Growing out of ecommerce packages
Most of the large retail enterprises start multi channel commerce transformation initiatives with a strategizing and package evaluation phase - the idea being that the selected ecommerce package would act as the center pin of their multichannel strategy. But is it really about the package or is it about what is done over and above to what the package provides that really matters?
As predicted by market research organizations last year, we see that a lot of the retail enterprises have actively started transforming their ecommerce businesses. They all see the online platform as a basic building block to build differentiating multichannel capabilities. Almost all organizations go through a package evaluation phase where they try to weigh capabilities of commercial off the shelf (COTS) ecommerce platforms. After having seen through some of the strategizing, evaluation, implementation and maintenance phases of our customers, there is a very interesting aspect that I want to bring out – about the relevance of the package evaluation and the package itself, in the medium to long term. Before proceeding further, let me make it clear that this is applicable only for enterprises that are large – large as in more than 250 M USD in revenue annually, or more than 250 K Items, or may be with more than 2 M active users and so on.
It all starts from this question – ‘Why should a particular enterprise be more successful online than its competitor when both are built on top of the same (or comparable) COTS platform, running on comparable infrastructure?’ There could be pure business reasons like better prices, better after sales service, etc – which are actually independent of the efficiency or capabilities of the commerce platform. In my observation each large, successful multi channel business has one or more features that differentiate them from others. It might be inter channel integration for one, a very wide and deep catalog for someone else or extremely dynamic and competitive price changes and promotions for somebody else. These differentiators when built on top of a robust and standard base platform complete a successful system implementation. The platform is absolutely essential and non negotiable – enterprises are not ready to spend time, energy and money in building what everyone in the world already has.
Now, a good COTS multichannel platform would provide the robust and standard platform – when conceived and implemented properly. But do they provide the differentiating features also? As answered by the question itself – they do not. If they did, they would not be ‘differentiating’ any more. Once any such features are rolled out in COTS product, those would become standard features and would get rolled out to all the users of that product. There are many examples – one of the most relevant ones right now is the marketplace concept. This is where many selling partners could compete by offering the same product(s) – may be at different prices or by having bundled services. No major ecommerce platform has it out of the box and so large retail enterprises have built this on top of existing COTS platforms. Another example is the ability for automatically pricing items based on internal (like supplier inventory, demand, etc) and external (competitor pricing) factors. The picture that I see repeatedly with large retailers is this – a lot them start with the COTS package and ends up building capabilities over, around and increasingly outside the platform. If one looks back at some of the large COTS implementations done in the last few years, it would become clear that most of focus is on building things around and on top of the platform, once the initial implementation is complete.
Tying this back to where I started - If the COTS platform ends literally being the platform on and around which one would build differentiating features, how can package selection be more important than the ability to plan and implement additional and differentiating features on top of it ? This is precisely my point as well. I am not trying to say that package selection is irrelevant for large enterprises. They are important and should be done after due diligence. However, package selection is only a necessary but not a sufficient ingredient for success in business. The process of designing customer centric business capabilities which would differentiate one business from another is the key for large retailers. This requires a clear business vision, backed by strong architecting and design capabilities.
Comments
Excellent article Mohan that brings out what direction all future product selection strategy exercise should be carried out as the industry matures by itself.
1. The top ecommerce engines have very little differentiation among each other and we have seen that the differentiation is very negligible.
2. So the key to product selection is not the engine itself (as they are expected to provide all essential commerce functionalities) but the key differentiators that enable the Retailers to achieve the retailer's market strategy and how quickly the engine enables to it. So it becomes imperative for the product selector to analyze these critical factors and not focus on core-commerce capabilities.
3. On the other side with patent rights being a strong point these days, more and more retailers might/should start demanding the patents on the commerce engine providers if there is a distinct feature being customized as part of their differentiation.
Posted by: Venky Surya | March 4, 2010 6:18 PM