Tim Bucciarelli:
Welcome back to Shaping eCommerce with IronPlane. I’m Tim Bucciarelli, the Director of Engagement at IronPlane. We are today continuing our series on the future of eCommerce.
Today, you’ll see a familiar face here, Aaron Sheehan, who we’ve talked to previously about BigCommerce and eCommerce platforms, generally. Today, we’re tapping his knowledge to talk about the future of eCommerce. We’ll dive into specific platforms and where we think the industry is heading in the future.
So, Aaron, thank you very much and, for those who don’t know you so well, could you just give a quick intro so they know your background?
Aaron Sheehan:
Yeah, absolutely. As you introduced me, I’m Aaron Sheehan. I’m the Director of Competitive Strategy at BigCommerce, have been in the eCommerce space for about eight years, most of that on the agency side of the business, just like IronPlane, doing delivery and consultation for merchants of different sizes and different verticals, and have been in tech a bit longer than that. And I live in beautiful Springfield, Missouri in the middle of the Midwest, where Fall has just begun.
Tim Bucciarelli:
So, given your history in the eCommerce space, I’m very excited to get your opinions on the future of eCommerce. So, the first question is really a broad question, and no points for getting it right or wrong, it’s just your own view of where the eCommerce industry is going to be going in the next five to ten years.
Aaron Sheehan:
Oh good. I didn’t study, so I’m glad there’s no grading. I don’t think we’ll call you back in ten years and tell you how right or wrong you were, so I think you’re in good shape. That’d be a great segment, though.
Tim Bucciarelli:
That's true!
Aaron Sheehan:
So, where the eCommerce industry is going in general? I think it’s going to continue to grow. It’s been interesting, I think much ink has been spilled on the topic of Covid and its impact on eCommerce. I think all of us in the space saw a disproportionate spike in the adoption of eCommerce as a distribution channel for goods and services right around early 2020, and that was out of necessity.
eCommerce, of course, has been increasing in adoption for years, well over ten years, year over year. The amount of market share that eCommerce picked up as a distribution method in that two-year peak Covid window, I know we’re not fully out of it yet, growth is returning to the normal pattern that we’re seeing pre-Covid. I think this change is being maybe interpreted as a retreat of eCommerce and, compared to, say, 2021 levels, I think 2022 levels are retreating, but they’re still higher than 2020, or still higher than 2019, which was higher than 2018.
So, I don’t see eCommerce as going anywhere. If you look at mobile phone adoption, if you look at the way offline and online experiences are being blended now, it seems to me that eCommerce is not going to go away now, when stores are reopening, because it wasn’t going away pre-Covid, it was growing, right?
As new generations of people become more accustomed to reaching for their phone or reach for their laptop when they want to research a product or buy something, that’s the first step, right? And the convenience of that can’t really be overstated. So, I don’t see it going anywhere.
Tim Bucciarelli:
Do you kind of feel like, let’s say, ten years from now, it’s going to be more of the same? Do you perceive there to be any substantial shakeup or shift in how it’s actually implemented or delivered or who it benefits?
Aaron Sheehan:
I would say the hot topic today in terms of brand-new innovations for commerce is the metaverse, which means different things to different people. I would say that you’ll see an increasing share of commerce being transacted on virtual worlds, and not necessarily because someone’s got a headset on and they’re having coffee with Mark Zuckerberg, and they have no legs, you know, that’s one manifestation of the metaverse.
Tim Bucciarelli:
But there’s also plenty of places like Roblox . . .
Aaron Sheehan:
I know it well. My daughter just turned 11, and she’s been getting into it, and I’ve been seeing the number of brands that show up and building sort of brand experiences, and she’s playing on a tablet, like an Amazon Fire tablet, so there’s no headset, there’s no like walking virtually. Minecraft is another example of that, where marketplaces are really being built on top of virtual worlds.
And to me, the metaverse is, in a lot of ways, simply an updating of the marketplace concept, or the shopping mall concepts, which is, “I’m going to build sort of digital property, lease it out to various brands, and we’re going to have attractions to get people into this digital property, and we’ll try to advertise and sell to them while they’re there.
What I haven’t seen yet is widespread of adults with actual purchasing power choosing to either begin a shopping experience by going into the metaverse or even by spending significant amounts of time there, and I think we’re probably a long way away from that because there are only so many valuable digital properties that will attract eyeballs and clicks in the quantities that you need to make the marketplace work.
So, it’s interesting. I think that the, I’ll just say, implosion of Web3 over the last six to nine months has probably not done the Metaverse any favors because they were really tied to one another, at least in messaging and thought leadership.
And so, I think in the short term, we’re going to see almost a retreat back to the familiar business models that make sense. “I buy something, and I sell it for more than I paid for it.” Turns out, that’s really a pretty winning way to make money, whether that’s online or offline, and I think you’ll see in the near term a sort of a move back to that model. You are seeing certainly a contraction in the number of direct consumer brands were ventured back, never turned a profit, and are having to close or sell for quite a bit less than they were valued two years ago.
So there are so many areas coming out of the speculative end of the eCommerce market; what happens in five years, I have no idea. It feels like we’ve been living in the last season of some kind of weird HBO show over the last few years with everything that’s happened in the world, and I have given up trying to make like medium-term predictions about what’s going to happen in the world because I think the writers have lost the plot, Tim. I don’t know who’s deciding what’s going to happen next season, but I think they might need to be drug-tested.
Tim Bucciarelli:
Yeah. A couple areas are particularly interesting to me. I think that we have been living through an unprecedented boom in venture-backed technology solutions and, to your point, a lot of them have been really focused on marketshare, marketshare, marketshare, users, users, users, and now they’re like “Oh, alright, there’s this thing called profit, so we need to start focusing on that.” But for some of them it’s too late and I think what we’re going to see is a contraction over the next five to ten years of that space, and that’s why it’s even more important.
And for us, as an agency, this is a lot of fun because we like giving advice, unsolicited, especially. And so when our clients are looking at ten different technologies, we really want to make sure that they’re selecting the right technologies to interact with their eCommerce platform, technologies that are vetted, proven, and will last over the next five to ten years rather than the flash-in-the-pan, trendy, shiny new thing that everyone’s talking about on Twitter and LinkedIn because I think there will be a contraction. There will be a lot of businesses that I think, unfortunately, are going away, some that are being purchased. So, I think that’s going to be a good thing in the long term for the market.
The other area that’s very interesting is the B2B space. I think there is still a very substantial population of B2B businesses that either haven’t given the time to really figure out how they can make the most of the digital environment, or they’re afraid of change, which is totally fair and reasonable. But I think we’re going to see more and more of that B2B growth and B2B innovation because I don’t think we’ve tapped into all of what is possible in supporting existing sales teams, in supporting different payment methods, purchase order processing, I mean we’re getting there, and I know that you specifically, BigCommerce, has invested heavily in that over the past year or two. I think that’s going to be even more exciting in that period, as well.
Aaron Sheehan:
Yeah, I totally agree. It’s funny, because Covid really accelerated the B2B space in a lot of respects because their normal sales channels were maybe totally disrupted, going out in person, visiting, having showrooms, field sales opportunities became really curtailed there for a couple of years.
I do want to go back a little bit, I guess this applies to B2B as well, but also to B2C, one thing that we are seeing that I think is having an impact on eCommerce are privacy laws and specifically Apple’s changes to building the cookie-less future, and data protection, and opting in / opting out, there’s a massive impact happening to, I would say, a lot of merchants who built businesses on Facebook Ads, right? “I’m a drop-shipper, I build an audience, I build a lookalike cohort, I hit them with Facebook Ads, and then I send them to my website.”
You’re seeing moves where more eCommerce platforms are becoming very interested in being the first-party source of data and truth for customer data specifically because of the fact that they no longer simply rent that data from a social media network or a platform of a platform, and you see a lot of those social media platforms looking pretty hard at eCommerce as an actual feature that they have because they can’t simply export their viewer data and intent data off to a platform.
This started, I feel like, in Europe like so many ideas do and has sort of pushed across the Pond in terms of data production, with CCPA in California, GDPR obviously, and then the move by entrenched vendors like Apple who are big enough now that they can simply say “We’re doing this because we’re going to build our own ad network and we’re tired of propping up everybody else’s because we’re leaving lots of money on the table.”
So, I think there’s two things. There’s an increase to verticalization inside of the platform space, any platform, not just eCommerce platforms, where it’s like customer data is the currency and if you have it, then you build ways to use that customer data yourself. And then I think you’ll see merchants changing business models to either have to go right or die with one of those platforms a little bit or figure out an omnichannel way of building out equally in lots of verticals and maybe having to change the way they acquire customers because it’s gotten more expensive to acquire customers.
Tim Bucciarelli:
At IronPlane, we work with two eCommerce platforms. We work with Magento, also called Adobe Commerce and we work with BigCommerce. Could you touch on kind of any of the experience that you have with Ordergroove in those particular platforms?
Aaron Sheehan:
And, as customer acquisition costs go up, you’re going to see the price of goods and services go up, too, right?
Tim Bucciarelli:
That brings to mind three things, and we haven’t even gotten onto topic #2 yet, but that’s okay - we’re going to get there. But I like the idea of looking at the European initiatives first because what tends to happen is, as they tighten their privacy laws, as they tighten their accessibility laws, as they tighten their security laws, those all bleed out into the rest of the world and, because eCommerce is global, if you have any global presence, you’re going to need to adopt those European standards.
So you may as well be looking at the future and saying, “Let’s already start to plan to be GDPR compliant.” Even if you’re exclusively selling in the United States, that’s the way things are going to go.
The privacy laws are going to come, especially if you’re managing first party data, you’re going to have to be on top of that from day one, once the policies are in place. And it’s the right thing to do. You want to protect the privacy of your customers and find creative ways, truly creative ways, to market to them and convince them that you’re the merchant for them.
The other is security. As we know, site security is really critical, there’s more and more incidents of malware and hacking and denial of service, I mean, there’s a lot of different elements that can come up. I think that’s going to be critical, not just reactive, but proactive ways to keep your site secure.
And then the third is accessibility. That’s where you are really trying to make your site accessible to everyone and that means, in particular, in the U.S. the ADA compliance for people with disabilities, that you enable your site to be used by those people with disabilities so they can go through and they can make a purchase just like everyone else. They can interact with your support team just like everyone else. These are not simply things to do; we understand that. It’s a heavy lift for a lot of companies. But there are laws, and they should be looked at carefully to see how you can best comply with them.
So, those are three that I think are really tricky for companies, but are worth today starting to look at. And in the future of eCommerce, I think those will play a big role now and into the future.
Aaron Sheehan:
Yeah, I agree. And it’s interesting, I think a bill just got introduced to the Senate and the House around accessibility, because one of the gray areas there is that there are groups like the WCAG who are sort of publishing standards, industry standards for font contrast, and font size, and screen reader support, and things like that, for the web, in general. And certainly, there were plenty of lawsuits in the last several years where people are suing merchants or the tech provider because the product or the platform does not meet those industry guidelines.
But there’s not really been sort of a civil penalty or legislative oomph behind that. There’s, “I can civilly come after you for discrimination, but I’m not statutorily violating something.” Like a lot of things, right, the government is slowly coming around to, “This is a big enough issue”, especially post-Covid, again, when everyone was forced online. You’re going to see more time and attention placed on that arguably you could say the same thing about tax. After the Wayfair ruling as states in the U.S. anyway slowly get around to internet taxation as a thing, you’ll see I would say, in general to everything you just said, a more regulated environment for merchants to operate in does seem to be the future.
And hopefully smart regulation that is benefiting the consumers, first and foremost, but also not harming merchants, I know that’s a fine line.
Tim Bucciarelli:
I love your optimism, smart legislation, I love it, I love it. Okay, so let’s move on to what I think merchants will be interested in, which is really just touching on some of the key eCommerce platforms that are out there today, talking a little bit maybe about the use cases, if they are distinct, and just kind of getting your perspective on maybe where they’re headed in the future.
Aaron Sheehan:
Oh! Well, alright! Well, there’s a lot to cover. I guess I’ll start with the artist formerly known as Magento, as that’s been a lot of my time over the last many years, we were discussing before the recording started.
It’s been hard to get a read on the Adobe strategy for commerce, but one of the things I think it true based on a lot of their press releases as well as messaging that goes out to the partner ecosystem and analysts, is that Adobe sees the future of commerce as composable.
We can maybe talk more about what means in a follow-on question. But there’s a recognition that if I’m Adobe and I sell a lot of different software products to the enterprise, I’ve got my Experience Cloud, which includes Adobe Experience Manager as a CMS or a digital experience platform, I’ve got Adobe Target, I’ve got Adobe Analytics, I’ve got Adobe Sensei AI engines powering personalization, Adobe Campaign Manager or whatever they’re renaming it, I think “Campaign” is going away and it’s being called something else now, probably something with “Cloud” in it would be my guess.
So if I’m selling lots of solutions to that sort of Fortune 500, IR Top 2,000, the commerce piece has to fit technologically alongside a lot of other customer acquisition and digital experience management.
The Magento platform, I think, has always been famously challenging to integrate, that would be a good way of putting it, into really anything, and I think you’ll see a lot more focus from Adobe on figuring out how to make that simpler at the enterprise. And I say the enterprise because, as I think we were discussing before the show, back in the olden days the difference between the Magento Community Edition and Magento Enterprise Edition, the free open source and the paid open source version, was pretty thin and the ecosystem pretty easily could support both.
And I think over time we’ve seen that the Magento Open Source ecosystem is going one direction, but the Adobe paid commerce product is going a different direction, both in terms of technology partners and agency partners as well as ends of the market. So, watching what happens as the Magento product slowly transformed, obviously, the Magento brand name is pretty much dead, right? You go to magento.com and you get, I think it’s Adobe slash something slash, it’s multiple layers of directory structure on the Adobe website.
They’re going to have to transform Magento from an open source on-prem software serving the mid-market to a composable software-as-a-service almost microservices architecture product serving the true enterprise. We’re watching that play out very slowly in real-time. I think Covid, like a lot of things, probably slowed them down in terms of their ability to quickly start making that switch, but I’m seeing more and more activity that makes me think that we’ll see Adobe giving maybe lip service to the mid-market they used to serve, but the people who are actually deciding the product direction are moving it upmarket and in a different architectural direction than previously the Magento product was.
Tim Bucciarelli:
Yeah, because the composable market is really firmly only applicable to those who can afford it. And those who can afford it right now are typically going to be enterprise-grade businesses who have the funds to invest in a composable architecture because it’s not simple, it’s not inexpensive. And if that is already Adobe’s existing client pool, they need to satisfy both the composable and the Adobe Commerce, if we can still call it, “monolithic” platform, then they’ll have a good opportunity to keep that market.
The mid-market, it’s interesting, I’ve heard people say, “Oh, Magento Open Source, there’s no licensing fee, it’s really good for small businesses,” and I cringe a bit when I hear that because, as a former eCommerce director for what I would consider a small to mid-size business, Magento Open Source is not an inexpensive platform because you typically need to have an agency helping you unless you have your internal PHP developer, which what small business has that, you really need an agency and that agency has to be good because Magento is not a simple platform. If you do upgrades, you do security patches, you do third-party modules, you do customizations, all of it has to continue working well together and the only people who can do that for you is a very skilled agency, and they are not cheap.
So, when you think about it, yes, you don’t have to pay the licensing fee, but you also need an agency and you’re spending $2,000, $5,000, $10,000 a month keeping your website up and running, optimizing it, ongoing, bug fixes, improving, new features, that is not inexpensive. So when people talk about it as a solution for small businesses, that’s when I start to wonder. I think it’s really mid, enterprise, maybe small enterprise, mid-enterprise, large enterprise, that realm.
Aaron Sheehan:
I agree. One thing I’ll say in terms of composable is, and this is something that surprised me; we might have even talked about it in the previous conversation that we had, as far as headless goes (obviously, BigCommerce is part of the MACH Alliance; we can talk more about that later), we have more headless builds than any other platform. We have a lot of builds on our platform, period, so there are a lot of large numbers there.
But it’s been interesting to me how much more adoption there is of composability or headless solutions in Europe than there are in the States, and while I think it’s broadly true that composable architectures or headless builds are generally kind of an enterprise-level thing here. That’s actually not the case in Europe. There are a lot of small to mid-sized businesses that are doing headless and composable things in Europe, but the use case for doing eCommerce in Europe is different, you have a lot more fragmentation among your audience in terms of language and presentation, and so you need more variety in your web experience because you’re serving a pretty disparate group of people, which is something headless lends itself to, and for whatever reason, I find that you’d said that it’s odd for a small business to have that PHP developer on staff, man, not in Europe.
It’s interesting how often we are selling to developers who are running eCommerce businesses in Europe compared to the United States. Historically for me, being in your shoes, being on the agency side serving that mid-market for a long time, it was the exception for me to be on a sales call or buying decision call with someone who wrote code for a living on the merchant side, where it’s actually normal to have those conversations in Europe. And so I think there’s a lot more comfort with complex technical solutions in the European market than there is in the States. Again, lots of different reasons for that. You can get into history and sociology, probably, to discuss that, which would be a fascinating topic.
But it is an interesting difference between the two, where we see a regional difference between who’s picking up on headless and who is slower to pick it up.
Tim Bucciarelli:
So, when we think about that kind of difference between Europe and the U.S., I think of it as a difference between platform selection as well because you have the likes of Shopify where you would never need a PHP developer, and it’s got this really attractive box that you can live within, and it does pretty much everything that you really need if you’re a certain type of business.
Aaron Sheehan:
Right. I guess Shopify’s our next one, Tim?
Tim Bucciarelli:
Yes.
Aaron Sheehan:
Alright. Well, they certainly make the most noise, I think, out of all of the platforms that I follow professionally, an enormous amount of merger and acquisitions activity, leadership changes, new functionality being rolled out, and just general . . . I think I can get away with saying this, but there’s something almost cult-like about Shopify if you’re very online like I am, unfortunately. There is something very interesting to look at as a social phenomenon.
Tim Bucciarelli:
It’s like a Salesforce model, as well. I think they could be put in that same category.
Aaron Sheehan:
Well, actually, you just put your finger on something very interesting, I think because, in a lot of ways, Shopify is following a Salesforce model. I’ll look at a couple of things in discussing this. One is more than 50 percent of Shopify’s revenue does not come from the subscriptions that they sell, but it comes from what they call merchant services on their financial filing, which is payment providing, you have payment basis points that they get when merchants run their transactions through Shop Pay, which is Stripe under the hood.
So, it’s in Shopify’s interests to really be running almost like a Fintech, where the web builder platform called Shopify and everything else that they build or buy is really just a facilitation engine for getting credit cards running through those rails because that’s where they make the money. It’s not selling $29-a-month plans to people dropshipping to a Facebook audience, that’s not where the money comes from.
Tim Bucciarelli:
I want to interrupt you just for a second because there’s an interesting thing that I learned when I went to Meet Magento, I don’t know why I didn’t know this, but Adobe Commerce, Magento Open Source, Adobe offers their own payment services.
Aaron Sheehan:
I’ll blow your mind even more, then, and we can edit this part out if it violates anything, back in the Magento 1 days, because PayPal was owned by eBay and part of Adobe, the native PayPal integrations back in the early days actually funneled basis points of every credit card transaction back to Magento. In fact, it was one of those things where by default, including the payment method in the platform, the payment provider, in this case, PayPal, was like, “Okay, you’re sending it out by default, you’re putting it in front of everybody, we’ll go ahead and pay you a bit of every transaction in exchange for this place of prominence and an enormous amount of evangelizing PayPal as a payment method inside of Magento,” and there were points at which the revenue from that integration was in excess of what Magento was selling their licenses for. Now this goes back a ways.
Tim Bucciarelli:
Yeah. They’re still using PayPal as the foundation of their own payment processing in this new version, it may be it’s just that they’re now more comfortable exposing it and marketing it and selling it as part of Adobe rather than as this separate entity, so they’ll basically white-label the payment processing from PayPal.
Aaron Sheehan:
Right. And I think it’s going to be a harder sell at some level because why do merchants pick Magento in the first place? They pick it because it’s ultimate freedom and they can do whatever they want to do. They often have a set of preexisting either business relationships or requirements that don’t fit inside the Shopify box to talk about them. So, if I don’t fit inside the Shopify box, I’m probably a lot less likely to use the payment provider you’re just giving me unless I was already using PayPal to begin with, in which case sure, why not. But it is an interesting thing.
To go back to Shopify, if you think of them almost like a Fintech in certain respects, in terms of their revenue basis. I’m a big believer that you should follow the money, what people say their values are and their goals and their strategies are is cool, but you can predict a lot more if you actually look at where the money comes from. And I think Shopify has built an incredibly attractive and opinionated first eCommerce platform for a lot of merchants because of the fact that, as a product design, the value of Shopify is that it tells you what to do.
And you and I in the agency side long enough to know that a small business who picks up Magento and opens up the admin panel and there are checkboxes and dropdowns and settings and really obscurely named things, and people get into trouble because they just start pushing, oh, there’s a button, I should push it, there’s an extension, I should install it, you can get into trouble really quickly.
Tim Bucciarelli:
It’s not WordPress!
Aaron Sheehan:
It’s not WordPress, well, you’ve never looked at the back of a WordPress admin panel where somebody’s gone ham installing plugins, and you scroll, scroll, scroll, and never hit the bottom.
I think what Shopify has done very well is to build an eCommerce platform that is opinionated and flexible enough to accommodate a large percentage of direct consumer merchants. And as long as you don’t come into that with deep requirements about things like your own payment provider, it’s a really good solution for a lot of people.
There are things that they struggle with a little bit, but I think instead of building a Salesforce Commerce Cloud in terms of level of functionality, I think they’re building a Salesforce Commerce Cloud in terms of vertical integration, which is we’re going to have clouds for everything and we’re going to sell you, we’re going to have the Shopify version of a CDP, we going to have the Shopify version of payments, we’re going to have the Shopify version of affiliate marketing, we’ll have the Shopify version of headless now, Hydrogen and Oxygen.
And it’s the Shopify version of a thing that someone might want, and if you’re like “I want it, but I don’t have strong opinions about how it works or what it does...”
Tim Bucciarelli:
Or who I pay for.
Aaron Sheehan:
Right. That funnel is very well greased, and so you kind of like end up there. So, it’s not about being the best at any one thing; it’s about being present at a lot of different things and making sure that every product is reinforcing every other product, and that the ultimate win for Shopify is that as I built this, did I enable more Shop Pay revenue to run through my rails. If so, then that was a successful acquisition or feature for them.
The other thing I’ll say is they’ve spent an enormous amount of money on Shopify Fulfillment Network.
Tim Bucciarelli:
On what?
Aaron Sheehan:
Shopify Fulfillment Network. They bought 6 River a few years ago, they just paid $2.1 billion for Deliver. The track record of that goal of becoming the anti-Amazon, I think, hasn’t really come true yet, and there’s an enormous amount of cash riding on their ability to build out almost like a parallel Amazon and think it’s a really good idea in a lot of respects and something that’s probably needed, competitively. I want to see the execution of that idea before judging whether or not it was a good idea.
Tim Bucciarelli:
We’ve been reading about it for the past three years. It’s actually pretty exciting. Not to bash Amazon. I mean, Amazon is fantastic in so many ways, and it’s a leader, and it sets the standards for a lot of eCommerce functionality, but they need more competition than what they’ve got.
I like the idea of Shopify Marketplace becoming a little bit more of that competitor to that Amazon mainly because what I like about it is that it’s not only helping Shopify, but they are more directly helping individual merchants, at least in theory. I mean, Amazon also does that through their own, but if they do it right and they don’t take massive margins away from merchants, I think it could be a very interesting play.
Aaron Sheehan:
I agree. And the Shop Pay app has sort of made changes in that direction over time to where there’s more searchability across category than simply browsing a particular storefront.
But the thing that Amazon does really well, but I think Shopify is not yet to that “to do,” is that trust factor. Actually, Amazon disintermediates the seller, which is one of the big pain points of sellers on Amazon. But most people would rather do business with Amazon than whatever seller happens to be selling the spatula they really, really want. Shopify has to own the delivery and so on and customer service end to approach the point where I, as a customer, am going to feel as comfortable reaching for the Shop Pay app as I do reaching for the Amazon app because I know it’s going to show up in two days, I know if there’s a problem I’m going to get my money back, and I know that it’s a real business.
Shopify still has a little bit of a problem with the barrier to creating a storefront being so low; there are plenty of scammers out there, and not really a good way of ranking and reviewing sellers on Shopify, and that’s got to be fixed, I think, at some level. We’ll see.
Tim Bucciarelli:
Let’s see how it turns out in the next few years. One thing I wanted to mention about Shopify, and we’ve talked about this before, is that once you’re in with Shopify, it can often be difficult to pull yourself away. And I mention that because I just want to harp on this again that selecting your eCommerce platform is so important, and the right eCommerce platform for your business is so important.
If you look at Shopify and you think it can do what you need today, you should also be looking at it five years from now, is your product selection going to change, is your complexity going to need to adjust, do you need to have a different payment processing setup, do you need more integrations, more flexibility for custom design, making that decision before you leap is going to be so important. If you’re good with Shopify now, you see your future, you’re still going to stay good with Shopify, fine. But just know that if you want to re-platform, some platforms make it more difficult than others, I guess. And that’s my lead into BigCommerce, by the way.
Aaron Sheehan:
So, BigCommerce has been on an interesting journey. We started off . . . and I’ve been here about eight months now, but I was a partner going back to 2018, we built some of the platform going back several years, so, I can talk about it both as a blend of being familiar with the actual product and the tech as an outside party as well as now being an employee of the company.
BigCommerce really started as a small business, eCommerce platform, it’s an Australian company actually, originally, that has, like Shopify, like Magento did back in the day, started off on that sort of disruptive innovation model where you do a really good job serving an underserved end of the market and then you slowly take your competitive advantages and you scale them up into the upper end of the market. We’re on that same path.
I think fundamentally, we see ourselves more like a SaaS version of Magento than we do a competitor of Shopifys, which is one of the reasons I’m here coming out of the Magento ecosystem. So, BigCommerce is much more a . . . we’re much more open in terms of how we architect the product. We don’t have a payments provider, for instance. We’re really focusing on just the eCommerce platform piece of it and being a good eCommerce platform and trying to let partners fill the other pieces of it because I’ve seen so much change and turnover in terms of who’s the number one ratings in reviews per buyer in the world?
Well, once upon a time, it was Bazaarvoice, then they went away, then Yotpo showed up, don’t forget TurnTo. Search and Merch, it was SLI, right or die, now there are a lot more providers out there. The market does generally do a pretty good job of sifting through and promoting better technology at a lower price point. The commodification of everything is something that works to the benefit of tech buyers over time.
We really take an opinionated stance that is we’re here to do our thing, and we’re trying really hard not to. We get asked all the time, “Hey, can you guys create your own payment method to be like Shop Pay?” “So, I’m a shareholder, and I would really like it if you could drive more revenue.” And I think probably the street would reward that at some level, but it’s not something we want to do just because of who we are.
It’s much more like that old-school Magento ethos of offering freedom and flexibility to our merchants and to partners who build on us knowing that, if you’re a partner of ours, we’re not going to in the middle of the night buy a competitor, lock you out of our ecosystem, and tell everybody no dice, you can’t play, you can’t use that partner anymore, which happens a lot with Shopify and is a big worry on the minds of a lot of Shopify tech partners.
Lots of stories there over the last year of examples, authorize.net, and buy with CRON, Mollie.
Tim Bucciarelli:
Well, they just invested, I think, this past year, $100 million in Klaviyo, which is an interesting move, a very interesting move.
Aaron Sheehan:
It is an interesting move, and I have some “tinfoil hat theory” stuff that we can maybe talk about off-camera.
For BigCommerce, I think we are really squarely serving what I would call the mid-market, maybe call the lower enterprise or enterprise, the lines are very arbitrary in terms of what people mean, but I’ll say in general that $500,000 of revenue up to the $500 million in revenue online is the place where we feel pretty comfortable being. That’s where Magento made its name and its ecosystem years ago, whereas arguably Adobe is moving away from that and going to the over a billion dollars big name accounts. And I think Shopify doesn’t honestly have a product yet, and you see companies like Oracle just getting out of it altogether.
There’s an opportunity for us, I think, to be, should be at least, if not the default, then a strong contender for anybody in that revenue range, simply because of our breadth of offerings and flexibility. If you need to assemble a headless stack, you can use us. If you don’t want to assemble a headless stack, you can use us. If you want to bring your own payment provider, you can. If you want to use one of the ones we have pre-baked in, you can, we don’t sell you one way or the other.
We have operations all over the world now, so they’re sort of a global company, so wherever somebody is . . . . And the barrier to entry to getting into BigCommerce is considerably less than the barrier to entry to getting into Magento was because of the fact that we’re SaaS. You’ve never at any point been able to go to magento.com, spin up a trial store, or have access to a store with sample data and an API that you can build against, you’ve never been able to do that with Magento. That would have been a task for a dev to go get Magento running locally or on third-party servers, and you could test against it.
We make that possible because we’re trying to incentivize people to test and learn on our platform and then to sort of scale up from there, as they need. You mentioned B2B earlier, and that was an area where we actually made some acquisitions this year, but we acquired apps that were already in our ecosystem simply because they were really good ones to bring in and offer as part of the core.
So, our B2B functionality is now all on par with like a Magento, right? There are other things you can do, customer-specific pricing, and quoting, and company account management, invoice portals, we have all of that and have for some time, which has been a huge growth area for us, as well. It’s interesting because we’re trying to cover all of the bases, but we’re trying to cover all of the bases in eCommerce without getting in over our skis and trying to become a CDP or trying to become like a Search and Merch vendor or something like that.
Tim Bucciarelli:
So we’ve touched on Adobe Commerce, Magento Open Source, Shopify, BigCommerce. There are hundreds if not thousands of eCommerce platforms out there and are there any others that you think we should mention in this “grouping?”
Aaron Sheehan:
It’s literally my job to track all of those hundreds that you’re talking about, if we take headless out of it, I think one that is worth watching is Salesforce. You’d mentioned marketplaces earlier, actually. So Salesforce made an acquisition beginning of the year of a Brazilian company called Atonit, I may be mispronouncing that, they are a marketplace company. They announced at Dreamforce a few weeks ago that they’d be rolling out a Salesforce marketplace offering to their Commerce Cloud customers at the first half of 2023. Again, they acquired the product, and they’re going to roll it into the core.
That is fascinating recognition of something you had said earlier, which is that marketplaces are a growing channel. If I have a brand and I already have traffic, then I have the first dependent ingredient to building my own marketplace. It’s very hard to build a marketplace from scratch when you don’t have customers, you don’t have vendors. But if you have customers already there and you want to broaden out what you’re selling to them, what products you have for sale.
I’ve seen a lot of apparel brands launching reseller marketplaces on their own properties where it’s “I sell a high-end luxury good, but I want to have like a certified reseller program where people can buy and sell used versions of those goods.
At some level, you would think aren’t you cannibalizing your own new sales? But the other side of it is, well this is going to happen anyway, so we might as well get a piece of the action.
Tim Bucciarelli:
Yeah.
Aaron Sheehan:
And so you’re seeing more single-brand-focused marketplaces, and then also general, like what Walmart has done, and what Best Buy has done, and what Target has done, many of these large retailers.
Tim Bucciarelli:
And what Macy’s has just recently done.
Aaron Sheehan:
Macy’s just did, yeah. So you’ve had vendors like Miracle and Marketplace are out there for a while, which are built like integrations to eCommerce platforms like a BigCommerce or a Salesforce. But Salesforce offering their own, especially given that there are so many apparel vendors and health and beauty vendors on the Salesforce platform, means that clearly merchants have been asking Salesforce, “Please give us a cheaper, easier way to build and manage that marketplace natively inside the platform,” and Salesforce seized the opportunity there.
So I think that probably has the potential to be the most significant Salesforce move of the last year. Otherwise, it’s interesting, the Demandware product, Salesforce bought Demandware, going in the way-back machine, that’s what that is, it’s Demandware. Well, that was Intershop even back further than that, the technology is quite old. It’s a very old eCommerce platform, I mean, ATG levels of old, and it keeps on chugging.
Salesforce’s strategy to me, when I look at it, is customer data first. Their Sales Cloud, Service Cloud, Experience Cloud, Commerce Cloud, Marketing Cloud, all of the Clouds put together, all of the Genie and Einstein AI that they have sort of stitching together a customer graph of data, the value proposition of that relies on every cloud telling the AI more facts about a particular person to build a more complete profile, like who they are, what they buy, and what they’re likely to buy, their LTV, all the rest of it.
I think Salesforce is going into that first-party data thing, they want to be a first-party data aggregator. They want to have that master system of record of customer data and then use that to generate value on the other Clouds that they sell.
And I think you’re seeing a lot of the Lightning platform, which is the technology backbone of most of the Salesforce Clouds, is that they’re trying to put that Lightning architecture to enable interoperability between other Clouds. Well, Salesforce Commerce Cloud is not built on Lightning. But this year, they reskinned the business manager back end of it to look like Lightning, and then they also built a brand new B2B eCommerce platform on Lightning. They ditched CloudCraze, which they had acquired a couple of years ago, and said, “You know what? This doesn’t fit with all of the other Clouds that we have. We’re going Lightning.”
It wouldn’t surprise me to see at some point a more thorough reengineering of Salesforce Commerce Cloud on top of Lightning, maybe slowly over time. It almost has to be slowly over time to avoid totally disrupting your user base. But I would expect to see, because of the value of interoperability inside of the Salesforce ecosystem, I would expect to see them lean into that even more and update the tech that is extremely old at this point for Salesforce Commerce Cloud.
Tim Bucciarelli:
It’s interesting, the way that you describe the Salesforce ecosystem sounds very similar to the Adobe ecosystem, with some notable differences. I mean, Marketo for Adobe has never been a core product, it seems to me. Maybe I’m wrong because I’m not in their target market, but it just seems like it’s there, it’s available, but it’s certainly not as popular or as well known as Salesforce in terms of the B2B sales engine that Marketo is.
The other area that’s different, Adobe has all these design tools, and creative tools, and that’s a huge foundation of their business for many, many years. But apart from that, this kind of ecosystem of like Adobe Sensei vs. Einstein, Commerce Cloud vs. Adobe Commerce, it sounds very similar. Are they playing in the same space? Are they competing for the same enterprise-scale clients, or is Salesforce somehow also able to meet the needs of mid-size enterprises and small enterprises, or even small/mid businesses?
Aaron Sheehan:
No, well, some of their products as standalone products are, certainly. Lots of smaller businesses use Salesforce as a CRM, for instance. But, they’re both pursuing the Oracle and the SAP strategy at some level, or the IBM strategy, which is if I already have a seat at the table to a big Fortune 500 company or a large global enterprise, I need to maximize that access by selling as many clouds as I can.
And the larger the company, the more procurement-driven they tend to be, meaning that it’s hard, actually, if you’re a Nestle or a Coca-Cola or a Johnson & Johnson to decide, “Hey, I want to buy a new piece of enterprise software.” That’s actually a long, multi-month, maybe a quarter or multi-year process to get through legal, contracting, and all the rest of it.
Once I’m in as a vendor of record, it’s very easy for me to be like “Oh, you need a CDP? I’ve got one. Hold on, let me go out into my trunk and get one out. I’m already in the parking lot. All I’ve got to do is run back out to my car and pull out another box and bring it in.” Whereas everybody else is still on the freeway trying to find the exit to get into the parking lot.
We love our challenges, don’t we? We had the Blue Apron analogy you gave, you should be getting royalties off of that.
Tim Bucciarelli:
I’ve got another one, by the way.
Aaron Sheehan:
Oh, I can’t wait! I can’t wait. But to answer your question, yes - I think Adobe and Salesforce are pursuing pretty similar strategies in their well-known enterprise software strategy system. And there’s a lot more nuance to this and more complexity, I think, depending on the specific industry we’re talking about. But yes, generally speaking.
And Magento was there to check a commerce box in the Adobe suite of enterprise software offerings, right? Just like the way that Demandware was there to check that box for Salesforce back in the day.
Tim Bucciarelli:
Yep. So, when we’re talking about the future look of eCommerce, we’ve mentioned headless and composable several times, and I’d just like to help our audience understand exactly what we mean when we say those two terms. Are they different? Are they the same? What should merchants know about them, and should they care at this point, or is this something that they should be looking at maybe down the road five years?
Aaron Sheehan:
So, composable vs. headless, or composable and headless, because they’re not really in competition with one another although it feels very much like they are. The way I explain it is, headless has been around for a long time. “Headless” is an adjective you would use to describe a piece of software where the frontend is separate from the back-end.
So a headless CMS like Prismic is a CMS where I’m writing content, and I’m creating, and I’m authoring, and I have a workflow, and maybe I have digital assets in there as well, but that software is not actually publishing that to a frontend web experience to be consumed in a browser. You would build your own frontend or get a different frontend system to do that, say, for eCommerce platforms, there are headless-only eCommerce platforms like Fabric that “I’m the backend, but I have no frontend. Somebody’s going to use a system to come in alongside of that.”
Headless is just an adjective for a system. Headless can be also just a means of using a system. For BigCommerce, for instance, you can deploy BigCommerce headlessly where you’re just using us to manage data, manage promotions, author content, but you have a totally different frontend. We saw this a lot in Magento days and here at BigCommerce where people are using WordPress on the front and an eCommerce system like a Magento or BigCommerce or something else on the back.
Composable really is, to me, an adjective describing a point of view towards building a business or building a tech stack.
So, composability is the word that I would use to say “I have multiple headless systems or multiple systems that do one particular function and I nest them together and connect them together in such a way that I’m using the best possible system for each function in my business, my PIM or product information management system to manage product data, maybe I’m using an order management system to manage order data, maybe I’m using a digital experience platform, or something like Bloomreach for personalization, and Search and Merch.
I put them all together, and I have an amazing experience, and I have an amazing experience that’s decoupled enough that I can pull something out, I can pull one Jenga block out of the tower, put a better Jenga block in, and the whole thing doesn’t come down.”
In a world like the Magento world, a monolith, which is usually the word used to describe an all-in-one software platform, there is no pulling out of a Jenga block, put a new Jenga block in. When 2.4.5 comes out, I have to upgrade all four million lines of code on my application, whether or not I’m using it. There’s going to be downtime associated with that. My promotions have to stop because I’m busy doing an upgrade, my integrations with third parties, I’m adopting a new loyalty program, better stop, make sure it’s compatible because I’m upgrading the entire monolith to a new dot version or a minor version.
And so that means that the business moves at the pace of the entire enormous tech stack that you have, the entire monolith that you have, you can only run as fast as that thing can stay secure, patched, and up to date because it touches and governs every single part of your operations.
Composability is the opposite of that, which means that you can absolutely roll out a new loyalty program while you’re updating your order management system because they’re disconnected, or not disconnected, but they’re similar systems.
The downside of composability for most merchants, and you kind of touched on this earlier, is that it is more complexity to build, to source and procure, instead of doing one RFP for one vendor, “one throat to choke,” that’s going to do everything, I’m talking to a bunch of different vendors and picking the best one. Each one should be cheaper individually, but the sum of that and then as well the costs of interconnecting them and getting them to a point where you could operate your business cohesively that way is a little bit higher and requires more technological maturity of an organization than just simply have a Magento and clicking a button in the back and having something show up on the front, which is really cool until it stops working.
That’s my difference between headless and composable Ted Talk.
Tim Bucciarelli:
Yeah, and I think to your point that the agency that’s involved with you in building out that architecture, if you choose to go the composable way, that agency should be able to guide you and help you choose the right technologies to tie it together and support you as you go forward because if Magento’s not a one-and-done, certainly a composable environment is not a one-and-done even more so, I’d say.
Excellent. Well, we’ve touched on a lot of different areas. I think we’ve captured a sense of your future of eCommerce vision, and we will check back in five to ten years and see how we’ve done.
But thank you, Aaron, very much for taking the time out today to talk to me. We’ll provide, again as always, a little bit of information about you in the show notes, how people can reach you, find you on LinkedIn.
Anything else you’d like to share with the merchants who tune in?
Aaron Sheehan:
Well I just want to say thank you for having me and bringing me back twice. I don’t know how many visits I’ll get before I get the gold jacket, but looking forward to having that maybe before the five or ten years and having to be accountable for the predictions.
Generally speaking, I would just like to encourage any merchants out there who are interested in learning more about BigCommerce or eCommerce, in general, to check out our website or our social media, we’re bigcommerce.com, and of course, we’re very active on LinkedIn and Twitter. We do quite a few webinars; we try to do a lot of educational content as well, both on the web and live or recorded sessions.
Reach out to me as well. If anybody ever wants to just talk about things, I’m more than happy to walk through what I’m seeing in the ecosystem in the eCommerce world that wants to talk about it.
Tim Bucciarelli:
Yes, absolutely. And similarly, folks who would like to talk to IronPlane about BigCommerce, maybe getting a demo set up, talking through the sales process, we do that day in and day out, so we’re happy to engage in those conversations, as well.
Aaron, thank you so much again for being with us today and we’ll look forward to our next conversation.
Aaron Sheehan:
Sounds great. Thanks, Tim. Have a good day.
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