Cost Savings And Business Benefits Enabled By Managed Marketplaces, A Commerce Solution For Brands And Suppliers By Rithum
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Marketplaces are a rapid-growth channel in an otherwise anemic retail landscape. Seventy-seven percent of brand decision-makers say that online marketplaces are growing faster than their organization’s traditional wholesale business.1 Consumers want omnichannel purchasing options and brands need to manage multiple marketplaces without sacrificing profitability. By adopting Rithum Managed Marketplaces, brands can focus on enhancing multichannel presence, streamlining operations, and driving profitable revenue growth.
Rithum Managed Marketplaces, formerly known as ChannelAdvisor Managed Marketplaces, enables businesses to connect their product listings, inventories, and order management systems with leading online global marketplaces such as Amazon, eBay, Walmart, and more.2 These integrations facilitate centralized control and near real-time updates across multiple platforms, allowing for efficient management and synchronization of product data. This is an important capability for brands because the channels through which buyers shop are fragmenting, and the pace of e-commerce change is rapid. There is always a new emerging program or channel, and brands need the ability to integrate and adapt quickly.
Rithum commissioned Forrester Consulting to conduct a Total Economic Impact™ (TEI) study and examine the potential return on investment (ROI) enterprises may realize by deploying Rithum Managed Marketplaces. The purpose of this study is to provide readers with a framework to evaluate the potential financial impact of Rithum on their organizations.3
To better understand the benefits, costs, and risks associated with this investment, Forrester interviewed four representatives with experience working with Rithum. For the purposes of this study, Forrester aggregated the interviewees’ experiences and combined the results into a single composite organization, which is a high-volume brand with $2.5 billion in companywide annual revenues and a growing marketplace business.
Prior to investing in Rithum Managed Marketplaces, their organizations struggled to effectively manage their presence across online marketplaces and channels, leading to inconsistent customer experiences and missed sales opportunities.
After the investment, the interviewees’ organizations scaled their marketplace footprints and drove operating efficiencies.
Quantified benefits. Three-year, risk-adjusted present value (PV) quantified benefits for the composite organization include:
For , increased speed of scaling to new marketplaces might be worth over three years.
For , year-over-year GMV and profit growth might be worth over three years.
For , technical labor savings for marketplace management might be worth over three years.
For , efficiency improvement for marketplace management might be worth over three years.
“I want to make my [organization’s] marketplace operations as efficient as possible. That’s why we work with Rithum.”
Director of innovation and product, office equipment
“For us, [the Rithum investment] is justifiable because of the efficiencies of scale and the analytics and insights that we’re gaining. It would require a significant investment on our end in personnel management and in execution to do without Rithum. It also allows us to focus more on strategy versus the operational aspects of running marketplaces.”
Vice president of omnichannel, fashion retail
Unquantified benefits. Benefits that provide value for the composite organization but are not quantified for this study include:
Costs. Three-year, risk-adjusted PV costs for the composite organization include:
For , subscription costs might total over three years.
For , initial implementation costs might total .
For , marketplace expansion and ongoing management costs might total over three years.
The representative interviews and financial analysis found that a composite organization experiences benefits of $3.30 million over three years versus costs of $1.13 million, adding up to a net present value (NPV) of $2.17 million and an ROI of 191%.
might experience benefits of over three years versus costs of , adding up to a net present value of and an ROI of .
“We’ve been able to take a marketplace business from $9 million to $127 million over four years. I’d say the ROI on this investment is high — probably higher than most will ever see in their careers.”
Vice president of omnichannel, fashion retail
Return on investment (ROI):
Benefits PV:
Net present value (NPV):
Payback:
From the information provided in the interviews, Forrester constructed a Total Economic Impact™ framework for those organizations considering an investment in Rithum.
The objective of the framework is to identify the cost, benefit, flexibility, and risk factors that affect the investment decision. Forrester took a multistep approach to evaluate the impact that Rithum can have on an organization.
Interviewed Rithum stakeholders and Forrester analysts to gather data relative to Rithum Managed Marketplaces.
Interviewed four representatives at organizations using Rithum Managed Marketplaces to obtain data about costs, benefits, and risks.
Designed a composite organization based on characteristics of the interviewees’ organizations.
Constructed a financial model representative of the interviews using the TEI methodology and risk-adjusted the financial model based on issues and concerns of the interviewees.
Employed four fundamental elements of TEI in modeling the investment impact: benefits, costs, flexibility, and risks. Given the increasing sophistication of ROI analyses related to IT investments, Forrester’s TEI methodology provides a complete picture of the total economic impact of purchase decisions. Please see Appendix A for additional information on the TEI methodology.
Readers should be aware of the following:
This study is commissioned by Rithum and delivered by Forrester Consulting. It is not meant to be used as a competitive analysis.
Forrester makes no assumptions as to the potential ROI that other organizations will receive. Forrester strongly advises that readers use their own estimates within the framework provided in the study to determine the appropriateness of an investment in Rithum.
Rithum reviewed and provided feedback to Forrester, but Forrester maintains editorial control over the study and its findings and does not accept changes to the study that contradict Forrester’s findings or obscure the meaning of the study.
Rithum provided the customer names for the interviews but did not participate in the interviews.
Consulting Team:
Veronica Iles
Tony Lam
Role | Industry | Region | Size |
---|---|---|---|
Director of innovation and product | Office equipment | Headquarters: US | Revenue: $63 billion |
VP of omnichannel | Fashion retail | Headquarters: Japan Operations: Global |
Revenue: $850 million |
Senior manager of business operations | Fashion retail | Headquarters: US | Revenue: $700 million |
VP of global digital product and consumer experience | Footwear retail | Headquarters: US | Revenue: $2.3 billion Employees: 4,000 |
Before investing in Rithum, the interviewees’ organizations had fledgling channel businesses through a single marketplace, but they lacked a more substantial marketplace presence. They used medium-sized teams to manage prior marketplace programs, and growth was driven mainly through incremental enrichment of existing channels.
The interviewees noted how their organizations struggled with common challenges, including:
The interviewees’ organizations searched for a solution that could help them:
“We knew that we had to figure out a way to scale if we wanted to grow and sell in more marketplaces. The whole goal was to be able to launch on Amazon [Marketplace] and to scale to multiple partners so we could sell through our own inventory.”
Senior manager of business operations, fashion retail
“At the end of the day [our goals] are all about operational efficiency.”
Director of innovation and product, office equipment
After evaluating multiple vendors, the interviewees’ organizations chose Rithum for the following reasons:
Based on the interviews, Forrester constructed a TEI framework, a composite company, and an ROI analysis that illustrates the areas financially affected. The composite organization is representative of the four interviewees, and it is used to present the aggregate financial analysis in the next section. The composite organization has the following characteristics:
Description of composite. The composite organization is a high-volume brand headquartered in the United States with global operations. It has companywide annual revenues of $2.5 billion, and it derives 30% of the total revenues ($750 million) from digital sources including marketplaces. The organization has 4,000 employees and a profit margin of 10%. Before investing in Rithum, the composite organization directly managed a website and one small marketplace business that processed $3.5 million in GMV annually. The directly managed marketplace had year-over-year growth of 10%.
Deployment characteristics. The composite organization’s primary goals for the Rithum investment are to add two primary marketplaces in the first year and to continue to add secondary marketplaces each subsequent year. The composite organization scales to new marketplaces each year, adding three individual new marketplaces in Year 1, one in Year 2, and three in Year 3. The cumulative total number of managed marketplaces is four in Year 1, five in Year 2, and eight in Year 3.
Ref. | Benefit | Year 1 | Year 2 | Year 3 | Total | Present Value |
---|---|---|---|---|---|---|
Atr | Marketplace scaling and speed to market | $461,165 $461,165 | $153,722 $153,722 | $461,165 $461,165 | $1,076,053 $1,076,053 | $892,764 $892,764 |
Btr | Marketplace GMV and profit growth | $78,750 $78,750 | $65,835 $65,835 | $64,733 $64,733 | $209,318 $209,318 | $174,634 $174,634 |
Ctr | Marketplace integration efficiencies | $485,971 $485,971 | $607,464 $607,464 | $971,942 $971,942 | $2,065,378 $2,065,378 | $1,674,063 $1,674,063 |
Dtr | Marketplace management efficiencies | $273,375 $273,375 | $97,200 $97,200 | $309,825 $309,825 | $680,400 $680,400 | $561,629 $561,629 |
Total benefits (risk-adjusted) | $1,299,262 $1,299,262 | $924,221 $924,221 | $1,807,665 $1,807,665 | $4,031,148 $4,031,148 | $3,303,090 $3,303,090 | |
Evidence and data. With the investment in Rithum, the interviewees’ organizations scaled their marketplace programs more quickly than what was possible by adding directly managed marketplaces. Interviewees said online marketplaces (e-commerce destinations that connect sellers and consumers) have gained a tremendous share in digital retail in the last decade and that they realized the need for their organizations to engage in marketplace channels in an efficient way.
Interviewees noted several ways that the Rithum investment enabled their organizations to scale their businesses more easily, including:
“We want to be able to launch as many marketplaces as we want as quickly as we can.”
VP of global digital product and consumer experience, footwear retail
“Rithum brings up new marketplaces that are joining the platform that they think would fit best for our catalog.”
Senior manager business operations, fashion retail
50%
Speed to market improvement
Modeling and assumptions. Based on the interviews, Forrester assumes the following about the composite organization:
begins with 0 in the initial year and adds 0 in Years 1, 2, and 3. The cumulative total number of managed marketplaces is 0,0, and 0 in Years 1, 2, and 3, respectively.
Risks. Forrester recognizes that these results may not be representative of all experiences. The impact of this benefit will vary depending on the following:
Results. To account for these risks, Forrester adjusted this benefit downward by 10%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $893,000.
For , this benefit might have a three-year, risk-adjusted total PV (discounted at 10%) of .
Ref. | Metric | Source | Year 1 | Year 2 | Year 3 |
---|---|---|---|---|---|
A1 | Number of new secondary markets added with Rithum | CompositeComposite | 33 | 11 | 33 |
A2 | Number of weeks required to add a new market in prior environment | InterviewsInterviews | 2424 | 2424 | 2424 |
A3 | Speed to market acceleration with Rithum | InterviewsInterviews | 50%50% | 50%50% | 50%50% |
A4 | Weeks required to add a new market with Rithum | A2*A3 | 1212 | 1212 | 1212 |
A5 | Weeks avoided for adding new marketplace | A2-A4 | 1212 | 1212 | 1212 |
A6 | Average burdened weekly cost of implementation team | CompositeComposite | $14,234 $14,234 | $14,234 $14,234 | $14,234 $14,234 |
At | Marketplace scaling and speed to market | A1*A5*A6 | $512,406 $512,406 | $170,802 $170,802 | $512,406 $512,406 |
Risk adjustment | ↓10% | ||||
Atr | Marketplace scaling and speed to market (risk-adjusted) | $461,165 $461,165 | $153,722 $153,722 | $461,165 $461,165 | |
Three-year total: $1,076,053 $1,076,053 | Three-year present value: $892,764 $892,764 |
Evidence and data. Interviewees said Rithum helps their brands connect with digital selling channels to drive incremental sales and GMV. They noted several ways that the Rithum investment enabled their organizations to capture additional GMV, including:
“Rithum gives us the opportunity to be present wherever the consumer is, and that is always the priority.”
VP of global digital product and consumer experience, footwear retail
Interviewees also noted several nuances in their organizations’ marketplace growth:
Modeling and assumptions. Based on the interviews, Forrester assumes the following about the composite organization:
Before investing in Rithum, has 0 with an annual GMV of $0.
With the investment in Rithum and the expansion to new marketplaces, might realize 0%, 0%, and 0% year-over-year increases in GMV in Years 1, 2, and 3 respectively.
Risks. Forrester recognizes that these results may not be representative of all experiences. The impact of this benefit will vary depending on the following:
Results. To account for these risks, Forrester adjusted this benefit downward by 10%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $175,000.
For , this benefit might have a three-year, risk-adjusted total PV (discounted at 10%) of .
46%
Three-year CAGR
Ref. | Metric | Source | Year 1 | Year 2 | Year 3 | |
---|---|---|---|---|---|---|
B1 | GMV with organic growth in prior environment | Y1 Composite; Y2 B1+B2PYY1 Composite; Y2 B1+B2PY | $3,500,000 $3,500,000 | $3,850,000 $3,850,000 | $4,235,000 $4,235,000 | |
B2 | Year-over-year growth in prior environment | CompositeComposite | 10%10% | 10%10% | 10%10% | |
B3 | Subtotal: Organic incremental GMV in prior environment | B1*B2 | $350,000 $350,000 | $385,000 $385,000 | $423,500 $423,500 | |
B4 | GMV with Rithum | Y1 Composite; Y2: Y1 Composite; Y2: B4PY+(B4*B5)Y1 Composite; Y2: B4PY+(B4*B5) | $3,500,000 $3,500,000 | $5,600,000 $5,600,000 | $7,448,000 $7,448,000 | |
B5 | Year-over-year growth in GMV with Rithum | CompositeComposite | 60%60% | 33%33% | 25%25% | |
B6 | Subtotal: GMV incremental growth with Rithum | B4*B5*B8 | $2,100,000 $2,100,000 | $1,848,000 $1,848,000 | $1,862,000 $1,862,000 | |
B7 | Net GMV added with Rithum | B6-B3 | $1,750,000 $1,750,000 | $1,463,000 $1,463,000 | $1,438,500 $1,438,500 | |
B8 | GMV growth attributed to Rithum | InterviewsInterviews | 50%50% | 50%50% | 50%50% | |
B9 | Profit margin | CompositeComposite | 10%10% | 10%10% | 10%10% | |
Bt | Marketplace GMV and profit growth | B7*B9 | $87,500.00 $87,500.00 | $73,150.00 $73,150.00 | $71,925.00 $71,925.00 | |
Risk adjustment | ↓10% | |||||
Btr | Marketplace GMV and profit growth (risk-adjusted) | $78,750 $78,750 | $65,835 $65,835 | $64,733 $64,733 | ||
Three-year total: $209,318 $209,318 | Three-year present value: $174,634 $174,634 |
Evidence and data. In addition to expanding to new marketplaces and driving year-over-year GMV growth, interviewees also noted that Rithum enabled their organizations to operate their marketplace integrations more efficiently. Interviewees noted several ways that the Rithum investment enabled their organizations to streamline technical operations, including:
“We’re able to solve technical issues with Rithum relatively quickly, and we can probably get to a resolution within a few days. The directly managed marketplaces take a bit more digging and evaluation, which would usually take a week [or more] to figure out.”
VP of omnichannel, fashion retail
600
Technical hours saved per marketplace each year
Modeling and assumptions. Based on the interviews, Forrester assumes the following about the composite organization:
sells through 0,0, and 0 in Years 1, 2, and 3, respectively. Each marketplace has a single change each year and one break-fix issue per month.
Risks. Forrester recognizes that these results may not be representative of all experiences. The impact of this benefit will vary depending on the following:
Results. To account for these risks, Forrester adjusted this benefit downward by 10%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $1.7 million.
For , this benefit might have a three-year, risk-adjusted total PV (discounted at 10%) of .
Ref. | Metric | Source | Year 1 | Year 2 | Year 3 | |
---|---|---|---|---|---|---|
C1 | Requirement changes per marketplace | InterviewsInterviews | 11 | 11 | 11 | |
C2 | Weeks to make a change on a direct managed marketplace | InterviewsInterviews | 1616 | 1616 | 1616 | |
C3 | Requirement adoption acceleration with Rithum | InterviewsInterviews | 90%90% | 90%90% | 90%90% | |
C4 | Weeks to make a change on a Rithum-managed marketplace (rounded) | C2-C5 | 22 | 22 | 22 | |
C5 | Avoided weeks needed to update marketplace requirement changes | C2*C3 | 1414 | 1414 | 1414 | |
C6 | Subtotal: Management savings for requirement changes | C1*C5*C13*C14*C 15 | $290,752 $290,752 | $363,440 $363,440 | $581,504 $581,504 | |
C7 | Break-fix issues per marketplace | InterviewsInterviews | 1212 | 1212 | 1212 | |
C8 | Weeks to resolve break-fix issue on direct managed marketplaces | InterviewsInterviews | 1.51.5 | 1.51.5 | 1.51.5 | |
C9 | Break-fix acceleration with Rithum | InterviewsInterviews | 75%75% | 75%75% | 75%75% | |
C10 | Weeks to resolve break-fix issue on a Rithum-managed marketplace | C8-C11 | 0.50.5 | 0.50.5 | 0.50.5 | |
C11 | Avoided weeks needed to resolve break-fix issues | C8*C9 | 1.01.0 | 1.01.0 | 1.01.0 | |
C12 | Subtotal: Management savings for break-fix issues | C7*C11*C14* C13*C15 | $249,216 $249,216 | $311,520 $311,520 | $498,432 $498,432 | |
C13 | Marketplaces managed with Rithum | Composite | 44 | 55 | 88 | |
C14 | FTE integration resources who work on requirement changes and break-fix | CompositeComposite | 22 | 22 | 22 | |
C15 | Weekly burdened cost of marketplace resource | CompositeComposite | $2,596 $2,596 | $2,596 $2,596 | $2,596 $2,596 | |
Ct | Marketplace integration efficiencies | C6+C12 | $539,968.00 $539,968.00 | $674,960.00 $674,960.00 | $1,079,936.00 $1,079,936.00 | |
Risk adjustment | ↓10% | |||||
Ctr | Marketplace integration efficiencies (risk-adjusted) | $485,971 $485,971 | $607,464 $607,464 | $971,942 $971,942 | ||
Three-year total: $2,065,378 $2,065,378 | Three-year present value: $1,674,063 $1,674,063 |
Interviewees said that in addition to operating the technical integrations with multiple marketplaces more efficiently, their organizations’ marketplace operations also recognized additional efficiencies from working with Rithum. They noted several ways that the Rithum investment enabled them to streamline marketplace operations:
Evidence and data. Interviewees noted several ways that the Rithum investment enabled their organizations to make their marketplace management more efficient, including:
“We could spend 5 to 8 hours … every day going through the file and converting our data to fit Amazon or eBay. We’re talking an 8-hour day, at least, just to make sure that the products get updated. ... It was a full-time job for someone.”
Senior manager of business operations, fashion retail
“You reap the benefits [of working with Rithum] from Day 1 from having full automation on the back end and less work to actually run that business on an ongoing basis. We’re saving 210 hours a month for a small market, so that’s where we’re really getting our benefits.”
Director of innovation and product, office equipment
“Rithum helps reduce operational support once we do go live with a marketplace because if you have a directly managed marketplace, that is obviously much more management and time that you have to allocate to order processing and management.”
VP of global digital product and consumer experience, footwear retail
75% to 85%
Increase in marketplace manager efficiency
Modeling and assumptions. Based on the interviews, Forrester assumes the following about the composite organization:
begins with 0 in the initial year and adds 0 in Years 1, 2, and 3. The cumulative total number of managed marketplaces is 0,0, and 0 in Years 1, 2, and 3, respectively.
In the prior environment for , the organization might have needed to add 0 each year to support its growing marketplace business.
might avoid hiring 0, 0, and additional headcount in Years 1, 2, and 3, respectively.
Risks. Forrester recognizes that these results may not be representative of all experiences. The impact of this benefit will vary depending on the following:
Results. To account for these risks, Forrester adjusted this benefit downward by 10%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $562,000.
For , this benefit might have a three-year, risk-adjusted total PV (discounted at 10%) of .
Ref. | Metric | Source | Year 1 | Year 2 | Year 3 | |
---|---|---|---|---|---|---|
D1 | New markets added with Rithum | A1 | 33 | 11 | 33 | |
D2 | Managers per direct managed marketplace | InterviewsInterviews | 1.01.0 | 1.01.0 | 1.01.0 | |
D3 | Additional marketplace managers needed to manage secondary markets without Rithum | D1*D2 | 3.03.0 | 1.01.0 | 3.03.0 | |
D4 | Percentage efficiency gain with Rithum | InterviewsInterviews | 75%75% | 80%80% | 85%85% | |
D5 | Avoided hires to manage marketplaces | D3*D4 | 2.32.3 | 0.80.8 | 2.62.6 | |
D6 | Burdened annual cost of a marketplace manager | CompositeComposite | $135,000 $135,000 | $135,000 $135,000 | $135,000 $135,000 | |
Dt | Marketplace management efficiencies | D5*D6 | $303,750.00 $303,750.00 | $108,000.00 $108,000.00 | $344,250.00 $344,250.00 | |
Risk adjustment | ↓10% | |||||
Dtr | Marketplace management efficiencies (risk-adjusted) | $273,375 $273,375 | $97,200 $97,200 | $309,825 $309,825 | ||
Three-year total: $680,400 $680,400 | Three-year present value: $561,629 $561,629 |
Interviewees mentioned the following additional benefits that their organizations experienced but were not able to quantify for this study:
The value of flexibility is unique to each customer. There are multiple scenarios in which a customer might implement Rithum and later realize additional uses and business opportunities, including:
Flexibility would also be quantified when evaluated as part of a specific project (described in more detail in Appendix A).
Ref. | Cost | Initial | Year 1 | Year 2 | Year 3 | Total | Present Value |
---|---|---|---|---|---|---|---|
Etr | Rithum Managed Marketplaces | $0 $0 | $106,400 $106,400 | $171,304 $171,304 | $242,060 $242,060 | $519,764 $519,764 | $420,164 $420,164 |
Ftr | Initial implementation | $283,401 $283,401 | $0 $0 | $0 $0 | $0 $0 | $283,401 $283,401 | $283,401 $283,401 |
Gtr | Marketplace expansion and ongoing management | $0 $0 | $222,103 $222,103 | $74,034 $74,034 | $222,103 $222,103 | $518,241 $518,241 | $429,967 $429,967 |
Total costs (risk-adjusted) | $283,401 $283,401 | $328,503 $328,503 | $245,338 $245,338 | $464,163 $464,163 | $1,321,406 $1,321,406 | $1,133,532 $1,133,532 | |
Evidence and data. The interviewees’ organizations pay Rithum Managed Marketplace subscription fees based on estimated GMV processed through the platform. The actual subscription fees varied significantly between the organizations based on how accurate the contracted licensing estimates were compared to their actual GVMs. The organizations’ subscription costs ranged from 0.2% to 7% of their GMVs and averaged approximately 2%.
Modeling and assumptions. Based on the interviews, Forrester assumes the composite organization’s subscription fees for Rithum Managed Marketplaces are $106,400 in Year 1, $171,304 in Year 2, and $242,060 in Year 3.
For , subscription fees for Rithum Managed Marketplace might be $0 in Year 1, $0 in Year 2, and in Year 3.
Risks. Forrester recognizes that these results may not be representative of all experiences and the cost will vary between organizations depending on:
Results. Forrester calculated a three-year, risk-adjusted total PV (discounted at 10%) of $420,000.
For , this cost might have a three-year, risk-adjusted total PV (discounted at 10%) of .
Ref. | Metric | Source | Initial | Year 1 | Year 2 | Year 3 | |
---|---|---|---|---|---|---|---|
E1 | Rithum Managed Marketplaces subscription | CompositeComposite | $0 | $106,400 $106,400 | $171,304 $171,304 | $242,060 $242,060 | |
Et | Rithum Managed Marketplaces subscription | E1 | $0 $0 | $106,400 $106,400 | $171,304 $171,304 | $242,060 $242,060 | |
Risk adjustment | 0% | ||||||
Etr | Rithum Managed Marketplaces subscription (risk-adjusted) | $0 $0 | $106,400 $106,400 | $171,304 $171,304 | $242,060 $242,060 | ||
Three-year total: $519,764 $519,764 | Three-year present value: $420,164 $420,164 |
Evidence and data. The interviewees’ organizations incurred external and internal costs in the following categories as part of their Rithum implementations:
“I’d say training is relatively minimal. Within a couple of weeks, you’ll be up and running.”
Director of innovation and product, office equipment
Modeling and assumptions. Based on the interviews, Forrester assumes the following for the composite organization:
Risks. Forrester recognizes that these results may not be representative of all experiences and the cost will vary based on several factors including:
Results. To account for these risks, Forrester adjusted this cost upward by 10%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $283,000.
For , this cost might have a three-year, risk-adjusted total PV (discounted at 10%) of .
Ref. | Metric | Source | Initial | Year 1 | Year 2 | Year 3 |
---|---|---|---|---|---|---|
F1 | One-time implementation fee | CompositeComposite | $10,000 $10,000 | $0 | $0 | $0 |
F2 | Internal technical resources tasked with implementation | CompositeComposite | 55 | 0 | 0 | 0 |
F3 | Weeks dedicated to implementation | CompositeComposite | 55 | 0 | 0 | 0 |
F4 | Weighted average weekly burdened cost of an implementation resource | CompositeComposite | $4,128 $4,128 | $0 | $0 | $0 |
F5 | Subtotal: Technical implementation costs | F1+(F2*F3*F4) | $113,188 $113,188 | $0 $0 | $0 $0 | $0 $0 |
F6 | Internal business resources involved with implementation | CompositeComposite | 66 | 0 | 0 | 0 |
F7 | Weeks to implement Rithum and primary marketplace | CompositeComposite | 99 | 0 | 0 | 0 |
F8 | Weighted average weekly burdened cost of business resources | CompositeComposite | $2,675 $2,675 | $0 | $0 | $0 |
F9 | Subtotal: Business resources implementation costs | F6*F7*F8 | $144,450 $144,450 | $0 $0 | $0 $0 | $0 $0 |
Ft | Initial implementation | F5+F9 | $257,638 $257,638 | $0 $0 | $0 $0 | $0 $0 |
Risk adjustment | ↑10% | |||||
Ftr | Initial implementation (risk-adjusted) | $283,401 $283,401 | $0 $0 | $0 $0 | $0 $0 | |
Three-year total: $283,401 $283,401 | Three-year present value: $283,401 $283,401 |
Evidence and data. The interviewees’ organizations incurred internal and external ongoing costs to optimize and expand their marketplace programs with Rithum. These costs included:
Modeling and assumptions. Based on the interviews, Forrester assumes the following for the composite organization.
adds 0 secondary marketplaces during the initial year, after their initial implementation. adds an additional 0, 0, and 0 new marketplaces in Years 1, 2, and 3, respectively.
Risks. Forrester recognizes that these results may not be representative of all experiences and the cost will vary depending on:
Results. To account for these risks, Forrester adjusted this cost upward by 10%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $430,000.
For , this cost might have a three-year, risk-adjusted total PV (discounted at 10%) of .
Ref. | Metric | Source | Initial | Year 1 | Year 2 | Year 3 | |
---|---|---|---|---|---|---|---|
G1 | Secondary marketplaces added | CompositeComposite | 00 | 33 | 11 | 33 | |
G2 | Weeks required to add a new market with Rithum | A4 | 1212 | 1212 | 1212 | 1212 | |
G3 | Internal business resources tasked with implementation | CompositeComposite | 44 | 44 | 44 | 44 | |
G4 | Average percent of time dedicated to implementation tasks | InterviewsInterviews | 50%50% | 50%50% | 50%50% | 50%50% | |
G5 | Average weekly burdened cost of an e-commerce resource | CompositeComposite | $2,596 $2,596 | $2,596 $2,596 | $2,596 $2,596 | $2,596 $2,596 | |
G6 | One-time cost per marketplace added | InterviewsInterviews | $5,000 $5,000 | $5,000 $5,000 | $5,000 $5,000 | $5,000 $5,000 | |
Risk adjustment | ↑10% | ||||||
Gt | Marketplace expansion and ongoing management | G1*G2*G3*G4*G5* (G6+G1) | $0 $0 | $201,912 $201,912 | $67,304 $67,304 | $201,912 $201,912 | |
Three-year total: $518,241 $518,241 | Three-year present value: $429,967 $429,967 |
The financial results calculated in the Benefits and Costs sections can be used to determine the ROI, NPV, and payback period for the composite organization’s investment. Forrester assumes a yearly discount rate of 10% for this analysis.
These risk-adjusted ROI, NPV, and payback period values are determined by applying risk-adjustment factors to the unadjusted results in each Benefit and Cost section.
Initial | Year 1 | Year 2 | Year 3 | Total | Present Value | |
---|---|---|---|---|---|---|
Total costs | ($283,401)($283,401) | ($328,503)($328,503) | ($245,338)($245,338) | ($464,163)($464,163) | ($1,321,406)($1,321,406) | ($1,133,532)($1,133,532) |
Total benefits | $0 $0 | $1,299,262 $1,299,262 | $924,221 $924,221 | $1,807,665 $1,807,665 | $4,031,148 $4,031,148 | $3,303,090 $3,303,090 |
Net benefits | ($283,401)($283,401) | $970,758 $970,758 | $678,882 $678,882 | $1,343,502 $1,343,502 | $2,709,742 $2,709,742 | $2,169,558 $2,169,558 |
ROI | 191%191% | |||||
Payback | <6 months<6 months | |||||
Total Economic Impact is a methodology developed by Forrester Research that enhances a company’s technology decision-making processes and assists vendors in communicating the value proposition of their products and services to clients. The TEI methodology helps companies demonstrate, justify, and realize the tangible value of IT initiatives to both senior management and other key business stakeholders.
Benefits represent the value delivered to the business by the product. The TEI methodology places equal weight on the measure of benefits and the measure of costs, allowing for a full examination of the effect of the technology on the entire organization.
Costs consider all expenses necessary to deliver the proposed value, or benefits, of the product. The cost category within TEI captures incremental costs over the existing environment for ongoing costs associated with the solution.
Flexibility represents the strategic value that can be obtained for some future additional investment building on top of the initial investment already made. Having the ability to capture that benefit has a PV that can be estimated.
Risks measure the uncertainty of benefit and cost estimates given: 1) the likelihood that estimates will meet original projections and 2) the likelihood that estimates will be tracked over time. TEI risk factors are based on “triangular distribution.”
The present or current value of (discounted) cost and benefit estimates given at an interest rate (the discount rate). The PV of costs and benefits feed into the total NPV of cash flows.
The present or current value of (discounted) future net cash flows given an interest rate (the discount rate). A positive project NPV normally indicates that the investment should be made unless other projects have higher NPVs.
A project’s expected return in percentage terms. ROI is calculated by dividing net benefits (benefits less costs) by costs.
The interest rate used in cash flow analysis to take into account the time value of money. Organizations typically use discount rates between 8% and 16%.
The breakeven point for an investment. This is the point in time at which net benefits (benefits minus costs) equal initial investment or cost.
The initial investment column contains costs incurred at “time 0” or at the beginning of Year 1 that are not discounted. All other cash flows are discounted using the discount rate at the end of the year. PV calculations are calculated for each total cost and benefit estimate. NPV calculations in the summary tables are the sum of the initial investment and the discounted cash flows in each year. Sums and present value calculations of the Total Benefits, Total Costs, and Cash Flow tables may not exactly add up, as some rounding may occur.
1 Source: “2022 Online Marketplace Tracker, Global,” Forrester Research, Inc., October 3, 2022.
2 At the time of this research, the name of the product was ChannelAdvisor Managed Services. In 2022, CommerceHub acquired ChannelAdvisor and later rebranded to Rithum. Interviewee quotes have been updated to reflect the new branding.
3 Total Economic Impact is a methodology developed by Forrester Research that enhances a company’s technology decision-making processes and assists vendors in communicating the value proposition of their products and services to clients. The TEI methodology helps companies demonstrate, justify, and realize the tangible value of IT initiatives to both senior management and other key business stakeholders.
4 Source: “How Brand Manufacturers Can Manage Messy Online Marketplaces,” Forrester Research, Inc., June 18, 2021.
Forrester provides independent and objective research-based consulting to help leaders deliver key transformation outcomes. Fueled by our customer-obsessed research, Forrester’s seasoned consultants partner with leaders to execute on their priorities using a unique engagement model that tailors to diverse needs and ensures lasting impact. For more information, visit forrester.com/consulting.
© Forrester Research, Inc. All rights reserved. Unauthorized reproduction is strictly prohibited. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change. Forrester®, Technographics®, Forrester Wave, and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies.
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