The economics of multi-site shopping carts (cont.)

As discussed in the previous blog, internet retailers are at a disadvantage when it comes to customizing web sites for individual customer segments.  While the economics of the web allows other industries to easily and economically create web sites for each important customer segment, the product master file prevents internet retailers from enjoying those same economies.

The product master file consists of anywhere from hundreds to tens of thousands of product master records.  The most fundamental purpose of these records is to give customers the information they need to make buying decisions.  However, the product master file serves many other purposes.  It is used to organize products, capture revenue and cost information, track inventory movement, and communicate with suppliers and other partners.

The size, importance, and many roles of the product master file make it complex and difficult to manage.    That’s why businesses never want to manage more than one product master file.  For some businesses this is impossible.  The distributed nature of their data requires that product data be duplicated and distributed.  This is a decision, however, that is never taken lightly.

Despite the revenue opportunities on-line shopping carts afford internet retailers, shopping carts create further complexity regarding the maintenance of product master files.  First, for many retailers the data contained in the product master file has to be expanded to accommodate the unique needs of an on-line shopping cart.  This includes newly written (and newly elegant) product descriptions, unique pricing structures, and additional data that is not necessary for brick and mortar customers (suggested products, customer reviews, etc).  In other words, the on-line shopping cart adds yet another role to the product master file.  The challenge doesn’t end there.  On-line shopping carts almost always require their own product master file in their own data repository.  Thus, the company is forced to create and maintain yet another product master file.

So, an on-line shopping cart duplicates and expands the role of the product master file.  This is difficult but considering the revenue opportunities, the branding opportunities, and the competition it can be argued to be a worthwhile effort.

But now that many retailers have an on-line shopping cart, how does an internet retailer distinguish themselves in the online marketplace?  One way is to create a better online experience for customers.  One way to give customers a better online experience is to give them exactly what they want.  Unfortunately, not all customers want the same things, even in the same industry.  To address this, companies can divide their customers into segments.  They can then devise product features and marketing strategies for each segment.  The same thing can be done on the Internet.  In fact, the Internet is the perfect forum (it’s economical and convenient) for communicating with many customer segments.

A shopping cart sits inside a web site and is therefore clearly a vehicle for communicating with customers.  As such, it should be customized to the needs of each customer segment.  The better the shopping cart experience for each segment, the more likely sales will increase.  Unfortunately, shopping carts can only be customized for individual customer segments at great cost.  The cost is not disk space, web site design, or bandwidth utilization.  Rather, the cost is the necessity to create an additional product master file for every shopping cart web site.  This is necessary because the architecture of virtually every shopping cart engine in the market today employs a one web site, one shopping cart, one database, one product master model.  That architecture will not allow an on-line retailer to use one product master file to support multiple web sites / shopping carts.

This creates a tremendous challenge for the online Internet retailer.  What should be a relatively easy task of customizing websites for important customer segments now becomes a significant challenge.  As we’ve already seen, managing a single product master file is hard enough, managing more than one can be a nightmare.

Next we’ll discuss how internet retailers can get around this problem.

15 Responses to “The economics of multi-site shopping carts (cont.)”

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