April 4, 2020
An eCommerce Platform Manifesto | What Retailers Must Deliver to Outperform the Competition

An eCommerce Platform Manifesto | What Retailers Must Deliver to Outperform the Competition

– [John Hessinger] Hello everyone. Welcome
to this latest installment of the Mozu Webinar Series. Today, we’re joined
by Forrester Research to bring you “An eCommerce Platform Manifesto: What
Retailers Must Deliver to Outperform the Competition.” My name is John Hessinger,
Vice-President of Marketing for Mozu, and I’ll be today’s moderator.
Today’s webinar is scheduled for an hour and we will leave time for Q&A at the end,
so please feel free to submit questions along the way. All right.
So let’s get into the content. I’m very excited to introduce today’s
presenters. First off, we’re joined by Peter Sheldon, a very familiar face,
Principal Analyst with Forrester Research, who will guide us through the rapidly
changing consumer expectations and what retailers need to be thinking about
in order to deliver against those expectations. In second position,
we’ll hear from Jason Wallis, Chief Technical Officer for Mozu,
who will share how retailers are using new innovative technologies
to not only meet, but exceed those growing demands. With that,
I’ll hand it off to you, Peter. – [Peter Sheldon] Great. Thanks very much,
John, and welcome everyone to the webinar today. As John said, over the next 25
minutes or so, I’m going to talk a little bit about Forrester’s view of the markets,
and I want to talk as to what is driving retailers to re-platform their eCommerce
technology and what they’re looking for in the marketplace. So let’s
take a start. I want to spend the first portion of the webinar looking a
little bit at the growth factors, what is driving this, quite frankly, explosive
growth in eCommerce technology. It really comes from the consumers and the shift in
spending from offline to online, increased usage in eCommerce. So we see this
globally. And I’m going to share with you now some of the data from Forrester that
we have. Forrester, as you know, is an independent research firm, and we spend
a lot of time, money and effort looking at consumer trends and forecasting
growth in the marketplace. One of the forecasts that I’m sharing with
you here, at the moment, is Forrester’s forecast for consumer online spend, and
this is for the U.S. market. So we can see today, in 2015, U.S. consumers will spend
about $325 billion online. And these are sort of traditional eCommerce
transactions, buy online/ship to home, buy online/ship to store, pick-up in store
type transactions. And so, year-over-year, we’re still seeing double-digit growth,
so sort of 11% year-over-year growth in online retailers. Growth’s slowly starting
to taper off. But still very significant growth through to the end of the decade.
And the overall share that online has as a proportion of total retail spend is around
10% today, and that’s going to grow up to 11% towards the end of the decade. So by
the time we reach 2018, U.S. consumers will spend $414 billion online.
And so this is quite significant growth. Now this is just B2C spend, so this is
consumer spend online. Now, if we take a slightly different look at this and look
at B2B spend, it’s already significantly higher than B2C. So today, U.S. firms
doing B2B eCommerce transactions, so these are typically engineers and buyers who are
buying from manufacturers, distributors from wholesale, already order $780 billion
worth of goods through B2B eCommerce today. And by 2018, we’re going to reach
a trillion dollars of B2B transactions. You can see, again, the growth rate
is very significant in this space and very similar to B2C. Around 10% of total B2B
sales now occur through digital online eCommerce channels, with the remainder
typically being EDI transactions and traditional relationships between
sales account reps and the end customer. So B2B is interesting because the actual
volume of visitors is much lower, but generally the volume of transactions and
the value of the transactions are much higher. As I said, B2B orders are
generally for, you know, bulk orders, very large quantities, and so the transaction
dollar volume tends to be much higher. Now, if we look back to B2C in retail for
a moment, we can see that retailers are very bullish on growth. This is from a
survey that Forrester does each year with Shop.org. And we can see here that the
majority of retailers saw a positive growth through last year, with some
retailers seeing significant growth of their online channel. So 27% of retailers
are saying their online channel grew more than 25%. 47% say that their online
channel grew between 10% and 25%. And very few, only 3%, saying that they were flat,
and only 5% of retailers saying their online channel actually decreased.
And those who are seeing decreases in online revenue, it’s usually a much
larger, overall organizational issue with a declining brand, declining brand
presence, more so than any specific challenge with growing the online channel.
If we talk a look now, all the data I shared with you just then was all U.S.
data. And we can see here, again, over on the left, you know, the U.S. market
size today and in 2018. But if we look globally, we see that there’s certainly in
the mature Western markets, like the UK, Germany, France, very similar growth
rates, you know, between today and towards the end of the decade, markets like
Germany going to move from being a $50 billion market to a
$75 billion market for online retail. But what’s really fascinating, if we look
at some of the emerging markets like Mexico, Brazil, Argentina, here we’re
going to see much higher rates of growth, proportionately. And in markets
like India are just set to explode, India going to go from a $7.2 billion market to
a $24 billion dollar market towards the end of the decade. And China, which
already dwarfs the U.S. market, they’re at $594 billion spent online in China today.
Now, these are mostly through marketplaces like Alibaba, Tmall, JD.com. But by 2019,
Forrester is forecasting that China becomes the first trillion dollar
eCommerce market. So all of this global growth, it’s really fueling investment
in commerce technology as many Western brands and retailers look to expand their
online presence into the emerging markets, into the BRIC countries and especially
into China. So all of this investment, also another big trend that we’re seeing
is around mobile. And if we think about mobile commerce today, we’ve gone
leaps and bounds from where we were just a couple of years ago. And today,
about 28% of all eCommerce online transactions are now from mobile and
tablet devices. And just a few years ago, this was nascent. It was, you know, 2% or
3% of transactions coming from mobile and tablet devices. So the growth in
mobile transactions is having a sort of foundational impact on the whole
industry, and it’s changing the way that organizations are investing in their
technologies to be able to serve the mobile customer. And if we look at mobile
traffic, especially, this is a very sort of telling picture. For most retailers,
there are some exceptions to this, but most of the sort of mature
online retailers today find that their combined mobile and tablet
traffic now exceeds desktop. And so, this is a really interesting
paradigm, because it puts desktop now as the minority touchpoint, and it’s
completely changing the way that firms think about having a mobile first
strategy. It’s changing investment strategies. It’s changing the technologies
that they’re using to serve the customer as we see this balance continue to shift.
And for most retailers, this happened at some point during 2014. Many of them
started to see these days during the holidays when mobile and tablet overtook
desktop. And now, in 2015, you know, this is pretty much the norm, and that balance
is said to continue in favor of more and more visitors coming in through especially
mobile devices, but also growth in tablets. And if we look at what this means
for retailers, again I’m sharing some of the data from our survey that we do with
Shop.org, we can see on left here, the percentage of sales, so that 12% of
eCommerce transactions come from smartphones, but 16% from tablets.
So combined, we’re just shy of 30% of the total revenue coming through the online
channel coming from smartphones and tablets. Over on the right, you know, we
talked about this, on average around about 50% of total traffic coming from
smartphones and tablets. But what’s really fascinating is to look at just the
year-over-year growth from 2013 to 2014, 87% growth in mobile sales,
52% growth in tablet sales. And this has really caught some
retailers on the back foot as their infrastructure and systems
are not really sort of designed to cope for this big shift towards
mobile-based eCommerce. So with all of these sort of trends
in terms of U.S. growth for B2C, U.S. growth for B2B, the overall growth
for international, and then this shift to mobile, as a consequence, most retailers,
online retailers, brands, manufacturers, etc. are investing significantly into
their commerce technology at the moment to make sure that their commerce technology
strategy is ahead of the growth of their channel, making sure that they have
scalable, high available platform in place to deal with the growth that’s going to
happen in the latter end of the decade. And so we can see here, most firms are
either increasing their CapEx expenditure on commerce technology or significantly
increasing. And we can see, we did the same survey 2 years ago in 2013, and the
number of firms who were increasing their budget increased from 66% in 2013 to
85% last year. Actually no firm is saying, “Hey, we’re cutting back on our CapEx
investment.” You know, there’s a few firms, 15% saying, “Year-over-year, our
investment in commerce technology is going to stay the same.” But really, you know,
at the moment, due to the sort of explosive growth that we’re seeing in the
marketplace, no firm is saying, “Hey, we should cut back on these budgets.” So
using that as context, as sort of some of the drivers in the market where the growth
is coming from, let’s take a look at sort of four of the key threats that are
driving firms to actually say, “Hey, you know, if we’re going to meet the demands
of the growth, then we have to look at whether our current eCommerce
technology is going to serve us well over the next five years as we get
towards the end of the decade.” And there are four key threats
that I want to sort of talk about that firms are experiencing
in the marketplace today. The first of these is simply
that there are a lot of retailers out there who are still using
homegrown platforms. Perhaps 5, 8, 10 years ago even, there’s a lot of retailers
who decided to build a homegrown solution, .NET, Java-based solution that served
them very, very well over the years. But often those homegrown solutions or
sometimes they actually started life as a commercial solution that was sort of
then customized and extended and forked. And today, generally, there’s no
resemblance to the original commercial solution, and certainly many firms in
that situation have sort of cut off all opportunity to actually upgrade to their
vendor’s latest version. So there are a lot of companies who are sort of stuck on
their legacy version of what was once a sort of mature commercial solution.
And so if we think about these systems, they really have too many miles
on the clock. And retailers are sort of experiencing a number of sort of issues
around platform outages, subpar performance, difficult to maintain, often
the business user tools that are put in front of the marketers or merchandisers
are outdated or inefficient, don’t have all the sort of latest visual
merchandising tools, etc. And one of the biggest issues is there’s actually skill
shortages. The developers and architects who originally built and architected these
incumbent legacy platforms, most of them have left. And so often retailers find
that even if they can keep the lights on and keep this legacy platform going on a
day-to-day basis, that there’s actually a huge operational risk around should they
have a problem, do they actually have the skills in-house to resolve and quickly
get the platform back on its feet again. So for a lot of companies, when they
think about re-platforming the driver is actually risk. It’s a risk of what would
happen if they had an outage with their platform. If they had some kind of
catastrophic failure with their homegrown or legacy platform, would they actually be
able to recover from that, and how is that risk increasing year-over-year as the
demands on the platform in terms of traffic and mobile sales, etc. continues
to expand? So this is a big, big driver that ultimately, using the analogy of the
picture, simply the car gets to the point where we need to pull over to the side
of the road and think about a Plan B. Now, second driver is omni-channel. A lot
of these existing legacy platforms or homegrown platforms were built and
designed in an era when eCommerce was its own channel and served, you know, only
online sales. But we all know that, today, for branded manufacturers and retailers
who have physical brick and mortar stores, that omni-channel is critical. And so, you
know, again today’s retailers need integrated product merchandising and
pricing between their online and offline channels. They want to be able to do
merchandise planning, to have consistent pricing and offering between online and
offline, and have a single toolset where they can do that from. They need
associate tools for the in-store customer experience, mobile point-of-sale,
clienteling tools. And often, these tools in today’s world are actually powered by
their eCommerce platform providing a lot of the features and functionality
for those tools. They need complete inventory visibility across all of the
channels, so making sure that stores have access to online inventory, and online has
access to store inventory, and making that inventory accurate, visible, and available
in real-time. And also retailers really want to be able to very quickly execute
on omni-channel tactics, things like buy online, pick-up in store, ship to store,
ship from store. These are tactics that they expect their eCommerce platform to
actually have these features baked in and enabled “out of the box.” And so for a
lot of retailers, getting to omni-channel maturity on a legacy platform is a world
of pain. And so often, again, one of the drivers to re-platforming is to look out
into the marketplace and look at sort of the current generation of solutions
that have much of these omni-channel capabilities now “out of the box”
or have stronger integration solutions for working with legacy in-store
POS merchandising systems. So omni-channel, again, a big driver
of re-platforming in today’s market. Number three is many of the existing
platforms can’t or don’t provide sophisticated data insights. So in the
world when eCommerce was its own channel, it was fine just to look at web analytics
and to have Google Analytics or Omniture and have sort of visibility into
what was happening day-to-day, visitors on the site, looking at conversion funnels,
metrics, and so forth, looking at key metrics, like average order value and
conversion rates. And that was sort of, you know, that served us well over the
last decade. But really, today’s firms really want to leverage real-time data
insights to drive more efficient and sophisticated marketing, merchandising,
pricing, inventory optimization, and to have a 360-degree view of the customer.
So today, using big data and analytics and customer behavior, retailers are
really looking to sort of automate their marketing and merchandising and pricing
strategies to have actionable insights, to have their platform tell them what they
should be doing, how to optimize their merchandising, how to optimize
their pricing to do sort of real-time competitive pricing, and to make
recommendations of the types of offers that should or should not be put in play.
They really want that 360-degree view of the customer. It’s no longer good
enough or sufficient to just know what the customer is doing online. We need to have
a full, end-to-end, integrated view of the customer, that we understand what
is the customer’s both online and offline behavior and how each of those
behaviors influence the other channels. So we often call this understanding
the customer’s path to purchase. How did digital influence the
customer and potentially influence the customer’s visit to a
physical retail store. And then four is today’s buyer. When I
say “buyer,” this is the people attending the webinar today. These are, you know,
executives, P&L holders who are responsible for technology selection,
and retailers and manufacturers who are looking at eCommerce technology.
And today, firms are not just buying an eCommerce platform. In addition to
eCommerce, they need to be able to support, you know, obviously the core
commerce functionality of the shopping cart, promotions, pricing. But they also
need to be able to support experience management. That’s giving more day-to-day
control to the marketers and merchandisers to manage the website and to be able to do
merchandising and layouts and A/B testing and multivariate testing just at the click
and drag of a mouse, and not having to have those be IT functions that require
developers to do these. They’re looking to get better control over their product
information management to have high quality, good, strong content on their
website, and so better processes and governance around how they onboard new
SKUs and products into their eCommerce engine. They’re looking for omni-channel
order management. We talked a little bit in particular about omni-channel tactics.
But order management platforms help facilitate those tactics and provide that
single view of inventory and provide the omni-channel fulfillment capabilities and
then also in-store associate enablement. It’s really sort of a common expectation
today that the eCommerce platform is, in fact, a suite. Then we call this now
sort of the “era of the Suite,” where many of the vendors in the landscape are
providing more than just an eCommerce platform. They’re actually providing a
comprehensive suite of capabilities. If we look at sort of Forrester’s
framework for this suite of capabilities, we see that there are sort of four key
pillars, and I just mentioned these, that the commerce suite of today really
needs to have the core eCommerce capabilities around cart
and pricing and so forth. They need to have experienced management
tools to allow the marketers and merchandisers to preview the site, to test
the site, to try personalization rules, to make sure that the site is working on
mobile devices and tablet devices, to do content management and offering and so
forth. And that’s really, really important today. It’s a big, big focus of many of
the retailers. And then, PIM I talked about and then order management.
So, you know, today’s platforms really are providing all four pillars or parts of
these four pillars and then making sure that wrapped around that there are great
commerce APIs so that we can develop mobile apps and kiosks and support, you
know, social and other touchpoints through APIs to make sure that these platforms are
fully localized so that they can support brands and divisions in different markets.
We can localize currency, and we can localize language to make sure that
we can run multiple sites and brands and divisions all from one instance of the
platform. This is sort of almost a mandatory capability today. You know,
most retailers have some form of global footprint, whether they’re operating
stores in Canada or Europe, and they want to run multiple market sites from one
platform. Or they have different brands and divisions, where they have sort of
smaller subdivisions. Or they want to run a B2B site for corporate orders alongside
a B2C site for consumer orders. And they want to do all this on a common platform.
It doesn’t make sense in today’s world to be running multiple different platforms
inside of an organization. There’s economies of scale that come from having
a single platform that can do all of this. And then, of course, at the bottom here,
making sure that these platforms are scalable, performance, that they have best
in class security, and that they integrate well with back-office technologies. And
this is really a given as we think about the sort of increase and demands
on these platforms going forward. So given this and given this sort of the
complexity of the suite, you know, what does the future hold for commerce
technology? Where are we going on this journey? And what are some of the sort of
changes in the sort of buying behaviors of customers who are buying commerce
technology? Well, the first thing to take a look at is to say, “Well, how are
organizations supporting their eCommerce today? What are the types of
solutions? So we can see that 28% of firms use a sort of a commercial license. These
are typically on-premise applications from the big software firms like IBM, Oracle,
and SAP. And there’s a lot of these platforms that are out there installed
today. And these types of solutions are still generally used, you know, by a lot
of enterprise companies and a lot of larger retailers. There’s also an equal
amount of homegrown or legacy commercial solutions out there, and I talked earlier
how a lot of these legacy commercial solutions may have started life as a
commercial tool, but ended up being customized to the point where, you know,
today they are, for all intent and purposes, homegrown or custom solutions.
And there’s still a lot of those solutions out there. We see a lot of open source
solutions and then also SaaS-based solutions, multi-tenant SaaS solutions
like Mozu in the market. And there’s still some full service offerings, some
companies who still are completely outsourced, not just their eCommerce
technology, but their fulfillment, their contact center, and their operations to a
vendor. Now, if we look at how the market’s shifting, over the next few
years, you know, what we’re going to see that, overall, as a proportion of the
market that the homegrown solutions shrink as a lot of those homegrown solutions are
replaced. And also a lot of the people who traditionally used on-premise, licensed
applications move over instead to using more sort of SaaS-based, cloud-based
solutions. So we’re certainly seeing more appetite from potential customers around
investing in open source and SaaS-based technologies to replace those
homegrown eCommerce platforms. And if we look at this, this is sort of,
again, a framework that Forrester uses to talk about sort of, really, a rule of
thumb for these different types of solutions that exist in the market.
So along the top here, we have really a vertical axis of online revenue, and we
can see it goes, you know, from sort of small SMB and mom & pop shops that are
typically doing less than $5 million in revenue online, through to the large
corporate enterprises that are doing over $5 billion online. And so some of the
really big guys, like eBay and Amazon, they typically build their own platform
and have hundreds of thousands of developers and hundreds of millions
of dollars or billion-dollar budgets to invest and build in their own solution.
From sort of $100 million online revenue up to $5 billion, licensed, on-premise
applications are still very popular and still commonly used. But what we see is
that multi-tenant SaaS-based solutions and open source solutions are coming up
markets, and they’re maturing and they’re better able today to serve larger
corporate enterprise clients. Multi-tenant SaaS is sort of very proven
from a scalability perspective, but is increasingly proving itself as being
very flexible as many of the vendors today have sort of extension
frameworks, pass environments where you can build extensions onto multi-tenant
SaaS-based environments. So multi-tenant SaaS is certainly competing very heavily
with licensed or on-premise applications, especially in that sort of upper
mid-market, the sort of $50 to $100 million in online revenue. Some of those
firms are increasingly looking to either open source or multi-tenant SaaS-based
solutions as they re-platform their legacy, homegrown,
or commercial based solutions. And so, when we also look at the rate
of re-platforming that’s happening in the market, what we can see here is, over on
the left, 34% of companies saying, “We have no plans whatsoever to re-platform
our eCommerce.” These are the companies that have been through re-platforming in
the recent past, in the last two to three years, and are very happy with their
current solution and have a return on investment to realize. And they’re
intending to stay with their solution for many years to come. But we can see
that 21% of all companies are currently underway with a re-platforming project,
meaning that they’ve already selected a vendor and either they’ve just completed
their vendor selection, or they’re in a phase of rollout of replacing their
eCommerce technology. And that’s driving a huge amount of investments into the
system integrators and agencies who are supporting these programs. But over on
the right of the diagram, we see that approximately over a third of firms have
near-term plans to re-platform. So going back to the four pain points that I talked
about earlier, we see there are a lot of companies who are putting together the
business plan and putting together budgets in place to re-platform away from their
legacy eCommerce capabilities and infrastructure over to a next-generation
platform in the next 36 months. So that’s going to drive significant investment
in commerce technology for the next three years or so. Now finally, let’s
wrap up and talk a little bit about where some of the growth is coming from. Over on
the left here, we see the breakdown by commerce technology investment by vertical
in 2013, and on the right, our forecast for how this is going to change by 2019.
Now, this is just a proportion of overall share, so the market is growing. But as a
share, B2C, so consumer products and retail, is actually going to sort of
shrink slightly as an overall market share. What we’re going to see is a big
investment from manufacturing, wholesale companies, business service companies who
are investing in B2B commerce, who are going to be using eCommerce technology
to do B2B sales as they sell to their distributors, to end customers, to
engineers, etc. And so big growth there. And then also growth from other emerging
verticals that, typically, we might not have thought of as investing in eCommerce
technology — education and government, healthcare, financials, utilities, media
and entertainment, telco. These are all companies that sell products and services
online and are increasingly investing in eCommerce technology to support those
sales. And that, again, is driving a lot of growth in the marketplace. So I’m going
to wrap up now and pass it over to Jason, who’s going to talk a little bit about
Mozu and Mozu’s view of the marketplace. But I hope that gives you a little bit of
sort of background and sort of foundation on some of the factors that are driving
the market and some of the sort of reasons that are leading retailers
to make that decision to re-platform and as you saw on the second to last
slide there, a lot of urgency around needing to re-platform in the
next couple of years. – [Jason Wallis] Thanks, Peter. Yeah, this
is Jason Wallis from Mozu. Peter, I always enjoy hearing kind of your thorough
analysis and broad overview of all the trends that are kind of affecting
retailers in the market today, whether it’s consumer behavior
or just advancements in technology. I would like to talk just a
little bit about, as a platform provider, kind of our
perspective on the same topic. And you know, certainly, what we see as we
talk to folks such as Peter or retailers in the market, that with all of these
forces at play, and with consumer behavior changing and expectations changing, that
if the platform isn’t really, you know, in a position to support that, it very much
starts to feel like, you know, a drag and a boat anchor. And I can’t operationalize
things fast enough to take advantage of this. You can be in a position where
you’re really overwhelmed by this change. Now, the difference with kind of platforms
that have the opportunity of being built in the market when it’s in this state and
they’re aware of these challenges, it’s a very different feeling because the
platform is very much an enabler of riding these waves of change and not,
you know, a barrier to being successful in the market in spite of them.
Setting the tone a little bit, I just kind of want to go back to kind of when
eCommerce was in its infancy. And we’ve got to go all the way back to the ’90s,
really into the early ’90s, and reflect on that point in time when the challenges
were very different. I mean, at that point, it was the basic blocking and
tackling of dealing with browser standards and just getting content and product up on
sites, processing payments, kind of very much the basics. And we started to
graduate and think about consumers as individuals and not as, you know, a mass
of folks and get some personalization. You know, that became more
important then. And then mobile hit us. And really, the modern smartphone
platform in 2007, when that came, then we hit the inflexion point.
And I don’t think we realized even then the pressure that was going
to put on retailers. And I certainly contribute a lot of the
omni-channel experiences that are in demand today as being born out of that
mobile adoption. So it really hasn’t been just about dealing with a new form factor
and a new interaction method with touch. It’s really just dramatically changed the
expectations where consumer expect in-store agents to have the power in their
hands to do it, because the shopper says, “Well, I have a personal computer in my
pocket basically that I can research and find anything in a moment’s notice. I
expect you to be able to do the same in the store,” as well as just the scenarios
now of showrooming and buying something and picking it up in-store, and all of the
sort of mobile enabled scenarios. So it’s dramatically changed the landscape.
And I think there’s really two key characteristics that a platform needs to
embody today in order to be an enabler and a viable, long-term solution for not only
the market conditions that we see today, but what are the market conditions going
to be like in the next two, three, four, five years. If you’re planning for what
you have today in a time of change, you’re going to find yourself flatfooted
in the not too distant future. So those two characteristics really are
nimbleness and openness. If you have nimbleness and openness, then you’re in a
posture where you can deal with change. And as a platform provider, you know, for
us, we strongly feel that SaaS is the most nimble platform delivery method out there
and for a couple of key reasons. Number one, the development lifecycle time of
envisioning, kind of getting feedback from the market that a feature needs to be
in the platform to the feature being delivered into the hands of a retailer
that can actually be used is considerably shorter. So, for example, the Mozu
platform, we have substantial quarterly releases that make new features available
for retailers to take advantage of. You think about the typical lifecycle of
software that’s delivered either on demand or through a typical license installed
model, that’s more in the neighborhood of two to three to four years between a
feature being developed, major product release being delivered, project
undertaken to implement, migrate and change. And so compressing those cycles
is absolutely critical in times when the market is forcing these changes on
retailers. So, for us, SaaS really gives that flexibility and that nimbleness which
allows us to be more innovative, move more quickly, and just have
a much faster time to market. The second piece is openness. And I think
Peter touched on some of the changes and kind of how SaaS platforms are becoming
more flexible and open. And that’s another key trend. For us and Mozu, that was kind
of a key tenet from the very beginning, was not only were we going to have this
highly flexible platform delivered via SaaS, but we were going to embrace
openness. So all of the development tooling and SDKs to build those extensions
and applications that Peter referenced, all that tooling is available open source
in kind of all the common and modern platforms that developers expect. So you
don’t have to worry about training a development staff on a proprietary set of
technologies that they’re going to become very expensive and only be able to work
with this one technology or toolset. It’s just more open from the get-go,
so it integrates with an entire ecosystem. The other thing for us is that we
very much believe in innovation and experimentation, and so we want to empower
retailers with that same capability. So unlimited sandboxes where retailers can
quickly at the touch of a button spin up an entirely new environment with their own
data, with their own content, and then try things out in that environment without
risking their production environment. So just removing all of the typical
technology and process and personnel barriers to that, SaaS technology you
can kind of have a Mozu platform element that makes that something that is
a click of a button in a few minutes instead of project to take weeks
and months to execute. And then finally, just we very much have
a policy of if we build reference stores or sites or demos, we release all of that
out to the market as well. If we make an advancement in a theme or some really
novel and effective responsive design techniques, well that implementation is
available for you to take and customize on your own. So that nimbleness and openness,
I can’t stress enough is very much a critical part of when a market is changing
rapidly and trying to be future proof against the changes that are coming, those
are the number one and two qualities that we feel a platform needs to embrace
in order to make retailers successful. What that leads to is, you know, the other
advantage that we have is that being built in a time where we sort of had an
understanding of the problems that people were facing is hard things are easy. So
with legacy platforms, getting consistency across devices, and this isn’t just about
delivering consistent content, that is one entire challenge and piece of the pie.
But it’s also about delivering consistent experiences and having feature parity.
So that on a Mozu platform is very easy to achieve because the platform was built
with that expectation from the beginning. So the management tools around the content
management, all the features and how they’re implemented mean that you don’t
have to sacrifice your mobile experience for your desktop experience, or as to the
point that mobile and tablet is really overtaking desktop in a lot of cases,
sacrifice your desktop experience for your mobile experience is really a
position that you may find yourself in. So consistency of functionality and
consistency of content is an absolutely critical element of the solution,
as well as streamlined operations. So most retailers have not just sort of
one catalog and one set of products and one price level that they want to target
to one device or one experience. It’s much more complex than that. So Mozu is built
from the ground up to handle this notion of bringing in externally sourced catalog
information or content, organizing it into a set of master catalogs or catalogs,
depending on how the setup needs to be to be optimized for that particular problem,
and then pushing them out to all of those digital experiences wherever a customer
might be. That might be in store. It could be a mobile device. It could be a desktop
experience. You know, being open and having this API backend really drops those
barriers to where that content can be served. And in the end, what that delivers
is consistent experiences and convenient experiences for customers, and that’s what
it’s all about. You know, customers are demanding these engaging experiences
across devices, in stores, online, being able to have visibility to inventory,
order data, etc. And if that’s not there, if the omni-channel scenarios aren’t
there, pick-up in store, customers vote with their feet. We’ve all seen that.
And that’s a trend that’s not going to go away as expectations are even
more deeply engrained for what a consumer can do on a site.
So just kind of bringing a picture here of kind of how Mozu hangs all this together.
There are several key components. On this multi-tenant SaaS backbone, we have
this strong development platform and development tools that allow you to
integrate Mozu into existing applications you already may have big investments in,
or customize and extend that Mozu experience, build native applications
and your native mobile applications. Really a lot of different platforms to
work with as well as do all of that front-end design and development work. The
key element of this where developers can provide reusable, we call them, widgets to
merchants and business users so that there’s a very strong thread through here
of empowering business users to make site changes without having to involve a
developer, because that just tends to slow things down. So very robust toolsets
or visual toolsets for managing pages, authoring content, previewing, publishing,
and then having business users be able to have all that control and power in their
own hands. So that’s a dev center toolset. And then there’s commerce and content
management toolset for managing the typical entities you see involved
in a lifecycle. And then the front-end experiences that are delivered really on
whichever device is appropriate for that and a core set of technologies that allow
you to effectively provide that feature and content parity across all those
experiences. The backbone of all of this is an exceptionally open REST API, once
again to allow really any developer to work in a platform of their choice and not
have to force anybody down the path of dealing with proprietary technologies that
are going to be only valuable in one context and hard to train people on. And
that just kind of gums up the works for all that innovation that’s demanded today. With some of our existing sites, we’ve
seen some really great growth. Jelly Belly is a good example of that. They replaced
their homegrown system. They were growing and they had one system that was
supporting B2C and B2B scenarios and a set of content sites worldwide. The system
started to manage them and kind of outgrew their ability to keep it up and running
and make enhancements to it, and they found themselves just only doing
maintenance and were falling further and further behind the mobile curve in one
regard. So they migrated over to Mozu, and one of the very first things they saw
was a dramatic increase in mobile revenue, because they finally had feature parity in
a site that worked very well across mobile and desktop experiences, and they could
manage it actually. So they were able to shift their development resources to
working on problems that differentiated them, and not working on kind of the
boring stuff, as I call it, that we do. They don’t have to worry about the cart
and some of the very basic things. We can handle that. You go build site
experiences that are unique to you. So it’s been a really good story
there and partnership with them. Another example is TonZof. And TonZof,
they launched initially moving from another platform, and they were struggling
on the other platform with performance and scalability and just, once again, the site
was managing them, they weren’t really managing the site. They couldn’t actually
get their large catalog in and have response times that were satisfactory.
So we brought them over to Mozu. They initially launched with about half a
million SKUs. Got that site up and running from scratch in just a few months. Their
performance has been through the roof. That’s another thing. We have a very
experienced engineering team that can ensure that their site runs and scales,
and they don’t have to worry about that. They can focus on their core business. And
I think they’re up now to over a million SKUs in that catalog, and they’ve seen a
dramatic improvement in the time that they can effect change on their site. Part of
that goes to the ability for them to push content into the system very quickly from
their external feeds. And the other part of that is just the visual toolsets they
have now for creating landing pages, promotional content, and just managing
the site is a much more robust toolset than they had in the legacy
platform they were on before. Another example is Sigma Beauty, maker of
cosmetic products. They migrated to Mozu. And their real goal was they wanted
to attract a younger demographic, dramatically improve their mobile
experience, and then provide a very rich and engaging site experience that was
just outside of the normal sort of cookie cutter approach to things, so a very
visual experience in that case. They also had a very robust catalog with complex
pricing rules and a lot of unique catalogs. They had some B2B mixed in with
their B2C business. So they were able to very quickly stand up a highly engaging,
very unique site experience. And their marketing team really has full control
over using the business user’s tools, where they had to kind of get back to
developers before. So they’ve been very much empowered and are very happy
with the time to market, innovation, and speed with which they can move
in that regard, and that parity across devices has been a key win for them. So just kind of closing out, for Mozu and
kind of how we see Mozu fitting in, in this sort of shifting landscape that, like
I said before, we have definitely had the benefit of building Mozu after this
seachange of mobile has made all of us aware that the consumer is in the driver’s
seat right now. So that gave us the advantage of being able to build the
ability to have these highly connected experiences and then a toolset that is
easy to operationalize and manage. Because if you can’t manage it, you’re not going
to be able to make improvements to it, and that’s going to become a big barrier as
the market continues to change and as consumers continue to push everywhere,
push retailers further and further. The second piece is reducing the dependence on
IT and software development, when you can really put the power in the marketing
team’s hands and let merchants make the changes they need to make and move the
site in a direction they need it to go, and kind of cut out that middle man and
reduce that cost. So that’s another key element of it. And then frankly, just
being on a modern technology stack with innovative technology and open, it really
allows us to be nimble and agile to changes in the market as they come. The
nice thing is, because SaaS makes us nimble, that enables retailers to be
nimble. So that combination of SaaS nimbleness and openness gives
an unprecedented level of flexibility for retailers. And I’m going to turn
it over to John to wrap it up. – [John Hessinger] Yeah. Thank you, Jason.
Thank you, Peter, as well. You know, for me, the market shifts resonate
very clearly as a marketer, as to the importance of unified experience
across all touchpoints, and really, as I practice in our team, meeting
consumers on their terms to ultimately win that customer engagement
and share of wallet and differentiate yourself as a retailer and as a business. Also the effectiveness of the modern
technology solutions that are coming out that actually put that control to create
those experiences directly in the hands of marketers and developers. So we’re freed
up on internal resources, where otherwise they’d be consumed by maintaining older
systems and struggling with inherent limitations and just how important that is
as people look for ways to continue to stay ahead of the demand in the
marketplace. So thank you both, Jason and Peter, for that. With that,
we’ll now move into our Q&A portion. I’m going to take a moment to
pause and gather questions real quickly. Okay, we have a short list of questions
here. Peter, this one is for you, it looks like. It seems every vendor has a cloud or
SaaS commerce offering today. What are the real differences between one
cloud platform and the next? – [Peter Sheldon] That’s a great question.
So I think the term “cloud” is often sort of bandied around or potentially
misused. Certainly, almost the majority of the vendors now can and do
offer cloud hosting, either themselves or through hosting partners. And so many
of the vendors talk about on-demand offerings, talk about cloud offerings,
talk about SaaS offerings. And it’s pretty across the industry now. Most of the
vendors will provide a sort of one throat to choke SaaS-based offering, where you
can typically lease the platform rather than necessarily buy it outright. So from
a licensing perspective, it’s very easy now to sort of spread cost of ownership
over a number of years, over a term, rather than having to sort of fork upfront
for a large, expensive, perpetual license. So that’s common. And like I said, the
actual hosting now is also done in a cloud-based environment, so sort elastic
scalability as more demand comes in. One of the big differences, though,
between the different cloud solutions in the market is whether they are truly
multi-tenant or whether they are single-tenant. And the actually tenancy
of the data doesn’t matter per se. Most clients, retailers don’t really worry too
much as to whether their data is actually a multi-tenant environment and shared
alongside other data or resides next to another client’s data. The real difference
between single-tenancy and multi-tenancy comes as to how upgrades are managed.
And this is sort of a bit of an Achilles heel of industry, because typically
on-premise, perpetual software needs to be upgraded. These upgrades, as you upgrade a
sort of on-premise platform typically take anything from a few weeks to six or more
months, depending on the complexity of the implementation and the customizations
and integrations that you’ve done. And so trying to keep up to date and upgrading
at the same rate that your vendor is releasing updates can be very tough,
because most of the vendors release updates every three to six months. Taking
every one of those upgrades can be very costly and disruptive to your roadmap,
as you have to divert technical resources to do upgrades, rather than to innovation
and to sort of feature enhancements and functionality. So the main difference with
a multi-tenant SaaS platform is the vendor is sort of on the hook for doing the
upgrade for you. They’re effectively pushing the upgrades to you, and you have
to take them whether you like it or not. Usually it’s a mandatory push, and all of
a sudden, one day, when you log into your administrative console, there’s some new
features and capabilities, and there’s always some training and education on what
those features are and how you use them. But it’s mandatory versus a
approval model with a traditional, on-premise or a single-tenant platform
where you have to request and approve the upgrade, and there’s effort
involved on your part in terms of the spend to have a partner or your own
internal technical resources actually implement that upgrade, do the
regression testing, and so forth. So the big difference between the
different SaaS solutions in the market is really who’s on the hook
for doing upgrades. – [John Hessinger] Great. Thank you,
Peter. This one I’m going to hand over to you, Jason. With the recent Goggle
algorithm change that puts more emphasis on mobile, is a responsive design still a
good solution, or is a dedicated mobile site a good enough or a better solution? – [Jason Wallis] That’s a good question.
It’s interesting Google adopting this change, because it’s further validation
of where the market is, not just kind of where it’s going. Their consideration of
mobile site performance and usability in their indexing process is a strong signal.
What we’ve seen since the change is that responsive is still a very effective tool
to not have that Mobilegeddon algorithm change have a negative impact, and it does
provide a positive impact. The downside of a dedicated site is, obviously, it’s a
different domain typically, and it’s also another code base. Having that feature
parity is very difficult to manage, and so you’re going to be falling short of
customers’ expectations in that mode. So responsive is still the way to go.
That’s kind of what we’re recommending, and the data that we’ve gathered
since that change has validated that. – [John Hessinger] Great. Thank you. Okay,
really quickly. This one is definitely for you Jason. What is the average
investment required to get onto the Mozu platform? We love this question. – [Jason Wallis] That’s a good question.
First, one of the core premises for Mozu is predictable pricing and fair pricing.
And so, for a variety of reasons, we do not feel that a percentage-of-revenue
model is a fair nor effective model, and that, in fact, it creates some
disincentives to providing unified experiences and getting all the data into
one place. For example, if you’re a brick and mortar retailer and you want to
provide order visibility across all of a customer’s transactions, but you’re being
charged percent of revenue, then you’re probably not going to have a strong
incentive to bring order data into your commerce platform because you don’t want
to pay revenue on that, and even though it wasn’t generated there. So we just kind
of want to avoid all of those perverse incentives, disincentives that get built
into that model. So Mozu is very much a predictable, utilization-based model in
terms of ongoing licensing costs, depending on number of site visits, etc.
And in terms of the initial investment required, typically that’s a function of
the amount of time required, because it’s a labor-intensive activity to migrate
platforms. The good news is that with our focus on time to market and openness, we
remove a lot of the barriers and friction in that process. So we found that we have
very favorable time to market times for launches, and so cost, therefore,
is a reflection of that and lower. – [John Hessinger] Great. Thank you.
It looks like we have about time for one more question. I’m going
to redirect towards you, Peter. Re-platforming away from our existing
solution is potentially a huge technical risk for our company. Is there
a way to do that with lower risk or phase our migration away
from our legacy solution? – [Peter Sheldon] Yeah.
That’s a great question. It depends on, in many cases, how much
revenue you’re pushing through your eComm platform. If it’s significant, north of
$50 million, doing a sort of overnight flick of the switch from your old platform
to your new platform is for sure risky. And you need to set expectations with
executives that there’s, most likely, for a period of months, going to be a drop off
in conversion rates, because there are teething problems as customers become
used to the new experience, if you’ve redesigned the actual storefront as part
of the migration. So there’s a few sort of ways that you can look at this. First of
all, if there’s multiple parts to your technology refresh program, then you
should probably do them in phases. So if it’s part of your overall program is that
you’re implementing a new PIM, implementing a new order management
platform, and a new eCommerce platform, perhaps new ERP, make sure you phase these
things. Trying to fit them all together into one project, just significantly
increases the risks. So prioritize these. If order management is top priority, do
that first. Put eCommerce off for a year. If PIM is something that’s there, but it’s
not as high priority, get your new eCommerce platform in first and then do
PIM next year. So phase the roll-out of the technologies. And then if you
do have multiple storefronts, if you have different stores for different brands,
or different stores in different markets, that’s a great way to pick some of the
lower risk sites and do your launch of the new platform on some of the smaller sites
first. Get past those teething problems and pains. Do some of the emerging market
sites, where it’s some of those smaller brands, and take the learnings from those
to make sure that when you flip the switch on your main NorthAmerican.com
site that everything goes smoothly. – [John Hessinger] Great. Thank you very
much. Well, it’s look like we are at our time limit today. We are happy to field
additional Q&A after the fact, offline. A special thank you to Peter Sheldon and
Jason Wallis, and thank you to all of our audience for joining us on this latest
installment of the Mozu Webinar Series. Have a great day.

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