How much ecommerce startups should invest in technology?

While choosing and making investment in the type of technology you want to use, one  should never spend money until you are not clear what you want to achieve through it; as experts says technology is significant business driver, it should be given significant attention for cash flow from the early days and for this startups must :-

  • Know your needs:

While planning about the type of  technology you want to use for your product, you must keep in mind ‘What are your needs,’ what all you need on your interface & backend, clearly define the purpose of your product, once these are decided then you can think through about kind of technology or resources needed, and also resources that are readily available to build it.

  • Build Minimal Viable Product: 

“The minimum viable product is that version of a new product which allows a team to collect the maximum amount of validated learning about customers with the least effort” . By focusing on MVP prior making major investment in technology, it can help the startups to understand what the customer want and thus this can reduce chances of companies picking up features which customers don’t want, this reduces time & money for developing those features., which is Fashion & Lifestyle website, also believes that new features must be tested with the customers before committing any significant investment in them. “Traditionally businesses used to wait until the entire technology platform is built before taking the idea to the market – however in today’s world, the startups that wait too long and invest significant capital before testing the viability are not going to be able to compete with other businesses that are much more nimble in their approach,” says Darpan Munjal, Co-founder, Fashionara.

  • Get to the right product definition: 

Once you know your need, one need to document those need well to make sure the right product definition and specifications reaches the development team. The documentation helps in arriving the exact product definition and will also save costs in unnecessary iterations and in providing useful tracking.

  • Consider cost vs Other Factors: 

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Sanjay Netrabile, CTO, explains that the cost involved for a startup’s core technology depend on factors which includes:

1. Technology stack being used – Languages/packages being used to develop the website

2. Hosting costs – Where the website would be hosted

3. Customization/Development costs – Is the website being developed from scratch? Or customizing open source ecommerce software.

4. Estimated load – Estimated number of concurrent users

5. Licensing costs – If using support based enterprise level packages, licensing cost would be huge.

He also says that while there’s a lot of emphasis on technology in any ecommerce startup, the costs have to be kept bare minimum.

  • Consider Cost vs Team Size:

Explaining about the importance of team size for a business, Amitabh Misra, VP, Engineering,, said that the team size has a direct function of the speed at which you want to build systems. Bigger teams will generally build multiple programs quicker. Besides, if one has a long term perspective, then one would want to build most tech components in-house and therefore need more engineers. Having people in-house means the IP remains with the company. Also the quality of the software depends on the team size. Inadequate team size means a compromise in terms of security, performance and robustness of the software.

  • Consider Cost vs Timeline

Cost on an IT infrastructure and development also depends on timeline and growth of a startup. Here is a case of Snapdeal on how they deployed various IT solutions and product features.

“We have built the entire technology platform in-house” says Amitabh, “that it’ll be hard to put an order of deployment, as each component continues to evolve. However, if we have to, we’ll go with the following”.

- Website, Catalog Management System, Order Management System

- Customer communication (Email, SMS)

- Customer Care

- Search

- Shipping and Logistics Systems

- Fulfillment Center Management

- Content Management System

- Mobile Site

- Review and Rating System

- Vendor, Inventory and Pricing Management Systems

- ERP for financial systems

What experts have more to share?

Nowadays, there are large number of free tools available in the market, like Google Analytics, Open ERP etc, which the startups can use in scaling up their websites. Also, there are lot of open source software available today and with cheap computing available on cloud, which can help to optimize technology investment. However, the biggest investment/cost today is hiring and retaining highly skilled techies who continue to be in short supply, says Amitabh Misra, VP, Engineering,

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Rajesh Nahar, CEO, Cbazaar: There are various products available in the market, where you pay and use, you need to have people who are efficient enough to use it.

Vijay Misra, Founder Director, Intuitent Online: A lakh at best if using own funds, a couple of lakhs on setting up a great website – spent mostly on good edging and navigation.

Mukesh Bansal, CEO & Co-Founder, Myntra: It can be as much as 50% of company investment in first few years and even at a larger scale 15-20% of company investment should go into technology to continue to improve the platform for scaling the business.

Darpan Munjal, Co-founder, Fashionara: The most important goal for a startup should be to invest enough so that it can validate the viability of idea and build a proof of concept that can be tested in market. Once there is clear understanding of the market and viability of the idea, an appropriate investment should be made to enrich the technology foundation.

Darpan Munjal further recommends the startups to look at the investment from the lens of its customers. If the investment will directly improve the overall experience and add clear value to its target customers in a differentiated way, it is an investment worth considering. He says that many companies like to invest in features or technologies that are “cool” but sometimes there is no clear use case about how that investment addresses their target customer’s needs. Those are the types of investments that should be avoided until a clear need develops in the market.

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    Very well summed it up. If these are basics are followed by e-com entrepreneurs, we would not see lot of businesses shutting shop in one year of operations.

  • sam

    Great Post and at the right time for us.. we’re now thinking of switching to a responsive website design, which is going to cost us some money but sometimes it’s more than required to invest in technology even if you’re a start up to be in line with current scene and your competitors.

    thanks for sharing this.