The New Role of Digital Commerce Platforms
eCommerce continually re-invents itself. While the basic premise remains the same – purchase goods and services online – the techniques and technologies continue to evolve. While we can point to massive industry shifts including mobile adoption, social selling, and online marketplaces when it comes to the architecture of eCommerce platforms, we have seen four distinct waves.
In the early days of eCommerce there were no eCommerce platforms or off-the-shelf software to be purchased. Pioneering companies looking to enable online sales were forced to build the entire system in-house from the ground up. This was a highly expensive endeavor as it included everything from a dedicated server room up to the UX customers would interact with.
These early companies made the investment to gain a competitive edge, but each company was forced to re-invent the wheel, implementing the same systems and writing the same software. As the number of companies wanting to sell online grew, the market for a standard system became a viable option.
This led to early eCommerce software which could be purchased and implemented to save time and money in bringing sales online. While initially quite simple in functionality these platforms tried to handle all the business’s requirements in a single package. They became larger codebases, encompassed more functionality, and became overly complex forcing retailers to change how they sold their products to comply with the opinions of the pre-built software.
As the eCommerce market exploded the set of potential requirements outpaced what a single software solution allowed. This created opportunities for experts on the specific software offerings to create customizations and changes.
To improve the customization process, eCommerce software vendors created guides and standard software interfaces allowing for a full ecosystem of plugins, themes, and customizations to be created. This system is what caused the transition from software to platform.
Software is a set of instructions that tell a computer what to do. Most often built as a standalone application that performs specific tasks.
A platform, on the other hand, is a hardware or software environment in which a software application can run. It provides the necessary infrastructure and resources for the software to function properly. So, a platform may be the operating system, cloud environment, or server which runs multiple applications. Or in this case an eCommerce solution that can run multiple customizations and plugins to support the specific needs of the business using it.
These customizations helped eCommerce software cover a wider range of use-cases but came with significant drawbacks which resulted in many companies choosing to stay with custom built systems or build their solutions from the ground up. These drawbacks included:
- Expensive development and maintenance by highly paid experts familiar with the platform being used.
- Upgrade issues with incompatible customizations and plugins.
- Security risks through low quality plugins or extensions that were poorly designed.
- Constant maintenance of the plugins and extensions that have been created.
- Performance issues as the system became more complex with little to no insight on where the issues live, the platform, the theme, or the many different plugins.
- Lock-in to a specific platform.
- Lack of flexibility. While these customizations gave more freedom, that freedom was limited to what was possible on the platform. This often resulted in eCommerce websites on a specific platform looking and behaving the same instead of reflecting the brand’s unique identity.
Software originally lived on-premises (on-prem) where it was installed and run locally on a company’s own servers and hardware. These on-prem offerings were owned, maintained, and managed by the company using them, and required ongoing costs for hardware, maintenance, and IT support.
To lower the barrier of entry and running costs, software vendors began offering fully hosted options. Typically referred to as Software as a Service (SaaS), these systems were delivered and accessed over the internet, rather than being installed and run locally. SaaS providers host and maintain the software allowing users to access it via web browser, client software, or API. This model also moved towards a subscription-based pricing model lowering initial costs in exchange for a monthly or annual fee.
SaaS solutions are more convenient, cost-effective, and represent the largest segment of eCommerce software today. While all SaaS removes the need to install and manage the software, many vendors repurposed their on-prem software and simply hosted it for their clients in the cloud, a true multi-tenant solution comes with additional benefits.
While easier to get started, these offerings still tried to handle all functionality or provide a platform to host any additional requirements. These solutions are known as all-in-one options in that they try to be the single piece of software that does it all.
No software is perfect, and it is impossible to handle every eCommerce requirement, especially as eCommerce has grown in both size and reach. This opened opportunities for smaller vendors to outperform these all-in-one options in a specific field. For example, a SaaS vendor may offer a significantly better search experience, pushing companies to purchase these products even though they are already paying for search functionality in their all-in-one platform. The new search would be so much better that the increase in conversion rate meant it was worthwhile for businesses to pay for search twice. This continued with each individual business function of an eCommerce operation – there was the built-in functionality of the eCommerce platform, but more advanced options serving that specific need.
This gave rise to what Gartner coined “composable commerce”. They defined composable commerce as a new approach to building and operating commerce systems. This approach is designed to be more flexible, modular, and scalable than traditional all-in-one monoliths. In a composable commerce system, instead of buying a single platform that does it all, you opt for these focused vendors offering advanced options to handle each individual component. These are then assembled and rearranged to create a custom commerce solution that meets the specific needs of the business.
Several key characteristics of a composable commerce system include:
- Modularity: The ability to easily add, remove, or replace individual components or microservices.
- Flexibility: The ability to easily customize and configure the system to meet specific business needs.
- Scalability: The ability to easily add or remove capacity as needed to meet changing demands.
- Interoperability: The ability to easily integrate with other systems and platforms.
While the shift from custom built to out of the box software and from on-premises to SaaS were slow transitions with many companies choosing not to adopt the change, the move to composable commerce has been swift.
The early adopters of composable commerce have seen great lifts in conversion rate and total revenue along with lower costs and complexity. While moving to pre-built software came with trade-offs, saving development cost while losing customization, composable commerce creates both cost savings and brings us back to a bespoke design handling even the most extreme requirements and allowing for brands to fully express themselves in every user experience.
This ability to adapt quickly, build exactly what is needed, and delight customers has made this shift a requirement to compete. In fact, Gartner predicts that “by 2023, organizations that have adopted a Composable Commerce approach will outpace the competition by 80%”.
The Future of Digital Commerce Platforms
With composable commerce being the clear future for companies moving off all-in-one software, away from custom built solutions, and for new companies looking to transact online we need to consider the role of the eCommerce platform.
Some experts are now ready to declare the eCommerce platform dead – instead, all solutions will be made up of individual components (Products, Search, Cart, Discounts, etc.) each offered from a different vendor. They believe software companies should focus on building one or a few of these components. A team of developers then combines these to create a unique eCommerce experience. I agree that the all-in-one platform is dead. It does not make sense to rely on a single piece of software to handle every requirement or to rely on a single software vendor to meet every need. I do believe though there is a need for a new type of eCommerce platform, specifically a composable commerce platform.
Those pushing for the creation and sale of individual components alone forget an important characteristic of composable commerce: interoperability. Having a team of developers spend months writing code to unify these individual components into a cohesive customer experience is one way to bring the pieces together, but it is not easy. Companies are selling what they call composable commerce but deliver individual pieces and the need for a massive development project.
Instead, a true composable commerce platform acts as the center of a composable commerce solution, orchestrating the individual pieces and handling any data movement and integrations, allowing companies true interoperability.
Embracing this view of a modern platform, Elastic Path has pioneered composable commerce. Elastic Path Commerce Cloud is the only solution that offers both industry leading components (i.e. PXM) and a robust Integrations Hub allowing for seamless interoperability.
The new role of eCommerce platforms is to allow composable commerce to meet its full potential. Removing the need for massive development projects and allowing companies to adopt a composable approach as quickly and easily as an all-in-one SaaS solution. While not yet fully realized, the Elastic Path Integrations Hub, D2C Starter Kit, and Pre-Composed Solutions TM create an amazing ecosystem with the fastest route to a composable commerce implementation. Swapping out components as requirements or the landscape changes is now possible with a few mouse clicks instead of an extensive coding project.
While Elastic Path has the first Composable Commerce Platform, expect to see more companies follow in this path as the market continues moving towards composable commerce.
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