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Market Movers Discussion on ecommerce and the evolution of industry Marketplaces in the New Environment

Al Lalani, CEO of Annex Cloud, and George Chang, Senior Executive Analyst for Marketplace at VTEX discuss ecommerce, the evolution of industry Marketplaces, and how they have become extremely agile and flexible in an effort to scale in the new environment.

Transcript

Al Lalani:

Welcome to Annex Cloud Market Movers, where we bring in experts and luminaries to help us through the current times. Today, I'm very, very excited to bring in George Chang. George is the executive marketplace analyst at VTEX, and he has an extremely varied background in commerce in general. George, welcome to the discussion.

George Chang:

Hi, Al. Great to be here.

Al Lalani:

Wonderful. Well, George if we may start with a little bit of an introduction about yourself, your role at VTEX, a little bit of background about VTEX and yourself, that'd be great.

George Chang:

Sure, sure. Thanks, Al. So I am the marketplace practice lead here at VTEX, spent 20 years in the e-commerce space with multiple executive roles in Rakuten, Sears, Newegg. And I was also the CEO of a bedding startup, one of the largest e-commerce bedding online retailers. And yeah, now I've been at VTEX, which to me is the next great e-commerce platform. So if you were to take the ease of Shopify and marry it with the flexibility of SAP Hybris, and then supercharge it, that was what you have with VTEX. And we're the only platform that has the e-commerce marketplace in OMS natively out of the box. I'm really excited to be here and talk more about e-commerce trends.

Al Lalani:

That's great. I love the marketplace aspect of what you bring to the differentiator. Maybe we started with that part of the discussion if that's okay. Marketplace for many marketers was a thing that Amazons and Walmarts of the world focus on. But you've brought it a little different. You've brought it essentially where other businesses can now leverage the marketplace to grow their business. Can you talk a little bit about the evolution of marketplaces and how businesses are starting to use them better now within the marketing mix?

George Chang:

Absolutely. Marketplaces aren't a new concept. They've been around for hundreds and hundreds of years, where you have someone that's providing or selling something and somebody that wants to buy it. I think marketplaces in the e-commerce sense in the United States have typically been a big boys' game if you will. A lot of that is due to the barriers in technology. A lot of that's due to the knowledge that's being locked in certain places.

But in the last couple of years, and certainly accelerated because of COVID, marketplaces have exploded across the board. And the reason for that is that they've demonstrated the ability to be agile, to be flexible, to have access to inventory, and to be able to scale in an environment that's viral. So if you look at companies like Uber and DoorDash with their $60 billion valuations, those are marketplaces. And Al, I think what you're starting to see now is you're going to see merchants purchase a lot of marketplaces opening in 2021. Because of the pandemic, they've really looked at their business model and they started to ask themselves, where can I unlock the full power of where I am in my ecosystem today? So typically in the past, marketplaces have been dominated by the big guys, but you're going to see that start to change.

Al Lalani:

And what I love about this aspect is, if you are a brand and any business for that matter, and you have a sizable, loyal audience, that's coming to you for whatever you do today, whatever products or services you offer if you can expand the scope of those products and services with anything that is complementary to the same audience, you're now giving them a better way to stay loyal with you. They're coming more often because you've essentially expanded the scope.

And you've given the ability to kind of monetize that audience a little bit more than you normally would have, in my perspective. And again, it's a little bit narrow from there. Loyalty, again, that's our background where we come from, again, has seen a big boost over the last year, as marketplaces have, where the focus on current loyal customers is exploding because as businesses come out of the pandemic, they're starting to focus on refocusing their customers to build their business back up while they're exploring marketplaces as an option to grow their business as well. How do you foresee in your experience being in e-commerce for a while, the refocus on retention and loyalty in general, and then how loyalty can tie in with the marketplace?

George Chang:

Right. Right. Well, look, it's no secret that customer satisfaction and loyalty are the key, important, critical elements for any business, whether you're a brand, distributor, or retailer. And what the marketplace allows with this model is the ability to have a better level of satisfaction. So if you're a B2C company or even a B2B company, if you know your customers and you're able to provide them what they're looking for, then they're going to behave a high level of satisfaction. You're going to have a high level of loyalty. If you don't have what they're looking for, they're going to go to a competitor. And so it's even more true for B2B companies. A customer has an established relationship with a company. They're buying products. But if you don't have what they want, they're going to go for someone else. So they go hand in hand. As matter of fact, there was a Forrester Total Economic Impact Report that showed that companies that had a marketplace actually had a longer lifetime value, customer lifetime value, and a high-level satisfaction. So when you talk about customer loyalty and marketplaces, they go hand in hand.

Al Lalani:

Absolutely. And one of the things I would add is specifically loyalty management when it comes to managing it for marketplaces because you now have multiple masters, so to speak. You've got your sellers and you've got your consumers, which would be the case. And then you've got the company itself that's throwing in the marketplace that probably has their own brand. In that capacity, running that loyalty management with that specific mix is a very interesting ploy because, at the end of the day, you're both serving the common customer and consumer. But at the same time, you have to make sure it works for both sides as well. So it's a very, very interesting play to bring it all together from a marketplace perspective.

Shifting gear to your e-commerce experience a little bit, you've been in the world for a very long time. And we've all been battling in terms of e-commerce being part of the mix. And how big is e-commerce as part of the mix? And it took us almost a decade to go from 5% of the mix to 15% of the mix. I'm talking about general retail. Retail would still be 95% in-store and 5% online. Now, the average became closer to more like 15% online before the pandemic. And it's jumped to from 15 to 25, in some cases 30 on these holidays and what I'm hearing of the mix. And some of it's got to do with the challenges in stores, but what is your take in terms of what impact this has on businesses? Is this going to stay? And then from a technology provider perspective, what does this place on you to be able to have the agility to now be supporting a much bigger piece of the pie?

George Chang:

Yeah, that's a great point. I remember back in the day when e-commerce was three or 4% of total retail. And we were evangelizing, hey, e-commerce is the next great thing. And fast forward, one out of every $4 spent is spent online. It's a crazy world we live in. And just like you said, because things are accelerating so fast, it's causing these different dynamics across the board. And to answer your question, how has it changed things? Well, it really depends on where you are on the digital spectrum. If you were one of those who were on the cusp of the spear of innovation, you're going to continue to innovate. You're going to continue to drive new experiences, you're going to continue to use and leverage what you have positioned there to gather more customers, create better customer loyalty.

Now on the other side of the spectrum, if you're lagging behind, you weren't able to jump ahead, you're looking at your business and thinking, wow, how am I going to survive? How am I going to make the leap? What are the barriers technologically? What are the barriers psychologically or inherent in the organization to help me get to the next step? So the pressure is, for us as a vendor, is to be able to adjust to every situation. And so now everyone's got their eyes focused on commerce. They're looking into us to help them. We were talking to one of our clients who just recently signed with us, and they've got a great growing business. But they're looking at us and saying, "Look, how can you help us quickly get from point A to point B and do it half the time and half the costs?" So I think we as being vendors is how do we innovate ourselves to meet the demands of our clients, to meet demands of their customers?

Al Lalani:

That makes sense. And I think two specific questions come out of what you just told me. The first one is, how different is it in Latin America? And just for everyone else, just to their benefit. I mean, VTEX is a leader in Latin America. You've got more business, e-commerce business, and many others in that space. But it's also a very different geographical location, comes with a whole different set of challenges around delivery, around consumer expectations, around many other things. And the impact of COVID has been pretty tremendous in that region as well. So how do you foresee? What do you see in the LATAM space, in the region generally, as it comes to e-commerce that's different than in North America, for example?

George Chang:

Yeah, that's a great, great question. Al, most of us, obviously, here are in North America, and e-commerce has been around for a long, long time. In countries like Latin America, where it's less rigid and there are fewer traditional boundaries, they're able to evolve much faster. So their piece of innovation in a lot of respects is actually much quicker and accelerates even more than what's happening in the United States. So for example, when COVID hit, quickly the buying behavior shifted. And one of the things that we did to meet those needs is we created and stood up functionality that allows stores that should have a scheduling system in the store where you can actually have slot management and you've got your schedule, your meetings in the store. So Latin America, as a market, is exploding and evolving so quickly.

Another use case that I can think of is Whirlpool, one of our major customers there, was looking to generate better customer satisfaction, better loyalty. So they have a mentality where they actually leveraged the marketplace where they're selling their products, but they don't sell Whirlpool TVs. So what did they do? They reached out to a partner in LG, they're selling LG TVs. So the boundaries we have a lot of times in North America being institutionalized, they don't have it in Latin America. So they're growing and evolving very, very quickly, very fast. We have another partner we just launched, Payless, who launched in the United States, and they're launching six new Latin American locations in Q1. They're expecting omni-channel or e-commerce to be 40% of their business. So that's how they see the opportunity in Latin America versus the United States. So it's a very vibrant, very rich growing dynamic that's different than what you see in North America.

Al Lalani:

That's awesome. And the second part to my previous question, around when you said the changes are happening in the growth of e-commerce, was around speed and agility. You mentioned customers are looking to get up and running quickly. Especially if they're behind the curve, they have a lot of catch up to do. They have a lot of things to digitize their business. If they are leading, they still are being asked by the consumers to do a lot. I mean, one of the things, for example, we all know about, we want to be able to deliver from our stores. If we are a store based situation, and there's a problem with COVID and I can't deliver from a centralized distribution center, maybe I can ship from the store. Maybe I can have to pick it up from the store. Maybe there are other things that I need to stay more agile and serve my customers.

From your perspective, one of the other things I've I've seen change is that microservice-based architecture coming into e-commerce and essentially what we call now headless, and essentially the ability to do this in a much more agile way. At the end of the day, whatever term we use, what it gives the end customer is the speed, the agility, and the flexibility to control the display and their microservices in a more cohesive way. How do you see, how important do you see that in the upcoming years as it comes to helping customers build and scale their e-commerce?

George Chang:

Yeah, definitely. I mean, I think a lot of folks have seen the word headless, have seen the word microservice-based architecture. But I can tell you being on the front lines, the paradigm shift is happening, and I think COVID has really accelerated that. Now, when you have a monolithic system where you want to make a change on one end but it affects 15 different downstream programs, that's not the way to become agile. If we've learned from anything, it's all about being agile, it's about being flexible. So I think that's where VTEX obviously comes in, and we have a very elegant solution that we allow customers to enjoy the full benefits of a microservice architecture. But we also have, out of the box, a very rich feature set. And so we allow customers ability to take advantage of best of breed solutions.

So we have a basic loyalty program where people can play with it, test it. But once they kind of grow up in it, they can easily bolt on in and. And say, "Look, I want a full feature. I've learned how to do it, but now these are things that I need." And so there's also something we have that's very vibrant, it's called VTEX IO. Let's say you've expanded your feature set and you're thinking, okay, well, now I'm built into VTEX infrastructure. So we have this servers list, low code solution that allows customers to actually extend their solution in the VTEX infrastructure in a way that's low costs, low effort and robust.

Al Lalani:

Perfect. Well, I know we covered a lot in a fairly short amount of time, George, but this was very, very good. It was very exciting to get you on this discussion and get your viewpoints. So I really appreciate you taking the time. Thank you for doing this. And for everyone else, if you want to watch additional such discussions, please go to annexcloud.com/marketmovers, where you will see additional conversations we've had with market leaders. George, thank you again and talk soon.

George Chang:

Thank you, Al. It was definitely a pleasure. Take care.

Featured Speakers

 Al Lalani

Al Lalani

Co-Founder, Annex Cloud

George Chang

George Chang

Senior Executive Analyst for Marketplace, VTEX

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Since 2010, Annex Cloud has provided industry leading loyalty solutions to more than 250 leading brands and retailers, including Jenni Kayne, Hewlett-Packard, Bed Bath & Beyond, e.l.f. Cosmetics, Olympus, Sugarfina, Mizuno, MacKenzie-Childs, VF Corp., with the ability to engage tens of millions of their customers one-to-one at scale.

The Annex Cloud platform provides fully integrated Customer Loyalty, Referral Marketing, and User Generated Content (UGC) solutions that seamlessly work together to optimize the customer journey and deliver a unified customer experience that is designed to accelerate revenue growth, retain valuable customers, increase average order values (AOV) and drive repeat order frequency.

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VTEX is a cloud based e-Commerce Platform and Omnichannel solutions company. Known for their vanguard technology and by being a time-to-revenue platform, VTEX has been recognized by the analysts from Gartner and Forrester, as a Global Leader for Digital Commerce. VTEX is ranked on Gartner's Magic Quadrant for Digital Commerce.

To learn more about VTEX, visit brand.vtex.com