the choice of architecture depends on profitability

Retailers are increasingly developing markets. But with an essential cost factor, the model commonly adopted to develop marketplaces is no longer the right one.

To react to this forum and discuss live with the VTEX teams about marketplaces and headless commerce, come and meet them at Technology Showcase for Retail November 28 and 29 in Paris.

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

This sales model is revolutionizing e-commerce, whether BtoC or BtoB. It 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 retailers’ enthusiasm for developing these markets. But in the current economic context, in which the cost factor is paramount, the model commonly adopted by contractors to develop marketplaces is no longer the correct one.

With the first order of disadvantages: profitability.

Don’t confuse speed with haste

The market has been made up of two types of players for several years. E-commerce service providers – who are at the origin of retailers’ global online sales infrastructure – and pure market specialist players – whom retailers call to develop their parallel market.

Implemented in this way, a marketplace solution is worth an average of 250,000 euros to buy more additional annual costs, at similar amounts, and thus takes a significant part of the Gross Merchandise Value (GMV), a key indicator for determining the health of an e- commerce site activity. To this value 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 at between 1.5 and 2 million euros.

For many retailers who have been working with their incumbent e-commerce provider for a long time, adding an expert marketplace partner is seen as the easiest solution. And still. It is neither cheaper nor faster.

All-in-one: the new model to follow

Now, technological developments have given rise to new generation e-commerce platforms. Also defined under the acronym all-in-one, they allow the development and management of e-commerce and marketplace activities through a single solution.

This multi-model offering is made possible by headless technology that can be compared to a Lego® architecture. Each e-commerce experience we want to offer is an easy-to-activate block that fits together seamlessly to form a seamless and flexible online sales ecosystem. There is no one building model, but as many as retailers’ imaginations allow.

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 usually scary. And yet, retailers have everything to gain!

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

But this is not the only advantage. The implementation of the entire architecture is shorter because it is no longer necessary to connect two different tools. The time-to-market is more efficient and above all the technology is much more agile and scalable.

rubs erased

In a traditional architecture, the smallest change or development project is faced with many constraints that impact multiple teams. Even the smallest changes require significant modifications and associated developments. The new platform generation eliminates all these frictions and thus offers much more flexibility, agility and freedom in all aspects of e-commerce development, and gives full powers to business teams, ensuring cohesion, stability and security to technical teams.

Without disrupting the backend, you can quickly make deep changes to your online sales offering. And so adapt to new uses and market changes. Headless is truly future-proof technology. And anticipating also means reducing costs.

Finally, these new platform models, such as VTEX, are multi-tenant SaaS whose remuneration is mainly based on the turnover achieved by the merchant, as well as an annual license. All data hosting and platform costs are included in the package. A significant benefit at a time when the price of energy is rising considerably.

Furthermore, platforms equipped with headless technology are perfectly suited for international retailers who have multiple sales channels and whose sales scenarios are complex and different depending on the country.

Management committees that intend to open a marketplace or launch a global overhaul of their e-commerce system cannot do so without considering this new generation of tools, however different it may be from the habits dictated by the market for several years.

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

And in today’s business climate, that number is the focus of all attention.

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

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