Future of Commerce: Navigating Commerce Complexity | RETHINK Retail
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Future of Commerce: Navigating Commerce Complexity

In the Future of Commerce series we dive into fastest-growing areas influencing what the industry will look like in the coming years.

RETHINK Retail Editor-in-Chief Julia Raymond Hare sits down with Emily Pfeiffer, Senior Analyst for Commerce Technology with Forrester Research, for a discussion on the increasing complexity of commerce.

 

 

 

TRANSCRIPT

Julia Raymond:

I’m Julia Raymond, editor-in-chief of RETHINK Retail, and Emily and I, today, are talking about where commerce came from and where we’re headed with commerce. So, a lot to unpack here. I’m going to let Emily kick it off and tell you a little bit about the history.

Emily Pfeiffer:
Thanks, Julia. This starts a couple of decades ago. There was a moment when e-commerce was really new and it was very exciting. And the technology that ran commerce businesses, digital commerce businesses, was kind of all baked in. It was one thing. And so we use Pangaea to describe this, if you remember your natural history, right? It’s the whole world used to have just one big continent, all stuck together. And that’s what the commerce solution was like. Almost everything you needed was kind of baked in to that one solution. It was often isolated from the rest of the business. So you would just kind of run your digital stuff, and then chuck the order record over the wall into the back office to record it, and everything kind of happened in that one digital environment. Over time, though, it became more complicated, right?

Order management and content management, all of these pieces became so complex in their own right, that they spun off. And similarly to how Pangaea became individual continents over time, these solutions spun off as well, and created different categories of technology that now run digital businesses. And when that happened, some of the larger software companies at the time decided to create one complete suite. So they bought up a lot of different solutions so that they could say, “Hey, we have the end-to-end complete commerce solution, total suite, so you don’t have to figure out the different techs that you want to buy.” Right? “You can get it all from us.” And they sold it as a benefit, right? You already know us and love us. And so you use us for this other thing, it’ll be great to use us for that thing. It’ll be easier, less expensive, simpler to integrate all these systems together, because we own them all.

It wasn’t always how it came to be though. And those value propositions turned out to be harder to deliver on than companies expected. Yes, the parent company was that major software vendor, but because they had purchased, they had acquired and not built these different solutions, they were on a different code base, different UI, totally different experience, and they were just integrated together. And I say just, because it was really the same as integrating the next guys, right, a competing solution. It wasn’t better or faster or less expensive to integrate with those. And because these companies are so large, the sales teams, the customer success teams, they often weren’t even the same. I have clients saying to me, when I’m like, “How is your relationship with this vendor?” They’ll say, “Well, for which product?” Because it’s that different, right? It’s that different to them.

So as that happened, the end-to-end suite kind of lost its perceived value. And we wound up with digital businesses becoming more willing to find their own, to curate their own suite, right? This idea that one vendor happened to buy the best-in-class solution in all of these different functional areas, right, happens to have all this stuff that will just manage to be perfect for me, it just became something that the industry didn’t buy, didn’t believe anymore.

And so those individual continents have continued to splinter and to kind of decompose. And the term headless came around not too many years ago, which was just a continuation of all of this modularization. And modern technology, the truly cloud-native API first way of building these solutions now have just accelerated this modularization that’s been happening now for years and years and years. And what we’ve got now is an extremely complex playing field full of tons of large, medium, and small players, where digital businesses might bring in very, very specialty solutions from a vendor that does only that one thing, rather than expecting to get everything or even most things from one big vendor.

Julia Raymond:
And you said the continents started to develop cracks or splinters, so there’s a crack in the foundation, sounds like, of how business consumers view the technology stacks. It’s becoming more custom, like you said, and with customization, it becomes more complex. And it sounds like it was just really good brand positioning, a decade or so ago, in terms of having that end-to-end full suite. And I actually hear the word end-to-end used a little bit less than I used to, even five years ago.

Emily Pfeiffer:
Me, too.

Julia Raymond:
Yeah. But which-

Emily Pfeiffer:
And what are the ends?

Julia Raymond:
What are the ends? There aren’t any, right?.

Emily Pfeiffer:
Yeah. They’re defined very differently, depending who you ask, for sure.

Julia Raymond:
Absolutely. And you talk with a lot of vendors, you talk with a lot of retailers, just like I do. What are you hearing in terms of the challenges that they’re facing with the increasing complexity of what it’s right for me? How do I know?

Emily Pfeiffer:
It’s so hard. There are much more choices than there used to be. There are more moving parts. There are more connections. There’s more connective tissue to hold it all together. One of the really appealing things about building a curated suite from best for me components was getting out of the vendor lock-in, right? There was this kind of real or perceived feeling that I’m stuck with this one vendor for everything. And yes, it’s one throat to choke. That’s not a nice way to say it, but there’s one contact to go to, if there’s one. But I wasn’t feeling those benefits, so I want to break out of that vendor lock-in. However, there are now so many different moving parts and such a complex ecosystem, that a lot of companies are finding themselves feeling really locked in with their services providers, right?

Somebody had to build those connections. Someone has to keep it up. Someone has to monitor it. Someone has to figure out where the breakdown is when something goes wrong. And I am seeing some specialty vendors who are standing up their own support practices. Because anyone who has run a digital business, I promise you, they dread that, “I don’t know, it works for me. Must be the next guy,” kind of support phone call, where they’re trying to figure out where in their stack there’s a breakdown. So there are some vendors who are actually offering support that covers more than their own solution now, where they will reach out to their own contacts at the partner solutions to help figure out where the issue is. It’s a creative way to support this really complex ecosystem that every, especially enterprise level, digital business is dealing with now.

One of the things that a lot of businesses worry about is where to start and how to manage all of these different moving pieces. What we recommend is to look at focusing on one side or the other, meaning the experience side or the operations side. The experience side is that front end, it’s the head, it’s personalization, it’s creating an amazing experience for the customer. And the operations side, it’s the OMS, it’s order management. It doesn’t all live back there. It has a huge impact on experience, just to be clear, but displaying near real-time inventory on the website, so that I understand what’s in the store near me before I get in the car. Right? Things like that. So when you’re trying to figure out where to start, you don’t have to bite off the whole thing all at once.

It’s too much. Choose one side. Right? Experience, operations. And you can figure out where to start by thinking about the type of business that you are and where there’s the best opportunity for impact, right? So a business that’s high fashion probably needs to make sure that that experience is right on the money. That’s a great place to start. A more commoditized product, maybe it’s about the operations just fulfilling on time, keeping expectations in check. But remember that it’s not just a matter of where you start, you have to continue. You have to iterate constantly. Start in one spot or the other, then revisit. Go the other way, go back and forth, keep on innovating. The technology enables that. We talked about upgrades and how much easier they are, but the onus is still on the retailer to stay on top of it and perpetually innovate.

Julia Raymond:
And I think it’s a great time to innovate because of the huge behavioral shift we’re seeing in consumers that probably is the first time in six decades or so, where consumers are so receptive to retailers experimenting and trying things that may or may not work out.

Emily Pfeiffer:
Right. Yeah. They’re kind of willing.

Julia Raymond:
And if I take a bird’s eye view of what you’re saying, retailers, e-commerce players, whether that’s retail or something similar, I feel like they have such flexible architecture. Each one has their own Swiss Army Knife and all of the tools that are in that knife that are right for them and custom for them. And in some ways, it sounds like this is making it easier for them to keep up with the times, because they can determine what are my customers looking for and how can I go to, like you said, a specialty provider and upgrade just that one area, and really hone in on increasing capabilities there before I move to the next thing, so that you’re not caught with the one throat to choke provider who’s becoming slow moving and pulling you back with them.

Emily Pfeiffer:
One of our predictions, I expect we’re going to see this more and more, is the old strangler approach, is what it used to be called. What it means is rather than replatforming, ripping and replacing my big legacy tech, which in many cases, especially with larger companies that have been doing commerce for a long time, they might still have a legacy home-built or purchased on-prem solution. And believe me, that thing is so ingrained into the guts of the business, trying to Jimmy it free while still running the business is kind of impossible.

So instead, what they’re doing, the old strangler approach in software, what they’re doing is bringing in cloud components, just the little components to augment and just improve what they have. So we know that about a fifth of digital businesses are planning in the next year or so to compliment their technology, their commerce technology, with SaaS, software as a service. Another fifth are planning to replace it with SaaS, and about 40% already have. So 80% of digital businesses in the next year or two plan to all, or at least in part, be on the cloud with their commerce technology. It’s definitely the way it’s going. But the fact that we’re not seeing it all as a rip and replace, we’re seeing it as this kind of transitional moment, that’s really telling. It’s hard. It’s just hard.

Julia Raymond:
It’s like jumping off a cliff and building your parachute or your airplane as you’re falling, it sounds like, a little bit. Yeah.

Emily Pfeiffer:
On the way down. Yeah. Good luck.

Julia Raymond:
So you can’t just do it all in one sweep. You have to componentize, like you said. And if we go back to the idea of components, which we started talking about at the beginning of our conversation, can you explain, quickly, headless for more non-technical people and is there any difference in headless, how we’re viewing it today, versus how we viewed it 10 years ago? Or is it more of the same?

Emily Pfeiffer:
Headless was not a prominent term 10 years ago. Essentially, all we mean when we say headless is the decoupling of, and this is my visual, right? Picture that commerce solution. Yeah. Just like this. It’s cells dividing. That’s what I picture.

Julia Raymond:
That’s what I was picturing.

Emily Pfeiffer:
Right? Perfect. Okay. So we used to have this commerce solution that even once OMS and other pieces had spun off, you still had this core commerce solution that managed the front end experience and the commerce engine, right, and the merchandising and the association to categories for the products and the cart itself, and all that. Headless really just means separating the head, which is that interactive layer, from the commerce engine, which is kind of the backend layer in commerce. That’s all headless means, technically. And headless vendors in commerce are generally the ones that don’t provide the head or that give you the option to get the head somewhere else.

This is kind of appealing, because you might design a website and invest an awful lot into figuring out the personalization, the merchandising, the experience of it. You can actually leave that in place and swap out just the backend commerce engine. So that struggle we were just talking about, this is a great solution for not having to replace everything all at once. It gives you a little bit more flexibility that way. But the term, in retail, there’s always a head. Always, right? You have to have a website or an app.

Yes. Alexa. I mean, something. There’s some way to interact with the brand. And so it’s important to think of it that way, and to remember that the industry, the market, can sometimes use headless to mean more than that, to mean that the componentization modularization of the greater stack, because it triggers that in our minds, right?

But technically, that’s all it means. It’s just the separation of those two things. And all of this has really been accelerated by the technology, the way we have of delivering the technology now, the truly cloud-native API first, right? And meaning it’s not just API exposure. And for the non-technical folks, think of an API as an outlet into your solution, and you can plug into it to get access to functions that are in it.

So having complete API exposure means the outlets are there and you can plug into them, but it still may be this monolithic piece of technology, where API first means you have different modules that can be deployed separately, upgraded separately, used alone, and they’re built to be accessed via API. It’s not clunky. They’re easier to update. You might have continuous upgrades and never even feel it, versus the old way where you’ve got a plan it a year out and you’ve got three months of user acceptance testing, and it’s going to grind everything else to a halt, right? So the modularization of the technology has been accelerated by all of this, but let’s not get carried away with what headless means.

Julia Raymond:
And Emily, I wanted to bring this back to retail because it’s near and dear to our hearts, obviously, at RETHINK Retail. Are there any things on the horizon that you’re most excited about when it comes to commerce?

Emily Pfeiffer:
We’ve all just had a moment together, unfortunately. It resulted in retailers having to do really big things really fast. And there was kind of a collective learning that if it’s really, really imperative, we can move that quickly, right? Standing up curbside that should have taken three to five years, they did it in weeks. And it was not amazing, but like you said, but for a minute, those were frontline workers and we thought they were heroes, right? It’s a great time to experiment. And consumers are still willing. They’re willing to try contactless payments. They’re willing to try all the different versions of buy online and pick up. And by the way, we know that there isn’t just one type of fulfillment that’s the one you should have and that’s what wins. They want options. They want options to meet their need of the moment.

Is it more important to get it in my hand as fast as possible, or just more convenient to have it show up, even if it takes a few days, right? So all of these options that would’ve felt almost insurmountable a couple of years ago, we retail. We now know we can get these things done in a much shorter amount of time if we see them as imperative. So that’s what I’m really excited about, is retail, as an industry, collectively deciding together to just go after it, move more quickly, bring in the cool new tech, and as you said, to experiment, for sure,

Julia Raymond:
And you touched on reliability. I would say reliability, alongside options, which you talked about, and then efficiency, are the three big takeaways for grocery, especially, because of the pandemic. And I know that the margins are stretching even further and hopefully technology will catch up and help offset the cost.

Emily Pfeiffer:
And prices may have to catch up too. Yeah.

Julia Raymond:
Yeah. Absolutely. But I did hear that going into the holiday season for 2021, there is some misinformation spreading around regarding fears over the supply chain, which we know will be stretched, but I don’t know if you’ve seen the news. There’s a bunch of TikToks going around and articles like stock up, and people are starting to hoard food. So we could be in for quite the season. I don’t know.

Emily Pfeiffer:
Consumers are more aware of the fact that there is a supply chain and how it all works than they’ve ever been before. It’s really interesting. But how do you run out of toilet paper, Target? How does that happen? This is not Target’s fault. Just to be clear, they have a process for predicting, right, planning how much toilet paper they’ll need week by a week, and deliveries probably come once or twice a week. But if everyone who might have bought their toilet paper in February buys it in the second week of February, that will break any plan. And that’s what happened. And people hoarding, meaning buying more than you need and just sitting on it for just in case, really does mess up the plan, because retailers knew what they could give or take, what they could expect to sell. So this is a self-perpetuating problem. And my plea going out to all my fellow consumers out there is please to buy what you need and not more than you need, and stick to your cadence. And if we all did that together, the supply chain would not be struggling as much.

Julia Raymond:
And we can all have a good holiday season, if we’re in this together. Don’t start hoarding.

Emily Pfeiffer:
Nope. It’s not helping anybody. Also, if you look at the carriers websites right now, they are not yet recommending shipping much earlier than usual to reach destinations by holidays. It can change, right? But if we’re all pretty reasonable about it, if we don’t wait until the very last minute, we don’t have to buy all our holiday gifts right this second. But we shouldn’t wait until the last minute. Let’s understand it will be a little bit taxed, but there’s no reason to panic. That’s the upshot. Don’t panic.

Julia Raymond:
Shout out to my brother, though, because without fail, every year on Christmas Eve, he’s at Target or somewhere buying all his gifts.

Emily Pfeiffer:
Oh, Julia’s brother.

Julia Raymond:
I know. I’ve tried. I’ve tried to help him, but that’s just how he rolls. So, I haven’t done any shopping. Have you? Just curious. Have you started shopping?

Emily Pfeiffer:
Yes, I have. And consumers are starting a little bit earlier. They’re telling us they’re starting. But that’s also been happening for years. The Black Friday, and then it was Black Friday on the weekend, and Black Friday into Cyber Monday, and it’s been kind of expanding back. It’s a really interesting lesson that we all had to learn together not too long ago, that consumers don’t magically have more dollars to spend just because they start spending them early. It just stretches out the spend, right? But yeah, shopping earlier and planning for it is not a terrible idea. There are some absolutely real supply chain issues. There are definitely delays, and especially with certain types of electronics and things like that. So shopping early is not a bad plan, but panicking and hoarding is…

Julia Raymond:
Definitely. And my personal prediction is that we will have record-breaking sales going into the holiday season and early next year, because I did see a Bloomberg economy report from, I think earlier this year, maybe in the summer, and they said from the world’s largest economies, they estimated 2.9 trillion, with the T, in savings that consumers have ready to spend, because they didn’t go out on holidays as much over the past couple years or have as much spending in general eating out. I mean, it really does add up. So I think we will see a little bit of a boom. I’m hoping, for retailers.

Emily Pfeiffer:
Our data says that a significant portion of consumers plan to spend the same or more as last year. Yeah.

Julia Raymond:
While I have you on, because you’re an expert in commerce, I wanted to ask you about, you mentioned TikTok earlier. First of all, are you on TikTok?

Emily Pfeiffer:
Nope.

Julia Raymond:
It’s gaining more and more traction, and I know social selling is something on the very priority list for a lot of retailers in commerce, especially D2C. So do you have any feelings about D2C or social commerce as we move into this next year?

Emily Pfeiffer:
Yeah, I have changed my opinion on social commerce. We all tried it. Old folks like me who have been around for a while doing this, we tried this once before, I want to say seven or eight years ago. It was kind of this masterful plan to start presenting products in social channels, little stores, brand stores and things, on Facebook and whatnot. And it was such a supreme disaster that I saw vendors who never came out of beta before they tossed it in the bin and kind of whistled and walked the other way. It didn’t work. Because the idea was let’s go meet the customer where they are, right? Let’s go to where they are and sell to them there. And consumers were like, “That’s not what I’m doing here. I’m not trying to shop.” Right?

“I’m looking for my old classmate.” It was a few years ago. What’s different now is the social channels are embracing it, right? They’re setting it up, and they have been for years. The Facebook feeds with the retargeting ads, all these little ways that we’ve kind of been setting it up over time. And consumers, I think, are primed for it. And if you combine that with, influencers, as you were saying, this kind of aspirational, how can I be more like this person, how can I look like her, how can my house look like theirs, whatever it is that we’re aspiring to, being able to buy it right in the moment, I really do think that it’s more appealing than it’s ever been to the right consumers. And I think I just read that social is already at 3.2%, which sounded really high to me, all things considered, and I wonder whether it was considering a link from social. Every target that links you to a website. But then if it is, then it sounds low to me. So I don’t know.

Julia Raymond:
Right. Yeah. For commerce in general, how much is actually influenced by social? Probably more than 3%.

Emily Pfeiffer:
Exactly.

Julia Raymond:
[crosstalk 00:22:54] people are just buying from a TikTok directly to the product page or from Instagram Reels or something.

Emily Pfeiffer:
When it’s native checkout in the social app, that really is different. I think it’s still very small. But the population that wants that is coming of age and becoming consumers. So it’s a smart thing to go after. I would just balance that.

Julia Raymond:
And terrifying.

Emily Pfeiffer:
Yes. Absolutely.

Julia Raymond:
I mean, if you think about Facebook owning Instagram, Instagram really competing heavily with TikTok, and all of the selling that is ramping up on the Instagram platform. I mean, Facebook and Google, they know everything about you.

Emily Pfeiffer:
They do. They do.

Julia Raymond:
Emily Pfeiffer of Forrester Research, thank you so much for joining this RETHINK Retail future of commerce chat, and I hope to have you again on very soon.

Emily Pfeiffer:
Thanks so much for having me, Julia.

 

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