It’s that magical time of year when the newest Gartner quadrant reminds us that digital commerce is the tip of the spear as the transformation of retail accelerates.
What’s different about the Magic Quadrant this year? Some new players are in the mix (welcome VTEX!). A new name arises among the leaders (we’ll miss you Demandware, but hello Commerce Cloud). This year’s report is also a timely reminder that the digital transformation of retail is now a global force.
Even though the bulk of retail sales still occur in stores, Amazon, Alibaba and other innovative digital retail leaders are ushering forth the future of shopping – and doing so on a global scale. Their vision centers on a borderless, digitally-infused customer experience built on top of a digital commerce platform. Although their operations are increasingly global, they appreciate the truism that that the most successful shopping experiences remain local.
Shoppers accelerating retail transformation
Any retailer or brand building for the future has the customer first and foremost in mind. Regardless of how one wants to define today’s shopper – “digital-savvy” or “channel-agnostic” are both popular — the bottom line is that the shopper wants convenience, ideally coupled with value and selection.
Today’s shopper doesn’t want to wait. He or she appreciates engaging content that fuels discovery. They rely heavily on insights from other shoppers and intelligent recommendations. They want an easy checkout experience and enjoy being rewarded for their patronage.
Time is the universal prize, so speed is a given. This is true whether they are transacting from a cell phone in Africa, shopping on their iPhone in a store on Main Street USA or buying via WeChat in China.
Digital commerce: The tip of the retail transformation spear
As the consumer evolves, retail must once again transform.
Global retail leaders know that shoppers in both Western markets and the emerging global middle class increasingly rely on technology and digital touchpoints to shop smart. In turn, these leaders — be they retailers and/or brands selling direct-to-consumer —trust digital commerce solution partners to enable more engaging product discovery, quicker and more convenient transactions, faster order delivery and more socially-adept customer care.
Retailers and consumer brands that will survive to see tomorrow must follow their lead. Their transformation also starts with the customer. Embracing transformation requires a deep understanding of the customer journey – and an acknowledgement that shoppers in different countries follow very different paths to purchase.
Few retail brands will lead the customer, most will follow. The strongest will be the fast followers. They will prioritize strategic planning and organization realignment — and will do so on a global scale. The fourth annual JDA/PWC survey (n=350 global retailers) finds that having a digital transformation strategy is the number one priority in 2017, with 69 percent of executives saying they plan to increase their investment in digital transformation over the next year.1
Retail transformation is now a global phenomenon — and those that “get it” are not just the usual suspects. In fact, the study found that more Chinese retailers are implementing their digital transformation strategies (58 percent) than the U.S. (40 percent). The study also underscored how many retail laggards are still operating in the U.S.; finding that 19 percent of U.S. retailers are struggling to — or choosing not to — define a retail transformation strategy at all.
Change is difficult. It takes a willingness to fail, to learn and to adapt. It can be an ongoing struggle.
Unifying channels and touchpoints still a challenge
Transformation creates new experiences not just for shoppers, but for merchants, retailers and brands as well. In recent attempts to create “seamless experiences” for shoppers, global leaders have focused their efforts on mobile engagement, social connections and efficiently mining vast troves of data to refine actionable consumer insights.
It is little wonder that the JDA study finds that mobile-enabled applications (85 percent), big data (86 percent) and use of social media data (85 percent) are the top technologies survey respondents are investing in or plan to over the next 12 months. As such, mobile, social and data intelligence are now the front lines of retail transformation. We see more and more digital retail leaders leaning heavily on their digital commerce platform partners to help them plan for tomorrow and execute their plans.
Yet the omnichannel conundrum continues. Execution issues linger, stifling visions of seamlessly integrated shopping experiences. The real world keeps getting in the way.
Driving online traffic to physical stores can be a challenge when the retailers are closing stores. The nirvana of order online/pickup in-store traffic creating spikes of retail store sales simply hasn’t materialized at the scale many omnichannel pundits prophesied. Connecting troves of legacy and separate systems has proven to be a futile (and very expensive) exercise for more than a few. Thus the industry’s channel-agnostic vision is shifting towards unifying customer experiences.
For more and more leaders, building “unified” shopping experience on top of a digital platform makes more and more sense strategically and financially. This evolution of thinking towards unified commerce is one reason why the multitenant SaaS platforms profiled in the Gartner MQ now place retail leaders in the driver’s seat of retail transformation.
Who are the leaders of retail transformation?
Who are the global leaders of retail today? Amazon is clearly the global leader, while innovators and investors like Rocket Internet and Alibaba are becoming key international players.
Also leading are specialty retailers and brands selling direct-to-consumer. This is especially true of those who have taken to heart the lessons learned by working with the digital commerce platforms that have populated Magic Quadrants over the years. These leaders have also bought into the need to build a global retail vision coupled with a propensity to embrace continuous innovation.
Other leaders are nimble retail start-ups whose “high velocity” business plans are built out of the gate for a global shopping audience, one that is increasingly populated by digital natives. As department stores and other old-line retail mall brands fade, these global challengers and niche players are filling the vacuum.
Today’s leaders will be tomorrow’s fastest growing, most respected retail brands. They understand the new math of retail: global reach + local feel. This “g-Local” approach embraces digital and real-world experiences while stressing flexibility (think pop-up stores and showrooms) and adaptivity (think curated and co-branded experiences). They appreciate the growing importance of global customer experience management (GEM) as they build local experiences globally — and are willing to invest their passions and resources accordingly.
As retail leaders embrace GEM strategies, they are expanding their partner horizons globally. In addition to working with established US technology firms, more and more are working with digital commerce solution providers based outside the US.
They are reaching new customers through in-country marketplaces in both maturing and emerging markets. They are relying on marketing partners around the world to connect locally with the rising global middle class as well as increasingly diverse base of shoppers within Western markets.
“They’re all leaders”
But first and foremost they are working with the digital commerce firms profiled in Gartner’s Magic Quadrant. Which ones? It depends. Many bigger retailers (with bigger wallets) are drawn to the enterprise offerings. Others will be drawn to platforms that own a niche from which they will expand, while others will choose to work with those who are building commerce platforms upon which their retail vision(s) of tomorrow will operate.
It’s ironic how some in the ecommerce industry who have invested time and energy over the years watching Saas commerce platforms jockey for position in Gartner Magic Quadrant often miss an important dynamic. All these agents of innovation are leaders. They are all driving the transformation of retail in their own way.
The bottom line is that if you are working with (or at least talking to) these “transformers”, you’re on the path to future growth.
Ecommerce community on cloud nine
Most of us who enjoy the release of the Magic Quadrant every year (or so) haven’t missed another important lesson. The evolution of the quadrant over the last 5 years has showcased the quick ascension of SaaS multi-tenant solutions to the forefront of innovation.
It is ironic how quickly times change. It wasn’t all that long ago that industry analysts would hear Oracle rail against now-distant memories like Sun Microsystems. When I walked into the international briefing room at Oracle OpenWorld several months ago, who was President Mark Hurd hammering away on?
Amazon Web Services is the mark now. The future is all about digital commerce – and the cloud commerce players are in the leading role. And if you think the ecommerce community is on cloud nine now, just wait until the B-to-B verticals follow the industry transformation path that the ecommerce community has blazed for retail. The digital commerce ecosystem has come a long way … in a relatively short time.
Few folks on the commerce platform spring tour this year would question that cloud commerce reigns supreme. Of course, the latest buzzwords have been hard to miss this spring. The visionaries talk about how AI will personalize big data and how chatbots, augmented and virtual reality will enrich the shopping experience. Their day will come (perhaps).
But the smart money in the retail world is focused on executing retail transformation plans now. These leaders are placing their bets on the cloud commerce platforms. They are investing in mobile commerce, global customer experience management, marketplace connections, instore-POS, localized payment systems, OMS, global logistics and universal customer care. Not the sexy stuff, but the operational foundations of global retail leadership. Just ask Amazon what it takes to lead.
A brand’s new opportunity
By the way, it is not just retailers investing in the cloud and digital commerce platforms profiled in the Magic Quadrant. Consumer brands have been out in force this spring at the ecommerce shows.
No longer are brands skittish about digital commerce. Those that have traditionally sold through retail partners are much less cautious about wading into digital direct-to-consumer commerce. They see a growing role for their direct-to-consumer business as the global transformation of retail accelerates. While respectful of their traditional relationships with retail partners of old, they understand the changing of the guard all too well.
Digital commerce offers them a crucial hedge as older generations of retailers fade and new innovators take their place. They see opportunities to build new relationships with consumers in emerging markets in LATAM and APAC. The brands are also seizing opportunities to re-engage directly with the next generation of shoppers in mature, digitally-savvy markets.
For many brands, both large and small, global retail offers them an exciting new growth opportunity — and to them, digital commerce platforms are the bridge to the future.
VTEX Day: Back to the Future
These are exciting times in the ecommerce world. As the 2017 spring commerce tour starts to wind down, I’ll add that a highlight of this past year’s digital commerce platform tour was a stop at VTEX Day in Sao Paulo. I wrote a short note at the Global Ecommerce Leaders Forum (GELF) community site about how VTEX Day felt like a time machine back to the early days of ecommerce.
VTEX Day draws retailers, global brands and solution providers from all over LATAM, a continent whose vast and diverse population of North American, European and Asian expatriates makes it possibly the most global of all the continents. In a way, it’s becoming a microcosm of global retail.
The excitement about digital commerce one witnessed at VTEX day underscored how ecommerce and mobile are defining the future of retail, not just in large LATAM countries like Brazil and Mexico, but also in gateway markets like Argentina, Colombia, Chile and Peru.
That is one reason it’s refreshing to finally see VTEX in the MQ this year. As VTEX accelerates its global expansion into the US and Europe, the company is well-positioned to draw from its global commerce perspective to jumpstart digital transformation. This is especially true for mid-market brands and merchants that embrace global-first visions and prioritize building engaging local digital experiences for their global customer bases.
As a global platform for commerce, VTEX is providing retail leaders the tools they need to thrive in the years ahead. Shoppers will enjoy a smarter and more convenient checkout experience. As Gartner mentions in the Magic Quadrant, VTEX’s SmartCheckout is a nice, potentially disruptive, differentiator. This is especially true for the emerging global shopper, who may still need assurances at checkout. By making online and mobile shopping easier, SmartCheckout reduces friction while increasing conversion.
VTEX also gets that global reach + local feel is the new math of retail. As their clients build local experiences globally, look for even more support for global customer experience management (GEM).
As a platform rapidly expanding into North America and Europe, VTEX understands that it takes a global network to grow retail sales globally by connecting with shoppers locally. The team has spawned a fast-growing ecosystem of value-add partners and innovative new start-ups which will continue to drive the technical evolution of the VTEX platform.
The VTEX platform basically owns LATAM ecommerce and we see more and more brands with global reach being attracted to VTEX; first for LATAM and then US and European builds, but quickly for the rest of the world. VTEX’s cloud commerce offering is a multitenant SaaS platform positioned for long-term success.
Being relatively new to markets outside of LATAM, the VTEX global expansion team will obviously face a lot of competition from their industry colleagues that populate the MQ. But they are up to the task and should be in everyone’s consideration set. Good luck guys!
And thanks to the team at Gartner for the latest work. Sign in for the report at https://www.gartner.com/doc/3690217