Tricky question

Many times clients or other agencies give us the question: How much does the implementation of Magento cost?

It is always hard to answer without any further details. There are so many factors, that might change the price. Many times without deep analysis it is just guessing.

Example – typical Mr Smith

But let’s get down to business.

A company listed on Polish Stock Exchange with a turnover of tens of millions EUR wants to create a new sales channel, which is e-commerce . We receive information that the budget for the creation of e-Commerce channel is much less than 15 000 EUR net. Let’s assume it will be 10 000 EUR net.

We assume that we need to create a simple e-shop on Magento. What needs to be done in this case and how much work does it require?

Sales meeting, details of implementation, preparation of the contract – 20 hours
Design service interactions – 160 hours
Design graphics – 80 hours
PSD to HTML – 80 hours
Implement e-shop (Magento) and integrate it with 3rd party providers (warehouse, payment etc.) – 480 hours
Tests, improvement and launch – 160 hours
Project management – 80 hours

Total 1060 hours. Counting hourly rate of 30 EUR for fixed price, we can estimate 31 800 EUR for the project.

What happened to the other 21 800 net? How to decrease the cost of implementation? With interaction design , the integration of inventory, perhaps testing? Do you follow me…? :)

Any alternative?

The cost of creating meaningful online store for company mentioned above equals around 30 000 – 50 000 EUR net. Annual maintenance and development of the platform is an additional 25 000 EUR net. Total  55 000 EUR net.

50 000 EUR net is the minimum startup cost to run one sales point in the shopping mall. If you add to this the rental cost it becomes quite huge amount of money. Keeping one offline sales point may cost 100 000 EUR net  per year + the cost of salary of the crew.  In total around 150 000 EUR net yearly.

When huge recognised brand goes online, they earn money from the first day and revenue quickly covers or exceeds the revenue from one of offline points. The investment in online shop might be few times less than offline point. So why people don’t see the advantage of online sales and want to create e-shop as cheap as possible?

Internet is for free

Many people believe that software and infrastructure should be very cheap or just for free. It doesn’t work that way. If you want to build a stunning e-shop and deliver great user experience, you should invest. Remember, even if the estimation looks a little bit expensive, it still might be worth doing. Benchmark your online and offline costs and decide what makes bigger impact on your revenue.

In our case the company (Mr Smith) has huge ambition and wants to go online, but it invests almost nothing. 10 000 EUR –  this will ensure the launch of a SaaS solution and small customization. It’s like opening offline sales point without cooperation with the architect, interior designer , merchandiser, people from health and safety and many other important aspects.

Is that the way you make business? Obviously More Info is being neglected than should be, a clearer path must be created or discovered.

What can you buy for 10 000 EUR?

– Fiat Panda in the basic version
– Trip to Argentina, Bolivia and Chille for 2 people
– Motor trucks – used …

Dear Smith, really? That’s the amount you want to invest in your best sales channel and your future revenue? Let’s be serious.

Damian Winkowski

Work less, but smart. Achieve results and ROI. eCommerce Geek (Magento Experts), right now at Divante eCommerce Software House

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    Very reasonable article, thanks for sharing it. I do believe good investments produce much better results. Anyone who wants to develop a successful business and earn a lot of money must be ready to spend some first.