Breaking down the costs of your “homemade” online shop vs. SaaS model

September 2016

Besides going online via a marketplace (which is definitely a total different concept redirect to SaaS solution post), business owners willing to digitalise their sales can either use a SaaS software or create their personal online shop through a web agency.

Of course, at the very end the outcome is similar: you have a personal, customized online shop where you can sell your products. However, the process to get there, time to market and the technology you rely on are extremely different.

The Digital Agencies process

Building your online shop

Let’s say you decide to implement your own solution through a digital-agency. First you check the agency’s hourly rate. You will find proportional prices depending on your country residence. For instance, in America this hourly rate can go from USD150 to USD1,000, whereas in Asia the price tends to be half of the American one, proximately USD75.

Once you figured out what costs are to be involved, you go through all the following steps.

You meet the agency, so that they can understand your needs and definition of e-commerce website strategy. Then the agency begins to design your e-commerce website, and once it is finished, they present you a prototype or even a demo, that you have to approve.

Afterwards, they can develop the website: structuring it on a CMS, the Content Management System, such as WordPress. Also, all necessary 3rd party integrations are done during this process, along with the web functionalities. Finally, a close look at mobile experience is required, as over the latest years it has been getting increasingly more crucial.

Finally, the debugging session – in order to make sure that your website works on all browsers – comes before the training session that enables your team to master the solution.

The least we can say is that this solution is time-consuming. The whole process means that before one or two months you will hardy have your website ready to use.

Your economic investment could easily range from USD39,000 to USD 260,000. In Asia, where the labour cost is still cheaper compared to the United States, it is reasonable to forecast a lower investment – however it is about some tens of thousands U.S. dollars. A ballpark figure could be USD19,500.

Anyway, it still could be a favorable outcome, if really in a couple of months you could be online. The required investment indeed is not totally out of reach.

Remember the content

Here we are. You are almost ready to sell. Almost? Do not forget you are a B2B distributor or retailer. Be sure, you will need more than a few pictures and a user-friendly interface to make it work.

First the data. You have to build your own data library, with all the SKUs, attributes and technical characteristics of your products. Indeed, you are involved in a technical business, as most B2B operators are. Thus, your e-commerce website has to be part of a comprehensive, online strategy:

- The first part of this strategy implies the appointment of a data category manager, who can transfer SKUs and other technical specifications from bulky paper catalogues online. We are not talking about a large number of SKUs, but about a relatively small batch ranging from 5,000 to 10,000 SKUs.

- The second part requires a business project and the appointment of a project manager.

Both project and data category management take time and require a tremendous expertise, which cannot be delivered by the web agency nor by your existing staff. This is why you have to hire at least two more employees.

Taking this into account, you’ll have to revise your previous estimate: instead of two months, building your online shop will take you at least eight months. And this to be ready to launch it in the ninth month.

In a nutshell, if you break down the costs you are going to face while creating your handmade online shop:

- USD 19,500 to cover the fees of the web agency;

- USD 13,500 to cover the salary of the project manager;

- the same amount will be spent for the salary of the data category manager;

- USD 800 to host your product data on a safe server.

When coming to the ninth month, after an investment of eight months and USD 47,100, you are finally ready to launch your webstore.

Then, why not to choose a SaaS solution?

To go for a SaaS model, you simply need to subscribe to a SaaS provider. SaaS is a particular type of software, as it is not stored in your company’s computers, but externally in a cloud computing farm. Consequently, it is delivered as a service – via a monthly subscription.

When considering the different parameters, we could actually even say that the main drawbacks of a web agency become advantages with a SaaS provider.

Time to market

Right now the majority of B2B players is shifting to the online market. In America, the B2B e-commerce industry hits total revenues to USD 780 billion in 2015. Indeed, the size of the B2B e-commerce market can give the impression that B2B e-commerce is mature and its strategies well defined. But from a business perspective, deploying your online strategy in almost one year is a huge period time – it actually represents the loss of a bunch of opportunities.

That is why a solution deployed in only 48 hours is more than interesting. SaaS is ready to use, is a turnkey package. In 48 hours you have your fully furnished online shop and you just start selling.

SEO

If you go online, you need to play according online rules. It implies that gaining a high SEO should be among your top three priorities. Entering the online market with a large delay dramatically threatens your potential online sales. On the contrary, the faster you get online, the easier you gain high SEO, to the detriment of your direct competitors.

Data Library

Be aware that after almost one year of project management you hardly have more than 10,000 SKUs. This is very little part compared to how many products there are out there. You have to continuously improve your data library for the next years.

However, a SaaS solution for B2B industry (e.g. the electro-mechanical components industry) is fully equipped with hundred thousands of SKUs. Hence, your online shop has the possibility to sell, for instance, 500,000 products.

- Cost

It is not just about the upfront cost of the web agency. You face the cost of the improvement of your data library on an ongoing basis, of your data server, and of your employees in charge of the project, etc.. It means about thousands of U.S. dollars per month for some years.

A SaaS provider on the other side guarantees a clear and flat monthly subscription which is totally customisable according to your business needs, and it barely goes beyond USD 4,000 per month.