Insights

The Era of Disruption

January 02, 2020

Innovation: A life or death choice for retailers

In the next decade, retailer success will be dependent on the effectiveness of Chief Digital Officers (CDO) adopting new business models and channels to consumers.

Our digital world is evolving. New technologies are disrupting traditional consumer relationships and provide new entry points for competitors. Thriving in this era requires intentional, high cadence experimentation and a set of technical tools that can keep up. Valtech perceives commerce tools, as such a platform, architected to support rapid and real-world testing of innovative ideas.

The Innovation Imperative

The world is changing at an accelerating rate. Retailers need to anticipate how technology will impact their relationship with their customers by judiciously experimenting with new models. Otherwise, they risk being left behind.

VOICE is everywhere, changing consumer behaviors and threatening retailers' traditional go-to-market strategies.

DIGITAL ASSISTANTS are in various devices, from mobile phones to refrigerators, digital assistants are increasingly becoming  intermediaries between retailers and consumers.

CONSUMERS are buying within video games. This is expanding beyond digital goods to include the purchase of real-world products for delivery.

VIRTUAL REALITY and augmented reality technologies have not reached mass adoption as quickly as the most ardent advocates had predicted, but there is little doubt they will be a significant part of the consumer landscape. And they hold the potential to change everything about the consumer buying experience.

CARMAKERS are actively rolling out the ability to shop through infotainment systems while on the road. This trend can only accelerate as autonomous cars reach the market.

AUTO-REPLENISHMENT SYSTEMS are just now reaching consumers- but have the potential to change the meaning of consumer loyalty radically.

Baseline Needs for Innovation

Innovation entails risk. Most experiments will fail. Retailers need an infrastructure that allows for:

  • Quick, low-cost deployment of new capabilities.
  • Simple and reliable reuse of existing investments in the exploration of new opportunities.
  • Rapid scaling out of successful experiments to capture market share.
  • The anticipation of or preparation for an unexpected rise of new consumer channels.

Anticipating and Reacting: The Retailer Lifeline

Retailers today recognize the importance of changing how they interact with their consumers. What is less clear is how to adjust to these changes. Reminiscing on the .com bust and boom even with innovative technologies, committing too early or over-investing can be risky. Dwelling on this unknown past requires experimentation. Prudent retailers understand the unpredictable nature of this industry. No one can meaningfully predict how the intersection of Al home assistance, the sharing  economy  and the potential of blockchain will change the retail landscape. In this context, retailers have an absolute need to be able to experiment with new business models quickly and inexpensively and be fully prepared to "fail forward."

The Value of Micro-service Architectures

Monolithic commerce systems can make new channel experimentation expensive and high risk. This would not be in the best interest of the retailer. When experiments are costly in time or money, innovation is stifled. Most of modern end-to-end commerce platforms evolved primarily through acquisitions of software products and smaller platforms in areas where

a monolith buyer was at a disadvantage or where it was missing respective functionalities. Time­ to-market is essential. Over the past 10 years we observed major platform consolidations in the e-commerce technology space. An acquisition of this caliber typically results in a monolith platform being marketed as an end-to-end, single vendor, functional solution. However, integrating such features can take years. This could be a potential obstacle for customers. Upgrades demand an extensive rework and testing effort across each facet. It's a costly undertaking for retailers.

All-in-one modern enterprise  commerce platforms are expensive, even if deployed and purchased based on a revenue-share (pay-as-you-grow) model. Decoupling just a few critical functions and features from the rest of such a platform's components is nearly impossible when the full suite is not utilized to its potential.

Hence, why more retailers are embracing the so-called headless or micro-services based approach to commerce technology. A headless commerce platform is essentially a robust, scalable, modern set of commerce modules and services that deploy in the cloud. They can be called upon through a custom-built user interface for a website, a mobile app, a voice-controlled device or a home appliance. In short, regardless of a user touchpoint or interface type, a very standard set of back-end platform micro­-services is utilized through a comprehensive API layer of the platform.

Some perks of using a micro-services based platform such as commercetools, include:

  • Individually consumable and priced on-demand type services (such as product price calls, promotion calls, order tax calculation calls, and other).
  • Such platforms are typically cloud-native, designed from the ground-up utilizing best-of-breed, modern software architecture.
  • They are headless, built for omnichannel, social, IoT and numerous other user interfaces.
  • They connect to the “old” world of offline stores and customer touchpoints like kiosks, POS terminals, store displays, etc.
  • There are hundreds of releases per year to grow and improve such platforms, while the underlying APIs are kept stable and backward-compatibility is assured.

Technical evangelists will praise the robustness and future proofing of a decoupled architecture. However, the more prominent business benefits are in providing a path to agility. It buys CDOs the ability to innovate towards the future and adjust to unexpected developments.

Valtech is enthusiastic about the headless approach to e-commerce and, after reviewing available technologies, we feel very comfortable recommending commercetools to those pursuing a more agile approach to the market. commercetools provides an innovative platform that allows fast, lower-risk experimentation with new channels for reaching the customer-or enables entirely new business models.

How Does the commercetools Micro-services Architecture Support Innovation?

commercetools supports CDOs innovation imperative by reducing the time and cost of trying new ideas. It does this in the following ways:

1 Freedom from the backend

CDOs can roll out experiments with new business models or consumer channels without touching backend logic, functionality or capabilities. New experimental programs can be launched without delving into the complexity of backend systems. It fundamentally frees CDOs from a central challenge with monolithic systems-the requirement that if you change anything, you have to change everything.

2 Faster time to value

commercetools' micro-services approach gets projects live more quickly because:

  • It simplifies quality assurance processes. Only the written micro-service requires testing.
  • Teams can develop in whichever programming language best meets the demands of the project-all codebases can coexist.
  • Development teams can operate autonomously. The business overhead and friction of coordinating distributed teams disappear.

3 fast and simple partnerships

By design, commercetools is APl-first. It is built with the ease of integration as a core design principle. For a CDO, this means that lengthy and difficult technical integrations will not strangle smart business partnerships.

4 Reduced partner or vendor lock-in

commercetools grants CDOs the ability to rejuvenate their supply chain partnerships and entertain new partners without the barrier of years of integration activities. This flexibility translates to substantial negotiating power, as well as simplified paths to the exploration of new opportunities.

Grasping the Future

According to one commentator,  "the retail and consumer goods industries will change more in the next 10 years than they have over the past 40." In the face of this upheaval, retail CDOs must experiment with new business models and channels for consumers. There is no one clear path to success in the coming decade; instead, winning retailers will rely on fast, frequent testing of new ideas to identify opportunities. To do this, they need commerce infrastructure capable of supporting fast, frequent explorations of new ideas. commercetools' micro-services based architecture is ideally suited to this task. It allows CDOs to try new ideas, quickly, inexpensively and at low risk-all of which lays the groundwork for success. 

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