What is the Cost of Headless Commerce?
When talking to brands about the benefits of Headless Commerce, one of the most frequent questions, and often the first, is "how much does it cost?"
Spoiler: Before a commerce vendor understands a brands goals and roadmap, the answer is almost guaranteed to be “it depends”. Understandably, brands evaluating commerce platforms are frustrated with "it depends." The truth of the matter is, there isn’t a better answer until knowing more about your brand’s needs and ambitions. This post will summarize what "it depends" on and how a few key areas influence the total cost:
- Subscription license fees and how it varies
- The 'types' of Headless Commerce platforms available and how they impact the cost
- Implementation & re-platforming costs
The Variable Cost of Headless Commerce
Headless Commerce vendors generally have a similar cost structure. While these vary slightly across vendors, usually, our customers don't view these as a significant factor in choosing which Headless Commerce platform is best suited to their needs.
Generally, the subscription license cost is based on how much merchandise is sold in a store. Gross Merchandise Volume (GMV) based costs are now standard. They range from a fraction of a percentage point to a few percentage points (0.3% - 3%) of GMV, depending on each contract. Usage-based costing is by no means a new cost structure; other SaaS solutions have a similar system - cloud computing is a good example.
The other alternative to volume-based pricing is based on the number of orders processed; this alternative is less common since the average order value can vary drastically from one brand to the next. At Elastic Path, typically, the costs start from 50,000 USD/ year and increase based on your transaction volume. The benefit of this pricing structure is the economies of scale, where your unit costs will be cheaper at $1 Billion in order value versus order value of $10 Million.
The most critical piece in evaluating what eCommerce solution to buy is comparing Headless Commerce costs compared to traditional monolithic solutions. No surprises here, Headless Commerce is usually cheaper - especially in the long term- than a conventional monolithic platform like Magento, Salesforce Commerce Cloud, or Shopify. For a more detailed look at the cost implications, please read our guide on the Total Cost of Ownership.
Beyond the subscription license cost for your core commerce platform, the licensing of third-party subscriptions could also be significant. With modern Headless Commerce solutions following a composable approach, brands can pick which third-party technologies they need to address their commerce goals. Typically, these include connecting the core commerce engine to third-party Search, Content Management Systems (CMS), Order Management Systems (OMS), enterprise resource planning (ERP) tools, personalization, tax & payments.
Each of these services will come with its own costs that must be evaluated with each vendor. Ultimately your total cost for third-party solutions will depend on what back-end solutions your brand needs to achieve its commerce experience goals.
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Types of Headless Commerce & Their Costs
Headless Commerce solutions can be broadly categorized into two main buckets. 'Retrofitted Headless' and Microservices-based Headless Commerce. In a nutshell - 'retrofitted' Headless solutions were built upon the older monolithic solutions, where the 'head' or front-end has been separated. This allows brands to create better customer experiences since they are no longer bound by only what is available out of the box from a monolithic solution. The drawback of these types of Headless Commerce solutions is that the back-end is still 'tightly-coupled,' where each component is interdependent, resulting in more costly and difficult customizations.
In contrast, Microservices-based Headless Commerce solutions are designed so each 'service' or component that makes up a complete solution can function independently and instead 'talk' to each other through APIs. This means that the whole solution is easier to customize and add to in the future as the brand's needs or their customer's needs change.
For a more detailed comparison between the two types, check out our headless vs retrofitted post here.
There are a few key factors at play when it comes to the costs:
- Microservice-based Headless Commerce allows you to pick and choose the necessary pieces for your brand. Rather than paying for every feature in a 'retrofitted' Headless solution (due to their tightly coupled back-end architecture).
- Future enhancements are cheaper to implement with Microservices-based Headless Commerce. This is primarily due to the lower 'effort' or developer hours needed to customize these solutions.
- Microservices-based Headless Commerce is designed to work with the best third-party solutions available for a particular function. Search is a great example, where the capabilities of a monolithic solution will be dwarfed by those of a third-party solution whose sole focus is on this function. Not only are they functionally superior, but a Microservices-based approach negates the need to pay for both the 'out-of-the-box' & a better third-party solution.
Understanding what services your brand will need to achieve your eCommerce goals is crucial. Even with a Microservices-based Headless Commerce solution, these costs can sky-rocket for complex solutions that require several third-party integrations, each with its individual cost component.
Implementation & Re-platforming Costs
At this point, many brands have had to go through a re-platforming as they outgrew their initial solution or realized that their current system was not flexible enough to handle their increasingly complex eCommerce needs. These brands are painfully aware of how expensive a complete re-platform can be and would love to negate the need to do so again soon.
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A significant portion of the cost of re-platforming is the implementation costs. Whether this is through a System Integrator (SI) or achieved by an in-house development team for brands equipped to do so, the majority of the resources spent in this effort are in the development. Although an SI will be more expensive when broken down into a per hour/ unit basis, it is critical to understand how it might impact your in-house development team's other priorities.
As with all other costs, the implementation costs will vary based on a few factors:
- A phased vs. a full-scale re-platform. The time needed to have a portion of your eCommerce solution moved to a newer solution versus a full re-platforming can vary significantly. Many brands prefer to 'strangle' pieces of their solution as they go to keep costs and performance in check.
- How much customization is required for your unique solution? Generally, it is easier and faster to customize a modern Microservices-based Headless solution. With a retrofitted headless solution, brands often have issues with higher-cost developer teams. Two contributing factors: the effort required to implement customization is higher. Sometimes, they need to know the old architecture of an existing solution (which can often be a scarce skill set).
- Do you need to start from scratch, or does a similar implementation exist that can be 'tweaked,' saving hours of development and testing time? Check out our Hub of Pre-Composed Solutions™ that allows brands to launch in a matter of weeks, not months.
For a more in-depth understanding of eCommerce re-platforming, check out our guide.
Bringing it All Together
In Summary, your brand's Headless Commerce costs will depend on the factors outlined above. Your total cost will depend on how you choose to:
- Volume (GMV) based subscription license fees for your core commerce platform along with individual third-party license fees for the entire composable commerce solution.
- Your chosen type of Headless Commerce solution implies variance in customizations costs.
- Implementation costs from SIs or in-house resources vary if it is a re-platforming and how you choose to transition to a modern Headless Commerce platform.
Ready for an estimate of Headless Commerce cost that addresses your brand's unique needs? Talk to us today to get started on your quote.