the choice of architecture depends on profitability

Retailers are increasingly developing markets. But with an important cost factor, the model commonly used to develop markets is no longer correct.

To react in this forum and talk live with the VTEX teams on marketplaces and headless commerce, come meet them at Tech for Retail show November 28 and 29 in Paris.

Marketplaces alone represent 62% of e-commerce sales worldwide, compared to 10% in 2008. The trend is similar for France where their weight increased from 8% of turnover in 2012 to 32% in 2020. In the first quarter of 2021, sales in markets increased by 44%.

This sales model is revolutionizing e-commerce, whether BtoC or BtoB. This is also the main reason for the explosion of online transactions, which will represent more than 6,388 billion dollars by 2024.

So it’s easy to understand the enthusiasm of retailers to build these marketplaces. But in the current economic context, where the cost factor is paramount, the model commonly adopted by contractors to develop markets is no longer correct.

In the first rank of disadvantages: profitability.

Don’t confuse speed with haste

The market consists of two types of players for several years. E-commerce service providers – from which retailers’ global online sales infrastructure originates – and pure players specializing in marketplaces – which retailers call upon to build their marketplace in parallel.

Implemented in this way, a marketplace solution costs an average of 250,000 euros to purchase and additional annual costs, in similar amounts, and thus takes a large part of the gross merchandise value (GMV), a key indicator to determine the health of an e-commerce site activity. To this amount is added the cost of the e-commerce engine, essential for the proper functioning of the marketplace solution. This additional cost also amounts to several hundred thousand euros.

With implementation and maintenance costs, the total cost of this type of project is estimated between 1.5 and 2 million euros.

For many retailers who have been working with their historic e-commerce provider for a long time, adding a specialized marketplace partner is still seen as the easy solution. And yet. It’s not cheaper or faster.

All-in-one: the new model to follow

Today, technological developments have given rise to new generation e-commerce platforms. Also referred to under the acronym all-in-one, it enables you to build and manage e-commerce and marketplace activities through a single solution.

This multi-model offer is made possible thanks to headless technology comparable to a Lego® architecture. Each e-commerce experience we want to offer is an easily activated brick that fits together without restriction to build a homogeneous and flexible online sales ecosystem. There is no one construction model but as much as the imagination of the retailers.

Using this type of platform to deploy a marketplace offering therefore requires a complete overhaul of the e-commerce infrastructure. A big project that is generally scary. And yet, retailers have it all!

Because even in this scenario of total migration of e-commerce to a new generation platform, the total cost of the project will be lower than the traditional scenario mentioned above. With an all-in-one solution, the retailer also avoids double annual costs, as well as double application of the GMV percentage.

But that’s not the only advantage. The implementation of the whole architecture is shorter because it is not necessary to connect two different tools. The time-to-market is better and above all the technology is more agile and scalable.

conflicts are erased

In a traditional architecture, the smallest change or development project faces many obstacles that affect several teams. Even the smallest changes require significant changes and associated developments. The new generation of the platform erases all these frictions and thus offers more flexibility, agility and freedom in all aspects of e-commerce development, and gives full power to the business team while ensuring unity, stability and security among technical teams.

Without disrupting the back-end, it is possible to quickly make profound changes to your online sales offering. And thus adapt to new uses and changes in the market. Headless is truly future proof technology. And hope also means cutting costs.

Finally, these new platform models, such as VTEX, are multi-tenant SaaS whose compensation is primarily based on the volume of business achieved by the merchant as well as the annual license. All platform and data hosting costs are included in the package. A significant benefit at a time when energy prices are rising dramatically.

In addition, platforms equipped with headless technology are perfectly suited to international retailers who have multiple sales channels and sales situations are complex and different depending on the country.

Management committees considering opening a marketplace or launching a global overhaul of their e-commerce system cannot do so without considering the new generation of tools, however different they are from practices dictated by the market over several years. .

Because what is at stake behind this choice is actually the optimization of the TCO (Total Cost of Ownership). In other words, the total cost of the project including all direct and indirect expenditure items such as integration, licenses to operate the solution, maintenance costs, team training, etc.

And in the current business climate, this figure is the focus of all attention.

This column was written by Grégoire de Briganti, VP in charge of EMEA customer experience at VTEX and Anthony Jasicki, partner at Madagence.

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