Salesforce Moves into E-Commerce with Demandware Buy

With this $2.8 billion deal, Salesforce makes a splashy move into the B2C e-commerce space after spending its first 17 years in B2B.

Salesforce purchase

Salesforce has acquired 38 companies since 2006, and the most expensive by far was the one it announced June 1: $2.8 billion for e-commerce marketing platform provider Demandware Inc.

San Francisco-based Salesforce will pay $75 per share in the transaction—a full 56 percent premium on Demandware's closing May 31 stock price of $47.99. The stock was selling for $74.75 late in the day June 1 after the news broke, up $26.76, or 56 percent. The transaction is expected to be completed by the end of July.

With this deal, Salesforce makes a splashy move into the B2C (business to consumer) e-commerce software business after spending its first 17 years in the B2B (business to business) space.

Twelve-year-old Demandware, based in Burlington, Mass., provides an enterprise-class cloud commerce development platform in the United States, Germany and the United Kingdom. Its frontline product is Demandware Commerce Cloud, a digital commerce platform that enables customers to build and execute complex digital commerce applications. Commerce Cloud also provides services for customers in global expansion, omni-channel processes, multi-brand and multi-site rollouts, predictive merchandising, and in-store operations.

Demandware Commerce Cloud is Versatile

Demandware Commerce Cloud consists of Demandware Digital and Demandware Store solutions. It also supports partners in integrating to third-party applications, such as email marketing, campaign management, payment management, personalization, social commerce, tax applications, and ratings and reviews.

The company markets its cloud-based platform to multinational corporations, retailers and branded manufacturers in apparel and footwear, health and beauty, home and garden, sporting goods, general merchandise and other categories through its direct sales force and channel partners. The company, formerly known as SSE Holdings Inc., changed its name to Demandware Inc. in August 2004.

The functionality Demandware brings to Salesforce is strategic in its continued competition with companies such as SAP and Oracle. Neither of those two companies has a B2C e-commerce-type offering.

"The only blind spot we had in CRM (customer relationship management) was commerce," Chief Product Officer Alex Dayon told Bloomberg News. "The future of commerce is really with solutions like Demandware, where not only do you provide personalized one-to-one shopping experience on your phone and on the Web, but you're also connecting the store into that experience."

Deal Creates a New Product Line for Salesforce

The deal is expected to improve Salesforce's revenue by about $100 million to $120 million in fiscal 2017, the company said on a conference call with analysts.

The acquisition "creates a new product line for Salesforce and will allow us to create yet another billion-dollar cloud," CEO and founder Marc Benioff said.

It's no secret that Benioff, whose company's market cap is at $56.5 billion and whose revenue is on track to total $26 billion this year but has yet to show a corporate profit, is looking for new ways to propel sales after slower growth at Salesforce in recent years.

With Demandware coming into the picture, Salesforce will have a good foothold in a fast-growing market that is expected to make up 12.5 percent of retail sales in the United States by 2020—up from less than 7 percent in 2014, according to industry analyst EMarketer.

Chris Preimesberger

Chris J. Preimesberger

Chris J. Preimesberger is Editor-in-Chief of eWEEK and responsible for all the publication's coverage. In his 13 years and more than 4,000 articles at eWEEK, he has distinguished himself in reporting...