When it comes to the vast pool of e-commerce companies, there seem to be big fish and then everyone else.
But Amazon.com Inc. AMZN, +0.56% , Walmart Inc. WMT, +1.51% , Target Corp. TGT, -0.14% and other well-known names aren’t the only options. Small and midsize retailers are making a splash with help from technology providers and platforms that have lowered barriers to entry.
In recent years, companies have come and gone for one expensive reason, according to Tom Bonney, senior managing director at CBIZ CMF, the private-equity advisory practice for professional-services firm CBIZ: the high cost of enterprise plans and systems. Often small retailers didn’t get a lot of value for their investment.
Now technology pricing has come down, and has become more data-driven, helping companies of all sizes to better identify trends, make better buying and customer-acquisition decisions, and generally run their businesses better, Bonney said.
“The dollars and complexity associated with technology has come down substantially, and smaller guys can pay by the drink rather than building their own,” Bonney said. “Five years ago, this kind of functionality would’ve been in the seven figures. Now it’s in the low to medium six figures.”
Getting started can cost even less than that. Companies like Shopify Inc. SHOP, +0.71% , BigCommerce and Salesforce offer programs that start as low as $25 a month with more advanced programs priced at $300 or less.
Shopify, which reported its first-quarter earnings on Tuesday, focused its earnings call on its offerings for both “entrepreneurs and large brands” of options for being both online and in stores.
“Things like shipping, fulfillment and logistics, which can be complex even for in-person transactions, go from being backroom functions to being part of the customer experience,” said Shopify’s chief operating officer, Harley Finkelstein, on the company’s earnings call, according to a FactSet transcript.
‘I think it can become real in the next five years that smaller companies can compete with Amazon. The industry fully understands what an Amazon-driven environment looks like and Amazon will get a counterpunch, or a counterpunch by a thousand cuts from the community.’
Tom Bonney, CBIZ CMF
Finkelstein emphasized the need to keep things simple given all that’s involved in running a retail business.
The company also works to help its clients respond quickly to changing tastes and e-commerce developments. “Business experimentation,” like quickly shifting products or managing customers, is key to the enhancements that Shopify makes.
The company’s goal is to “remove a lot of the time from the infrastructure side” so that business operators can focus on other areas of the business that will allow them to compete, even with the heavyweights, said Lynsey Thornton, Shopify’s vice president of UX (user experience), in a separate call with MarketWatch.
However, they’re not going to go head to head with a company like Amazon in areas where the e-commerce giant clearly has an advantage. Rather, they’re relying on unique products and other features that are “truly theirs.”
“Businesses on Shopify are often finding other ways to compete,” said Thornton. “They’re usually not competing on price, but the brand, quality of product and unique aspects of the business.”
Rob Garf, vice president of industry strategy and insights within Salesforce’s retail business line, said that cost-saving technology developments, like the move to the cloud, also allow smaller companies to have better relationships with customers.
This is something that larger companies strive for with their various tech upgrades and other efforts. Retail giants are collecting as much data as they can to get to know their customers and give them an experience worth coming back for.
“The cloud provides innovation without a costly upgrade, and that helps [smaller retailers] move quickly and more nimbly than legacy brands,” Garf said. “Smaller, more nimble companies have thought about their tech portfolio as a competitive feature so they can move more quickly.”
As a result, small business has become big business. Big enough that even Amazon recognizes its value.
The company launched its first-ever Small Business Impact Report on Thursday, outlining the technical services Amazon provides these companies and how much money is involved in the Amazon Marketplace part of the business.
“We strongly encourage our merchants to sell both direct to consumer and on Amazon, and we provide the integration tools to do that,” said Brent Bellm, chief executive of BigCommerce.
With these tech tools, a bit of business savvy and a unique business model, it isn’t so farfetched that some of the small businesses of today will find ways to rival the big players.
“I think it can become real in the next five years that smaller companies can compete with Amazon,” said Bonney. “The industry fully understands what an Amazon-driven environment looks like and Amazon will get a counterpunch, or a counterpunch by a thousand cuts from the community.”
The SPDR S&P Retail ETF SPX, +1.28% is down about 1% for the year so far matching the S&P 500 index SPX, +1.28% decline for the period. The Dow Jones Industrial Average DJIA, +1.39% is down 3.2% for 2018 so far.
No comments:
Post a Comment