Collision Course

shipsOver the last few months, I’ve been meeting with a lot of folks working in ecommerce at major retail brands in North America. There’s been a ton of interest in the Shopping Index reporting my team at Demandware has been working on, particularly as everyone begins their holiday campaign planning. The Index is a project to apply analytics reporting to the incredible amount of ecommerce data that flows across the 1,300+ retail sites on the Demandware platform – you can read more about it here.

Since I joined Demandware, I’ve been struck by the many similarities between the digital analytics and ecommerce platform markets. These are both fast-developing markets whose clients – small, mid-sized and large companies, mostly B2C but also B2B – are seeing most of their new growth, if not all of it, in digital rather than brick-and-mortar. As a result, these companies are racing to adopt new technology to support that growth, which often leads to painful and awkward change in their organizations.

I’ve noticed that, over and over, when I’ve been talking with ecommerce teams, the conversation begins squarely in ecommerce and gradually drifts towards… something else. Part marketing, part commerce, part customer experience, part “digital intelligence,” if you want to call it that. Ecommerce folks are constantly referring back to topics I used to talk about while at Coremetrics – contextual marketing, using data to inform merchandising, leveraging browsing and search data, and so on.

For someone whose tech career has been built in the technology of how people buy and shop online, this convergence is… interesting. And it has given me some clues about where the industry is headed, probably sooner than we think.

 

Two waves converging

Commerce and marketing have always been two sides of the same coin. Everyone selling online has an ecommerce platform, whether it’s from a vendor or custom-built, and some sort of digital analytics tool as well. Not everyone using a digital analytics platform has or needs ecommerce – but very many do, and concentrated among them is most of the value in the analytics market.

Once upon a time, the ecommerce platform was just a complement to a company’s “real business” offline, but anyone still living in that world is either dead or dying. Foot traffic in stores is down and same-store sales are middling as consumers – particularly younger ones – find new, easier and more fun ways of shopping, fueled by the proliferation of ubiquitous mobile devices and social networking. In this world, great merchandise alone is not enough. Amazon, after all, will have close substitutes for all but the most inimitable brands out there, and will probably be cheaper and offer free shipping. Rather, offering a unique, sticky customer experience, paired with a sophisticated marketing stack to acquire new customers, is increasingly the golden road to success. Retail is undergoing this transformation right now, and other industries are steadily following suit.

In this world, where does “marketing tech” end and “ecommerce tech” take over? Vendors on either end have steadily moved towards each other over time. Digital analytics evolved from being a mostly descriptive tool to being a proactive customer acquisition and engagement portal that also offers analytics reporting. Adobe Marketing Cloud is as good a benchmark as any here, and I estimate that half of their revenue today comes from Experience Manager alone. Ecommerce has steadily added customer engagement tools too. hybris introduced its Marketing Suite earlier this year; Oracle has a large array of capabilities in its Marketing Cloud (most recently, Maxymiser) as well as its Commerce Cloud from ATG; IBM has consolidated its ecommerce and marketing products into a single business unit, IBM Commerce; and in my own house, Demandware acquired predictive intelligence firm CQuotient last year.

adaptersIn the #measure world, we always talked about “integrations” with ecommerce. That was fine once, but increasingly, I feel like integrations are probably insufficient. The leading digital analytics platforms capture and report far more signal-rich data than most of the ecommerce tools (or teams) are productively using today. On the flip side, the ecommerce platforms are awash in extremely actionable data that’s closer to registered users, merchandise, margins, promotions and campaigns – much of which is still kept separate. Integrating these two can be done, but is often not worth the considerable time and effort required, in large part because these are fundamentally two entirely different platforms and sets of data from different vendors. (Indeed, the market for integrating them has provided a lot of the fuel for the flourishing #measure consulting industry!)

As all of our online interactions become more personalized, and the effective use of data becomes a more important competitive advantage across almost every industry, this dichotomy between categories of tools seems unsustainable to me. One seems more likely than ever to natively embrace the other.

Predictions

Developing a whole new enterprise analytics or ecommerce solution is both prohibitively expensive and difficult to scale, which would indicate a likelihood of acquisition. Yet from the ecommerce standpoint, there are very few leading analytics acquisition targets. Webtrends is one – their CEO, Joe Davis, was once the chief executive who led Coremetrics to an acquisition by IBM. Then, much further down the list, you have the likes of Mixpanel, Webtrekk or AT Internet, none of whom I see as likely targets.

Yet from the opposite standpoint of digital analytics giants like Google or Adobe, the field of potential ecommerce capabilities is broader. SMB-focused ecommerce vendors like Magento, Bigcommerce, Elastic Path and Shopify are all growing quickly – and at least Magento is in the process of being spun off. Many of these vendors have close existing relationships with SI partners and both Google and Adobe. What’s more, ecommerce is becoming more central than ever to the core revenue strategies for both companies. Becoming an ecommerce solution vendor would seem like an odd move for Google to make – but then again, so would becoming Alphabet, and I would imagine the company is interested in ways to diversify its revenue outside of advertising. For Adobe, ecommerce is squarely in its headlights. The adjacencies to its Marketing Cloud and Creative Cloud units are obvious.

dlibertNeither here nor there, but I remain surprised that Microsoft has chosen not to enter this market too. And imagine the potential of a Salesforce ecommerce offering that could tap its CRM and Marketing Cloud tools. Hm.

Whether or not those two giants jump into the market, be prepared to see significantly more linkages between the leading enterprise ecommerce tools and “MarTech” over the next few years. As usual, there will be more sheer technology than qualified, trained people to use it impactfully. Then, as now, opportunity will abound for hungry full-stack employees.

 


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So, what do you think ?