The Pluses and Perils of In-House Retail Software

This year, Dick’s Sporting Goods is transitioning to in-house software across all of its e-commerce platforms. The effort echoes similar tech initiatives by Walmart and Home Depot, and has piqued the interest of retail and technology companies alike. But as the sporting goods giant shifts its nationwide online operations to self-built software, it risks diverting focus from the core competency of selling.

Dick’s e-commerce overhaul includes changes in website design, on-site search and checkout capabilities, product listings, and more. While retailers bolstering tech teams is a growing trend, that doesn’t make it an inherently smart business decision. For companies thinking about creating proprietary e-commerce solutions, here are a few ideas to consider:

Keeping Up With Innovation

Building robust technology and e-commerce programs requires a significant time, personnel and financial investment. Though retailers may be able to clear this hurdle once, the challenge doesn’t stop there. With tech-infused companies like Amazon.com leading the charge, e-commerce’s innovation is rapidly paced and seemingly unending.

Third-party software companies are already experts in the field and equipped to respond to fast-moving technology trends, whereas industry changes can catch retailers off guard. Digital demands may force companies to hire new employees or funnel more resources, either to keep pace with technology or just maintain existing systems. Even with well-laid plans, in-house software development swallows operational focus, potentially distracting from broader considerations about the products you’re actually selling.

Weighing the Costs

Paul Gaffney, Dick’s chief technology officer leading its software surge, noted that the tech push will enable the company to list merchandise within 30 minutes. This beats the previous waiting period that could extend to five days, allowing Dick's to respond more quickly to major sports outcomes and breaking news. He says the goal of the system is to earn 10 times the amount in revenue as it costs to develop.

However, this lofty goal is difficult to accomplish. Dick’s software took eight people to develop, and if the company expects to continuously measure up to other platforms, it will require a much larger team and leaders with relevant experience. In contrast to polished third-party options, retailer-built e-commerce solutions require more maintenance and a lengthy trial-and-error process to perfect. The larger questions facing stores as they attempt to move into the development world cut to the core of their identity: Do retailers actually want to become technology companies, and are they prepared to make that shift?

In-House vs. Third-Party Software

There are specific cases where proprietary software provides value, although it should be considered carefully. For instance, if the program responds to a unique, specific purpose of your business, it may be worthwhile — or necessary — to develop an internal team that’s able to build it with your company’s insight in mind. Dick’s Sporting Goods is trying to decrease reliance on other providers while preparing to meet increasing inventory management and omnichannel expectations. However, in most cases it’s better to trust software partners with a solid, long-standing reputation. If a solution already exists, it’s best to buy it rather than attempting to manufacture a personalized replica.

Finding Alternative Solutions

While there are benefits to creating your own online retail systems, it also carries significant costs. E-commerce and content management system providers are continuously evolving and creating more advanced platforms, further reducing the need to assemble a team and create your own. If you’re a retailer trying to adapt to a swiftly changing market, you can achieve success by partnering with third-party technology companies and focusing innovation within your areas of expertise — retail and customer experience.

Rasmus Skjoldan is chief marketing officer at Magnolia, a leading open-source content management system used by retailers and e-commerce companies.