SaaS, or Software As A Service, is a big industry today. Salesforce, Microsoft Office 365, Google Apps, Dropbox, and Amazon Web Services are few of the leading names of this industry. The software delivery model offered by SaaS can be used for a variety of business purposes like CRM, ERP, project management application, accounting software, collaboration software, transaction processing, billing and invoicing, and even for e-commerce purposes. BigCommerce, Shopify, and Volusion are some of the big names in SaaS e-commerce solution providers.
Business owners in e-commerce face two main choices for their e-commerce software: open-source and SaaS. Generally, SaaS e-commerce platforms are suggested for small to medium size e-commerce merchants. Considering SaaS solutions don’t require merchants to deal with the technical nitty-gritty like software security, updates, and performance as well as the costs of regular software maintenance. A 3rd party vendor is responsible for hosting and maintaining the cloud server that runs the e-commerce software. Merchants only need to pay a subscription fees on a monthly basis to keep using the SaaS software.
This model leads small to medium size e-commerce business owners to believe that SaaS is completely hassle-free and more cost-efficient than open-source or on-premise solutions. But is that really the whole picture? As we’ll dive deeper into SaaS hidden costs and problems, it will become clearer that using SaaS for e-commerce isn’t as straightforward and simple as one might assume it to be.
Here are some of the major costs and issues associated with using SaaS e-commerce platforms that aren’t talked about often:
Higher Cost of Setup
SaaS e-commerce software come ready to use, they are already built and hosted, and all you need to do is sign up with a monthly subscription plan to get started. While this may seem convenient at first, you’ll be surprised how quickly the monthly cost multiplies into a huge figure when you factor in the cost of 12 months, or for years.
SaaS platforms charge you for selling and managing your hosting, for domain name, number of products you can upload and sell through your shop, number of staff accounts your store can have, number of additional features you can integrate into the platform for your shop, etc. Charges for all these specifics are included in the monthly subscription fees of the hosting plan you choose.
But, here’s the catch! If you intend to offer exceptional shopping experience to your customers, you can’t just sign up for any hosting plan. The basic plans offered by SaaS e-commerce platforms happen to be too basic in most cases. You’ll be tempted to opt for more advanced plans that will, naturally, cost you more on a yearly basis. If you were to pick out the most advanced plan the platform has to offer, you could end up spending thousands of dollars every year into running and maintaining your online shopping store.
Now, let’s look at the alternative option of using open-source, e-commerce software. To begin with, open-source platforms are available for free. This means that you don’t need to spend money on acquiring licenses for using these software. Of course, the open-source e-commerce platforms come in paid versions, too, which are equipped with better tools to support improved shopping experience. But what’s remarkably good about the paid open-source plugins is that when their license expires they won’t stop working, you will only stop receiving any new updates for the plugins. This means that your online store isn’t at risk of shutting down altogether once the license expires.
For your open-source e-commerce platform, it’s you who will have to purchase and arrange for the domain name and hosting. You being the decision-maker, gets to decide whether you want to go with shared hosting to enjoy the competitive prices or go with dedicated hosting to get more exclusive advantages against a higher price.
Limited Scope for Complexity
The level of complexity required in e-commerce stores varies from one merchant to another. Some merchants have simple processes in place which don’t require any advanced customization. Others might have more complicated workflows, such as selling globally, selling on many marketplaces, dealing with several warehouses and distributors, etc.
Ideally speaking, business owners should always be keeping their eye on the future goals. If, as a business owner, you aim to become bigger and better with time, you’ll need a system that works and grows in tandem with you. SaaS e-commerce platforms aren’t the best when it comes to extensive complex customization. The front-end of these platforms can be customized, but there is limited scope for accommodating any intricate custom functionalities for the back-end.
If you plan to hire a specialist to personalize the front-end of your SaaS store to match your brand style, prepare to shell out extra bucks. And because the SaaS platform doesn’t leave much room to incorporate more advanced business processes, you might need to integrate other specialized platforms which take care of those technicalities with your SaaS store. Be ready to spend on those integrations, too.
Charges Against Every Transaction
How would you like if every transaction taking place on your online shopping store was being charged? Not a very appealing scenario, right? Well, this is the reality with most of the SaaS e-commerce platforms. These platforms charge a certain percentage amount on every transaction taking place through the website. So, while you’ll have to pay for the transaction fees of the payment gateway, you’ll also have to pay a transaction fees to the SaaS platform.
The cumulative impact of these transaction charges takes away from your revenues and profits. You think you’re earning a lot, and maybe you are, but at the same time you’re also paying out on every dollar you earn. To cope up with these transaction charges, you may choose to offer your store products at higher prices. But the moment you do that, you run the risk of losing out your customers to other shopping portals that are cheaper than yours.
With open-source e-commerce platforms, on the other hand, there are no such commission/transaction charges. You’ll only be paying the standard charges for using the payment gateway services, nothing more.
No Sense of Ownership
Your e-commerce store is your brainchild, your business. You put a lot of effort, time, and money into building it from scratch. Of course, when you’re so invested in it, you’d like to be the unconditional owner of the store. Sadly, that’s not something that SaaS e-commerce platforms offer. The SaaS e-commerce store is yours as long as you regularly pay the subscription fees. You stop paying that and your store goes “poof!” The code isn’t for you to download, use, and keep forever.
If the SaaS platform were to increase its charges for hosting and transaction, either at a time when your business is running slow, or in a way that doesn’t seem profitable to you in the long run, it might not remain financially feasible for you to continue with the platform. You may have to migrate to another e-commerce platform which is going to run up your expenses.