Why Composable Commerce users save 5x more than legacy platform users
Preparing for the success of your eCommerce 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 eCommerce 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 make a decision on an eCommerce platform, and evaluating cost as a key factor, it’s imperative that you do not place all your focus on implementation and 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 customer demands change, the market shifts, or competitive pressure heats up.
I know getting live can seem like the most important thing when you’re just getting started, but I think we can all 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 purchasing an eCommerce solution, I urge you to spend time on understanding the long term costs associated with each solution you evaluate.
How eCommerce platform costs differ?
There are really only two main types of eCommerce platforms to choose from now: rigid legacy platforms like SAP Hybris, Salesforce Commerce Cloud, and Magento; and Composable Commerce Solutions like Elastic Path and Commercetools.
Legacy platforms are more rigid by nature and therefore making changes to your eCommerce 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:
- Were able to make changes easily and quickly
- Saved 5x more on cost of changes
- Saved weeks on developer time
As many eCommerce 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 solutions.
Because Composable Commerce solutions 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 solutions year over year to better understand your savings.
Understanding your Year 1 Cost
There are 4 main categories you need to consider for your year 1 cost:
- The cost of your core commerce software
- The cost of your third party software
- The cost to host your frontend
- The cost to implement your solution
Core Commerce Software
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 are pretty standard and will be easy to find once you speak with your vendor's sales specialist.
Typically this will be lower for Composable Commerce solutions. At Elastic Path, the tiered pricing enables you to account for your estimated growth over the next three years, lock in pricing, and allow you to plan 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.
Third Party Software
The cost of your third party software is dependent on the route you choose to extend your platform.
Traditional legacy platforms offer more out-of-the-box functionality and utilize a plugin approach which allows you to choose from a variety of applications within your platform’s marketplace.
Composable Commerce Solutions utilize a best-of-breed approach which allows you to choose the vendor you want to support your service and compose your custom solution.
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 customize your integrations to fit your business needs and compose them. It is important to note however, that out-of-the-box features and plugin applications are prebuilt based on how your vendor believes your application should operate and it’s a one size fits all. However, if your business requirements don’t align with your vendor’s idea of how the application should work, you will have to make changes to customize it, which can get quite costly.
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.
Lastly, implementation, the category usually rules our decision process. This is dependent on the cost of your developer and the time it takes to build the front end and the backend of your system.
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. Vendors like Elastic Path however, offers the Composable Commerce hub which is fully equipped with a robust library of Pre-Composed solutions and Accelerators to get your solution up and running with ease. Still, you can see it will be slightly more expensive for a Composable Commerce solution.
Overall, you can see the rigid legacy platforms and Composable Solutions are basically on par when it comes to Year 1 costs. There’s a stigma attached to building your solution from scratch and, I get that it can be a bit scary, but vendors like Elastic Path work with your team to make the process seamless and worth your while in the long run.
Understanding Your Costs After Year 1
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:
- Maintenance of your system Upgrades to your commerce software
- Upgrades or changes to your third party technology partners
- Changes in the backend functionality to fit your business requirements
- Addition of new user experiences to keep up with customer expectations
A top digital strategy will be one that is iterative and is 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, and frontend hosting will remain the same. However, as you consider your year over year changes, the cost increases and even surpasses the original implementation cost that you were most concerned about.
This 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.
How Brands Cut Cost with Composable Commerce-as-a-Service
Elastic Path offers Composable Commerce-as-a-Service, an API-first, headless commerce solution for digitally driven brands who want to move at the speed of market and beat their ambitious growth goals. Businesses who adapt Composable Commerce-as-a-Service can move faster than those using traditional, dated commerce solutions. In fact, our customers have added new user experiences like self-checkout and curbside pick up in as little as four days. While others have had to completely replatform their solution mid implementation because their rigid rigid platform couldn’t fulfill their requirements.
CD2 Learning saves 50% on cost
CD2 Learning, a web based learning management system for enterprise level companies, offers businesses the ability to capitalize on revenue from online training that they offer to their stakeholders. This business model requires multiple customized storefronts for each customer, to deliver a unique experience. While deploying their strategy on a dated legacy platform, they were faced with high costs and even higher wait times.
Each time they needed to deploy a new storefront, they experienced a bottle neck at their vendor’s support team. They had to submit a support ticket each time, and they had to wait on their vendors availability to assist them. This not only increased their cost with each support ticket but also slowed their time to market.
When CD2 made the switch to Composable Commerce-as-a-Service from Elastic Path, they saw savings of almost 50%. With the flexible API-first, headless approach, they no longer had to wait on their vendor to deploy a new store front and were able to quickly spin up new individualized client experiences. In addition, because a dedicated support team is a key component or working with Elastic Path, they eliminated a huge cost factor.
Pella Saves 1 Year of Implementation Time
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 very 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.