commerce platform

As we have seen during this article, to select the best e-commerce platform for your store you must analyze the possibilities within different perspectives: technology, finance and business.

Each of these analyses is part of a more coherent decision, without involving emotional factors like: “the salesperson won me over” or “my competitor uses this tool’. If you follow the steps of this article, your decision will be more certain to hit the mark and the chances of success of the virtual store will increase.

Now, let’s analyze some of the more common scenarios for defining which would be the best e-commerce platform:

An entrepreneur’s initial virtual store

This is the most common scenario we find; after all, the number of virtual stores now exceeds 450,000. If you are an entrepreneur, you are putting together your first virtual store and you forecast selling up to R$50,000 per month, the tip is:

  • Opt for a platform with a low monthly fee. Some of them may even be free, up to a certain size. This is the ideal strategy for breaking even;
  • Choose a free platform that has no setup and installation cost. This will increase your chances of payback;
  • As this is your first store, try not to choose platforms that will require technical expertise. Generally speaking, the Open Source and On-Premises models will mean you have to have an employee or specific expertise, and this may divide your time between a salesperson and a technology company;
  • Be aware of SEO requisites, since investment in media can be very expensive at the outset. One way of selling at a lower cost can be to join marketplaces. See here our article about the benefits of this strategy;

Start-up virtual store of someone with e-commerce experience and capital to invest

  • At this point, you can now start thinking about an initial investment and pay a higher monthly price on the platform;
  • Concern yourself with the ability of the platform to generate conversion. The aggregate cost is primarily important for mid-size companies whose objective is to be profitable;
  • As you have expertise in the market, an Open-Source or On-premises platform must be analyzed. You will now be able to technically identify the differences.

Virtual store of a company that already has a physical store

  • Your focus must be on putting together a solid RFP to identify multichannel functionalities. The Implementation of the strategies between online and offline are essential for success;
  • Consideration must be given to more expensive platforms at this time. Investment in technology may make the difference between having store that is profitable, or not;

Conclusion

Choosing the ideal e-commerce platform is no easy task. But it is a necessary one. It’s a process involving multiple variables and proper planning, since it is one of the key factors for success (or lack of it) in an online retail enterprise.

Given so many metrics and requisites to be evaluated, there is clearly a need to monitor the constant evolution that the e-commerce platform must have to remain innovative, while adding differentials, under the risk of a project seeing its investments thrown out with the rubbish.

The robustness and constant upgrading of the platform must be taken into account, otherwise, in a short space of time, you will end up having to migrate your e-commerce to another platform, to the detriment of the initial investment.

When choosing your e-commerce platform, be sure to analyze all the factors we have covered here.

Leave your comments and doubts, if you still have any doubts about how to choose the ideal e-commerce platform. And come and get to know VTEX. We are the leaders in providing corporate solutions for e-commerce.