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Ebook | 19 minute read
See how Elastic Path reduces your eCommerce platform’s TCO.
Preparing a successful digital commerce strategy is oddly similar to preparing for the success of your marriage or long term partnership.Which couple do you think is more likely to have a successful and long lasting relationship?(A) The couple that focuses all their time and effort on the wedding day. This couple spends thousands of dollars and countless hours perfecting their color palette, picking the “perfect” menu, and choreographing a first dance.(B) The couple that focuses their time and effort on their relationship in the long run. This couple prioritizes learning how their partner wants to be loved, understanding their differences, and ensuring they are compatible and ready to jump into a committed life long bond.Option B, of course.It seems so simple when I break it down that way, right? The wedding day, though we may look forward to its official debut, isn’t the reason why a marriage lasts. It’s everything you prepared for and do after.The same goes for your digital commerce strategy. Your wedding day, in this case, is your implementation and first year live, while the marriage is your years or decades of long term partnership following implementation and year one.So if you are trying to choose an eCommerce platform, and cost is a key factor, it’s imperative that you do not place all your focus on implementation and the first year live. I’ve seen brands fall into this trap many times, only to be surprised by the exorbitant costs accumulated due to updates that need to be made as new integrations are added, customer demands change, or expansions are required (whether to include a new brand, geography, etc.). I know getting live can seem like the most important thing when you’re just getting started, but I think we can all agree that the revenue you will see from staying live is even more important. So, if you truly want an idea of the total cost that you should expect when investing in a new eCommerce solution, I urge you to spend time on understanding the long term costs associated with each solution you evaluate.
There are really only two main types of commerce products to choose from now: dated legacy platforms like SAP Hybris, Salesforce Commerce Cloud, and Adobe Commerce; and Composable Commerce products like Elastic Path and Commercetools.Legacy platforms are more rigid by nature and therefore making changes to your commerce strategy often gets difficult, timely, and costly. On the other hand, the loosely coupled architecture of Composable Commerce solutions allow for rapid and easy changes.On average, brands that switched to a Composable Commerce solution from a legacy Platform:
As many digital commerce experts will tell you, change is the biggest driver of cost for digitally savvy brands who need to be able to react quickly to the market and outpace the competition. Therefore, cost of changes must be a top consideration when comparing Total Cost of Ownership for eCommerce technology.Because Composable Commerce products are built for change, your total cost of ownership ends up being significantly reduced year over year compared to legacy platforms. This guide will break down the different components of cost across the two product types (legacy and composable) year over year to better understand your savings.
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There are 6 main categories you need to consider for your year 1 cost:
The core software cost or licensing fee is what we like to refer to as the most “upfront” pricing. These tend to be packaged as either monthly or yearly licensing fees, which can be: tier based, continuous revenue based, or percent of sales based. This means the vendor will either charge you a fee based on your estimated GMV or charge you 1-2% of your GMV at the end of the year. These pricing structures are pretty standard and will be easy to find once you speak with your vendor's sales specialist.
Generally, for Composable Commerce products the cost for core commerce software will be lower than legacy platforms in year 1 and beyond. At Elastic Path, the cost of your core commerce software is based on transaction volume, either GMV or orders processed. Pricing typically starts around $50,000 USD/ year for Elastic Path Commerce Cloud, our SaaS microservices product, and increases based on your transaction volume.
With our tiered pricing model, you are able to account for your estimated growth over the next three years, lock in pricing, and prepare for your spend in the future.
With guaranteed pricing and no surprise overage fees, it will provide clarity to your team on other investments that your company can embark on and allow you to forecast your budget in advance.
While “payments” is sometimes a pre-built integration of core commerce software, it’s critical for innovative brands with complex needs to think about leveraging a best-in-class, third-party payment processor. Providing a seamless checkout experience across your multi-brand, multi-geo and multi-business model brand is imperative in today’s market. Studies show that brands can increase sales by up to 46% after enabling local payment methods. And implementing this in the early stages of your commerce project can increase your revenue potential significantly. For these reasons, even if built-in payments is offered, most platform users end up contracting with a third party for payments.
So what’s the cost of implementing a third-party payment processor such as Stripe or PayPal? Pricing varies depending on the volume of the transaction or what the merchant will be processing. Some vendors will utilize a model with pricing per transaction and other vendors have flat rate pricing. As we continue, we will share how Elastic Path manages pricing for payment processing.
Third party software refers to technology partners for functionality like content management (CMS), search, order management (OMS), personalization, and more. The cost of your third party software is dependent on your business goals and your core commerce software. Traditional legacy platforms offer more out-of-the-box functionality meaning you will likely have fewer third party technology costs at launch. However, it’s important to keep in mind that this out-of-the-box functionality is often mediocre at best. We tend to see brands happy with it for their first year. After that, we have noticed a trend where these brands begin to evaluate third party technology ON TOP of their platform in order to power the experiences they require. This can often feel like paying double for the same functionality. Composable Commerce products utilize a modular architecture which allows you to choose your preferred third party vendors and compose your a commerce solution to fit your unique business requirements.Third party software cost will be slightly higher for Composable Commerce solutions because you have to consider the developer time that will be required to design and build the various integrations that make up your complete solution. At Elastic Path, we have invested in Integrations Hub to make this faster and less expensive. More on that later. In addition, when it comes to adopting a best-of-breed Composable Commerce approach, you do not have to complete a rip-and-replace migration. Instead, brands can start by migrating one functionality area (like catalog), one experience (like a pop-up shop), or by integrating third party vendors one at a time (start with CMS, then optimize search, etc). This gradual approach can make the transition to Composable Commerce easier and more cost-effective.
Frontend hosting is a small but important piece of the TCO equation to consider because the vendor you choose will determine the performance of your website. For most legacy platforms, frontend hosting will be included, while you will have to choose your hosting provider for Composable Commerce solutions at an additional cost.
Traditional legacy platforms have more out-of-the-box functionality and therefore their main cost will be due to alterations and customizations.Composable Commerce solutions will require an in-house team or agency to compose your solution. This will include all the customizations of the frontend, backend, and third party software we mentioned before.We found that 60% of commerce replatforming costs come from integrating third-party solutions for specific functionality like search, CMS, or OMS.At Elastic Path we offer products and services to kick-start implementation and reduce the time-to-market and cost of getting live.The Integrations Hub is a central repository of instant-on, no-code integrations accessible within Commerce Manager, our business user tooling. These integrations save you time and money on custom development work and allow you to launch integrations with vendors such as Algolia and SendGrid in minutes.With the Integrations Hub, the heavy lifting is already done; all you need to do is activate our “instant on” integrations.It also makes integration swapping easier and faster if you decide to change or add a new integration along your commerce journey.Traditionally, implementation costs would be slightly more expensive for a Composable Commerce solution. However, with Elastic Path’s Integrations Hub, implementation costs are actually less than traditional commerce platforms. Utilizing Integrations Hub can reduce implementation costs by as much as 50%.
You might be thinking, if I’m using multiple best-of-breed solutions then the monetary, time, and resource costs to operate (host, manage, and troubleshoot) will be exorbitant. You’re probably weighing the operational costs of a Composable Commerce solution compared to a legacy platform and thinking the all-in-one legacy platform would be cheaper. When comparing these platforms to most Composable Commerce solutions, that is true. However, Elastic Path offers the first-and-only assurance offering for Composable Commerce solutions. Composable Commerce XA™ provides multi-vendor solution assurance, where Elastic Path will serve as the primary point of contact for managing issue identification and resolution across your solution. This reduces the frustration and time commitments of navigating multi-vendor solutions, ensuring that your store is back to running at full capacity as quickly as possible.Elastic Path’s Integration Hub also reduces the cost of operating a multi-vendor solution by handling the hosting, management, and monitoring of integrations. Simply put, this cuts down on your devops and cloudops costs.
Check out our collection of on-demand demos to see how Elastic Path will enable you to customize commerce experiences across any digital touchpoint.
As we mentioned earlier, embracing a Composable Commerce approach can be done gradually by choosing specific focus areas to modernize or experiences to design and launch.For those who want to take the slow and steady leap into Composable Commerce, Elastic Path offers modular products to get you started.
EP Product Experience Manager (PXM) combines Commerce PIM, Product Merchandising, and Catalog Composer capabilities in one central place where merchandisers can create differentiated, innovative commerce experiences that drive revenue and conversion. Creating merchandising strategies like dynamic bundles, complex catalogs, variations, configurations and more can all be done in minutes by business teams. Brands are able to reduce the money and time spent on expensive custom workarounds and hacks. Elastic Path prices EP PXM at 80% of the cost for the core commerce software Elastic Path Commerce Cloud. This could be a more economical option for brands who just want to get started with EP PXM functionality only.
As we discussed earlier, having a third-party payment processor can yield big returns in the long run for your business. EP Payments reduces the complexity and cost of managing several payment integrations with a single pre-integrated solution to easily facilitate complex checkouts across brands, channels and touchpoints. Creating a frictionless and fast checkout experience with features like one-click checkout increases conversion rates by over 7% for known customers.Elastic Path has created a very transparent and easily managed pricing model for EP Payments using flat rate pricing, regardless of card type or transaction type. Pricing depends on what the merchant is going to be processing.
Composable Commerce XA™ provides experience assurance that de-risks the transition into Composable Commerce by providing a single point of contact to call when issues arise across your multi-vendor solution. The third party data integrations from your various vendors are monitored via proprietary technology so issues can be identified and resolved rapidly.This price for the solution is valued at a percentage of your total contract with Elastic Path.
Once you’ve got your solution up and running all you need to worry about are changes. Some changes you plan and are prepared for, and others can come and knock you over like a tidal wave, for example the COVID-19 pandemic. Your survival is dependent on your ability to adapt to change. So if your solution can’t, you leave your brand vulnerable to becoming extinct.
Typical changes you will need to account for include:
A top digital strategy will be one that is iterative and focused on continuously optimizing customer experiences to ensure maximum customer retention and higher revenues. But the reality is, change does not come cheap or easily with legacy platforms. Due to their rigid structure, the tasks mentioned above are difficult and therefore drives up the cost of changes executed by your developer.
Let’s consider a scenario where your revenue is flat year over year. Take a look at how your cost differs for rigid legacy platforms versus Composable Commerce solutions.
You can see core commerce software, third party software, payment processing and frontend hosting will remain the same. As you consider your year over year changes, the cost of change will be higher for legacy platforms because their architectures are so tightly coupled. This tight architecture means that there are many interdependencies that developers will have to painstakingly take into account, in order to keep the system running smoothly and not break. Developers end up having to do a full-system regression test/QAs and restarting the entire application after every change. This not only increases developer time but decreases your speed to market.There’s a significant reduction in cost for Composable Commerce solutions because its modular architecture allows you to quickly try new things. That means no down time for maintenance, and designing and deploying is quick. This not only reduces developer time but also reduces the risk of putting months and significant investment in only to find out something doesn’t work. Tangentially, the ability to quickly and effectively make changes will increase your ability to outpace competitors, keep up with customer needs, and embrace emerging technologies that make your eCommerce strategy easier and more engaging.Furthermore, the cost and time needed to upgrade and change third party vendors will be easier over the years if you utilize Elastic Path’s Integration Hub. Composable Commerce XA™ will also save you more time and money in the long run to support issue resolution promptly.
While a Composable Commerce approach may seem daunting to some, Elastic Path has invested in products and services to empower brands to launch their unique commerce visions with reduced risk from both a cost and time perspective. Learn how some of our customers have innovated without blowing their budgets below.
Cymax Group Technologies is a Vancouver-based eCommerce brand that sells furniture for both B2C home furnishings as well as B2B commercial office furniture. After experiencing rapid growth in sales post-pandemic, they were seeking a commerce technology with a modern architecture to meet consumer demands.During the technology evaluation phase, they deliberated over the choice between Salesforce and Elastic Path. Salesforce Commerce Cloud offers a flat rate percentage of GMV. For example, a brand may have to pay 1% of all GMV sold through the platform, whether that brand’s GMV is $10 million or $50 million. But with Elastic Path’s pricing they realized they would save more money long-term. Elastic Path uses pricing tiers for the percentage of GMV. For example, a brand with a GMV of $0-10 million could expect to pay a certain percentage of revenue of revenue but, a brand with a GMV of $10M- 20M could expect to pay a slightly lower percentage, $20M-$30M could expect an even lower percentage and so forth. As your volume/revenue grows, the price rate decreases. Essentially, the rate per dollar goes down over time. This will inevitably save you more money as you increase your revenue and grow into your platform over the years.
Pella Windows and Doors’ story is a little different. Pella, a manufacturer of fine windows and doors, focuses on bringing a seamless commerce experience to their customers for their highly customized products. They spent close to a year with their legacy monolith trying to configure their commerce strategy. At that time, they had invested a lot of time and money and their platform still couldn’t support the level of customization they needed to deliver to their customers.
When Pella made the switch to Composable Commerce, not only were they able to launch their first D2C channel ever, but they were also able to build a custom product configurator to provide an engaging experience for shoppers, even when discovering complex products. Pella was able to achieve more in a year than they did spending time trying to reconfigure their previous platform to fit their goals.If your company’s goal is to rapidly and continuously adapt to the market and keep up with evolving customer needs, then customization and changes are inevitable. To keep cost low, you will need a modular and flexible architecture that is provided by Composable Commerce.
As you can see, understanding your total expected cost isn’t straightforward. Traditional legacy platforms may be attractive because they are well established in the market and seem cheaper in year 1. But when we look at the cost of changes year over year, you end up paying a lot more with a legacy platform.While it may seem a bit daunting to build your own composable solution in the beginning, the benefits outweigh the cost and you end up paying less in the long run. Plus, Elastic Path’s individual solutions can help you embrace a Composable Commerce approach gradually and at a reduced cost.If you want to learn more about reducing your total cost with Composable Commerce feel free to book a meeting with one of our team!