Last year, Internet Retailer, and ecommerce research company, released a data-driven report of the current ecommerce vendor landscape. This report, titled 2019 Leading Vendors to the Top 1000 E-retailers, surveyed 183 ecommerce executives to gain insight on trends relating to using vendor vs. in-house solutions for various technology needs. The report covers ecommerce platforms, email marketing, online advertising, payment processing, personalization, cloud services, analytics, and much more.
Some of the highlights from this research include:
- 66% of retailers opted to use a vendor when implementing new technology rather than build it in-house, up from 51% a year earlier.
- 65% of retailers say they turn to vendors because they don’t have the expertise to build e-commerce technology in-house.
- 49% of retailers say their ecommerce platform is their top budgeted priority over the next year.
While the research goes on to reveal who the top vendors are for each segment analyzed, another big takeaway from this report is that an online retailer’s commerce architecture is now more important than ever before.
66% of retailers opted to use a vendor rather than build in-house
This percentage, up 14% from the previous year, is a massive indicator of the importance of the right commerce architecture.
Just to quickly recap what commerce architecture is, it’s the entire ecosystem of software that a business uses to run it’s digital operations, and how they work together. This includes any ecommerce platform, ERP’s, CRM's, OMS's, PIM's, marketing suites, analytics, reporting, etc. Different architecture types have different strengths and weaknesses, so it’s important to know which is best for your unique business.
The fact that most retailers are increasingly usings third-party vendors for each component is important. For an online business to truly excel, all of these components need to be working together and passing data between them efficiently. Without this, massive data bottlenecks will appear that will affect the businesses bottom line as it grows because additional staff is needed to keep up with the data. I’ve outlined this in a couple of previous posts (here and here), but the bottom line is that scalability, not growth, is the only way forward for businesses trying to reach the next level. Scalability happens when a business grows but has automation is in place to handle the increase in data exchange. It’s only achieved by understanding the commerce architecture best suited to the business, and defining a working strategy around it.
Defining a strategy centered around commerce architecture helps businesses navigate the world of third-party vendors. By knowing the architecture and how it applies to the business, business operators will know which components must integrate with their ecommerce platform (or other platform) vs. one that doesn’t need to. If a business is not building the component in-house, it’s now more important than ever that the vendor supplied component meets the requirements of the commerce architecture.
65% of retailers say they turn to vendors because they don’t have the expertise to build e-commerce technology in-house
Another indicator of the importance of defining a commerce architecture strategy is shown with this stat. Most retailers just don’t have in-house expertise to build the technology they need.
When a business is not in control of what the technology needs to do but are searching for solutions, their stuck comparing features and benefits while deciding which vendor or solution to use. While this may work for minor components, it’s not the right way to go for the major components as you typically won’t see any of the negative aspects searching this way. Instead, by knowing the businesses commerce architecture and how the component should fit within it, businesses will be in a better position to ask the right questions and find the best technology for the business.
If operators make the wrong choice, that’s ok. One of the main concepts when thinking in terms of commerce architecture is that you can, and should, swap components from time-to-time as better solutions are found. This is one way that agile technology companies, which include online retailers, stay on top of their competition.
49% of retailers say their ecommerce platform is their top budgeted priority over the next year
Nearly half of all respondents surveys indicated that their ecommerce platform is the big ticket item to invest in over the next year. Many retailers know that the customer experience they provide is what differentiates them within the marketplace, so it’s no surprise that the ecommerce platform is a top priority.
Improving your commerce architecture makes your ecommerce platform better. Why? Automation and scalability. The more that an ecommerce platform talks to the other components within the architecture, the more streamlined and efficient operations will be. The businesses bottom line will benefit as sales increase because automation is processing data between systems that would have otherwise been done manually by human staff.
Are you using the right architecture?
We recently created a couple useful tool for retailers to help them gain insight into their business.
My suggestion, run through each tool above to gain some valuable insight. They’re quick and won’t cost you a thing. Give it a try (and let us know what you think)!