Presented by Commercetools
The COVID-19 lockdown kicked off a global surge in ecommerce spending -- and online shopping became a significant force in worldwide retail. While consumers are back out on the streets, digital spending hasn’t slowed down significantly, despite the macro headwinds that have naturally slowed retail growth. U.S. ecommerce sales in Q1 2024 reached about $268.12 billion -- up 8.5% over Q1 2023.
But are B2B and B2C companies keeping up? While most companies say they’re actively investing or hoping to invest in their technology stack to keep up with current customer demand, and prepare for the future of retail, a significant number of enterprises are still making do with legacy platforms, a hope and a prayer. Change is painful, running a migration project of any size has risks -- and most of the big players are already online, steadily making millions or billions in revenue through the digital channels they’ve already established over the past two decades, says Dirk Hoerig, founder and CEO, Commercetools. The real problem is that today, technology and customer expectations have finally outpaced many IT teams' efforts and budgets.
“You can get quite far with customization to an old system -- but then it starts to cost significantly more money, and consumer paint points keep increasing, and many companies are waiting until the point of no return, and things break for good,” Hoerig explains. “We estimate about 85% of the enterprise retail market runs on monolithic systems that are end-of-life, or soon to be end-of-life.”
He references an old saying: there’s no time to sharpen the axe when you’re too busy chopping wood. But for many companies, the need to modernize their stack -- to save money in the middle and long term, increase their top line revenue and better meet consumer demands -- has become critical.
Retail tech as a competitive advantage
It’s not about technology in the end, it’s about deciding what needs to get done, from a business perspective, from a customer perspective, in a world where your ecommerce platform is no longer a gatekeeper, but an enabler.
That can be something as simple as instituting buy-online/pickup-in-store ((BOPIS). The real difference is when a company, like Commercetools client Ulta Beauty, can now launch a feature like BOPIS in a week, rather than months. Another client, the major U.K. retail chain John Lewis Partners, used to be able to handle roughly 12 feature releases a year -- and now that’s up to several thousand, Hoerig says.
“Every time their team has a new idea they think will drive customer retention, revenue, help increase conversion rates, make something easier and so on, they’re able to launch quickly without any interference with other functionality,” he says. “It’s about making more money and saving all those IT costs that were previously being poured into basic maintenance.”
Meeting customer expectations in this market has become synonymous with staying on top of technology innovation. That includes creating a unified, personalized experience across all touchpoints -- which from the consumer perspective looks like it ought to be easy, but in reality, has been a customer experience holy grail. Inventory management systems with real-time information about what’s in stock in any warehouse, or in the closest store to the customer, also seems like it should be a piece of cake. However, behind the scenes, personalization and inventory tools have been cobbled together from a broad array of disparate systems that were never meant to work together.
“The experience should be ultra personal, both to the situation and the device, with no waiting times, the same discounts, full access to inventory and so on,” he says. “We’ve all been trained, in the last 20 years, to behave that way.”
Composable commerce to the rescue
Budgets are low, customer expectations are high, and they’re only getting higher. Bridging that gap is composable commerce. Essentially, it’s building a customized ecommerce tech stack from a selection of technology components that work seamlessly together, instead of trying to fit a company’s needs into a one-size-fits-all legacy solution.
“Composable commerce helps you to build and run commerce experiences that you want across any touch point,” Hoerig says. “It gives you the flexibility to not only realize your brand’s value and represent it, but also provide all the capabilities and constantly change them to match customer expectations.”
Many companies that Commercetools has talked to have four- or five-year-long backlogs of ideas and projects they want to implement on, and the reason is always a monolithic system that was tailored to business needs when it was rolled out. As a result, every change pushes the system farther away from where the company started, and for a much higher cost. The building blocks of composable commerce make it possible to swiftly make changes without any interference or breakdown in the overall system, without any programming language -- think the John Lewis example of going from a dozen updates to thousands.
The other major benefit is that composable commerce offers the speed and scalability necessary for today’s traffic peaks and security requirements.
“A Black Friday traffic peak today is larger than a total year of online revenue 15 or 20 years ago,” Hoerig says. “With a cloud-native, modern approach, and best-in-class infrastructure resources, companies can automatically scale and overcome these peaks. It’s designed so that you can run billions in revenue in a cloud-native, secure environment, coupled with the ease and the simplicity of making changes as quickly as possible -- that’s how Ulta Beauty launched BOPIS within seven days.”
The Commercetools platform, in particular, is tech agnostic; no matter the vendor, programming language, or product offering, all pieces of the stack are plug-and-play, and they’re connected into a seamless solution using APIs on the backend.
“Most of it is already pre-integrated for you,” Hoerig adds. “Some companies have such complex requirements that they prefer to build their own solutions on top of these building blocks. But for 95% of companies, they can go with the best-in-class architecture and be live within a couple of weeks. All of our composable commerce projects are about 30% shorter in time, on average, than any monolithic rollout.”
Additionally, Commercetools Foundry, a precomposed solution, is a best-of-breed blueprint for both B2B and B2C enterprises that is ready to go out of the box and pre-integrated with third-party technologies, to help businesses meet targets faster, despite increasingly complicated technology and market conditions.
“We realized that monolithic vendors were gatekeeping, because it helped them monetize without providing additional value,” Hoerig says. “For us it's about helping our customers get more things done, at a much faster pace, in order to provide better offerings to their consumers. That’s what it’s all about.”
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