Many dot-coms are fast running out of capital. And that’s not surprising, given how much Web maintenance alone can cost. Among the catalogers that responded to Catalog Age’s 2000 electronic marketing benchmark report (see the June issue of the i.merchant supplement) 27% spend more than $100,000 on annual Website maintenance, up from 18% last year. And the estimated mean amount spent on annual Website maintenance is $43,600, up from $40,900 last year.
While some catalogers figure into their maintenance budgets the salaries of employees who manage their Websites, maintenance costs usually are limited to software purchases and upgrades, server hosting and upgrades, hardware purchases and repairs, content management, and site programming and design.
“We spend about $250,000 annually on our Web maintenance,” says Jonathan Plotzker, director of catalog and Web operations for San Francisco-based home goods cataloger/retailer Restoration Hardware. That’s more than double what the $300 million company spent last year, “but we recently switched our Internet service provider,” which accounts for some of the additional cost, including new subscription rates and service fees. He says the $250,000 includes Website hosting and programming, which is outsourced, and inhouse day-to-day site maintenance, such as updating content and responding to e-mail. But the annual costs do not include the salaries of the two full-time staffers who maintain the site.
Giving the hefty sales increases many Web catalogers are reporting, a 100% increase in spending on site maintenance is hardly out of line. “Our annual Website maintenance costs are $3 million,” says Jason Loeb, network manager of Mount Vernon, MT-based gardening catalog Etera. “And that’s a 200% increase from last year.” But Etera includes the salaries of its Website maintenance employees in its costs. Salaries aside, Loeb says that 50% of the site maintenance costs are allocated to software and hardware expenses. Loeb says Etera’s annual sales are $5 million-$15 million.
Of course, not all online catalogers are spending millions to maintain their sites. “This year we expect our maintenance costs to be in the $65,000 range, up from about $40,000 last year,” says Rory O’Connor, creator/Webmaster of ShopIrish.com, the Website of Creative Irish Gifts, a Macedonia, OH-based cataloger that generates $7 million-$10 million in annual sales. In addition to software and hardware upgrades and site design and production, the $45,000 salary of one of two Website employees is included in that total.
Both O’Connor and Loeb are convinced that maintenance costs will always go up, but Restoration Hardware’s Plotzker believes that maintenance expenses will level off as early as next year. “I think a lot of the basic costs will have stabilized, and technological costs will stabilize or drop,” he says.
Also, “with a lot of the smaller players dropping like flies,” there will be fewer online retailers in need of hardware and software to maintain their sites. That lower demand “will necessitate lower prices,” Plotzker says.