Very recently Roman wrote about the lack of innovations in e-commerce and his frustration with the outlook leaders of popular shop systems gave.

Well, I can feel his pain. Since 2010 there has not really been any kind of innovation across the leading open source systems including Magento, Oxid e-sales, Shopware and PrestaShop from my point of view. It seems everybody got comfortable and relaxed once the feature push of Magento got to an end after the take over by eBay. I am under the impression that everybody went focusing on large “enterprise” clients underlining the stability and scalability of their software and therefore lost the focus on innovation. The nice thing about these enterprise customers is that they do come with deep pockets helping to monetize the open source development and attract other merchants. However at the same time they are the ones usually not requiring innovative features but a robust set of basic native functionality. I strongly recommend to read through this (German) post going into more details about the Enterprise direction the mentioned players are taking. Startups and more agile merchants trying to distinguish themselves from the big players are different and suddenly cannot rely anymore on native innovative features to be introduced by the open source shop systems.

And here we are right in the e-commerce innovation dilemma!

You are not convinced, yet? Let’s take a look at the facts.

Here you can find two years of Magento release notes starting in June 2011 and ending in April 2013. There is not a single major innovation I could find – but countless fixes, changes and refactor tasks.

So was all the innovation saved up for the big Magento 2 release? I was curious as it was first mentioned more than 1.200 days ago. Doing the research I came across an interesting discussion on hacker news I like to quote:

Magento 2.0 sounds promising. However, Magento 2.0 is lead by developers-only. No marketeers are involved to communicate merchant needs. I have tested Magento 2.0 dev60 and it is nothing more than a technical rewrite. Magento 2 offers the same feature set as Magento 1. You’ll just need to pay a developer to migrate all your 1.x extensions to 2.x, since there is no upgrade path.

So as much as I loved and praised the features and innovations Magento introduced and made available back in 2009 it seems to be obvious that whoever stood behind them has left and took the magic away.

And what about Oxid, PrestaShop and Shopware?

Taking a look at their release notes and comparing the feature sets with Magento it is interesting to see that most of the new features are not part of the open source solutions but have been released as chargeable modules and add-ons. For example something quite basic as bundled products is not included as native functionality in Shopware but available for €495 as extra charged module developed by Shopware themselves and published in August 2012. Looking at the PrestaShop module collection (78 modules) or the Oxid e-sales modules and their eFire marketplace it is more or less the same picture. The releases of the core open source product mainly focuses on bug fixes, performance improvements and rewrites. Even essential features are published as complimentary chargeable modules and the real innovation has to be driven in custom projects or bespoke agency work.

An additional good indicator of how innovative shop systems are is to look at startups utilizing the software to go to market. For example shopping clubs or subscription based startups used to be able to start into the market with a quite small budget as the shop systems were able to offer them a 80% ready solution out of the box. Over the last 24 months I have not seen new innovative startups in the e-commerce field who chose to work with one of the solutions mentioned above. For example Chloe+Isabel, an innovative social commerce startup from the US, had to build a custom solution with much higher investments.

When we first launched, we had to create all of our software from scratch as it just didn’t exist. While this was a different kind of challenge, what we quickly realized was that though Chloe + Isabel is a jewelry company, we had to be just as proficient as a technology company.

said Chantel Waterbury the founder of Chloe + Isabel in an interview.

Most of the startups I talked to would have loved to work with one of the open source shop systems after realizing that they are forced to build a costly and risky custom solution to achieve their goals. So why could they not utilize or extend the solutions available? Ironically the APIs are not open and powerful enough to support innovative shopping functionality and content segmentation driven micro sites utilizing just as much commerce functionality as they need. So as a result each of the leading systems has built its own eco system not being able to support true innovation. APIs were not the focus but added and enhanced later on in the process. This makes the solutions slow and harms service orientated architectures where merchants heavily rely on well performing and stable APIs to connect all the components utilized.

So the questions I like to ask are: Will there ever be a new shop system leading innovation and bringing it to the masses like it used to do Magento back in 2009? Or are we at the beginning of a larger paradigm change where shop system setups will not be like we know them up to today?

24 thoughts

  1. Alexander,

    thank you for sharing your view on innovation.

    I do not agree.

    First of all: why do you need innovation? The goal of any business must be to build a very successful company. If it’s just about being innovative, the business misses the fundamental principle of market economy. Nobody blames BMW to successfully sell cars, even if they did not invent the car. Ask Oli Samwer if he thinks that Zalando is innovative. It’s not.
    E-Commerce is not new. Mail-Order has been existing for over 150 years. The cost drivers stay the same: fulfillment, returns, shipping rates, customer care and marketing.
    Technology is just a vehicle to place an order. With couch commerce you are selling a technology yourself that ultimately just places an order in an enterprise resource planning or warehouse management tool. And then the 150 years old mail order processes take over.
    My next point is, that it is not the job of the shop software company to take care of innovation.
    In my opinion it is the job of the E-Commerce Companies, whether they are startups or established businesses to innovate. But not just for the sake of innovating, but solely because there are business opportunities.
    With every new business model that goes along with an innovation, you need to define many things. Technology is just one of them. It is a make or buy decision based on the actual business case on hand. If there is standard software, use it. If adaption of standard software to the specific needs is cheaper than developing a custom solution, then adapt. It basically burns down to this simple understanding.
    Any new business model must agilely adapt to what you learn from customers and from the market. This means that you have to constantly learn, develop and test iterations of your software.
    A good standard software which is flexible to adapt, is innovation in itself.
    But sometimes the requirements of the business model or just the need of flexibility demands that you build your own software. There are TOP 100 webshops out there using either (highly adapted) standard software or an individual solution.
    Lastly, you say that Enterprise size companies usually do not require innovative features. I disagree.
    Zooplus switched from an individual solution to Hybris, Zalando from Magento to an individual solution. There is no right or wrong answer. The key is to constantly optimize the business model. This is why BMW is successful.
    For any business and much more so for innovative business models, standard software can only be a starting point.
    I will take Shopware as an example, because I know the softare and the people there quite a bit: if Shopware would provice such a starting-point-technology, they would already be doing a good job. But they just built bepado and do some smart partnershipgs, for example with Plentymarkets, thus being able to fulfill a much greater set of their customer needs. I would judge Shopware a highly innovative company.
    Yours
    Andi

    1. Hi Andi – thanks for the great comment.

      Concerning your first point: why do we need innovation?
      Well, everybody loved Magento for offering innovative marketing and sales features. Why? Because it’s not anymore the challenge to create an online store and launch it but to get people in it and convince them to buy. Very much like in the classical retail business. Everything that follows after the order has been placed is indeed manageable by well-established processes and tools. But the innovative sales features require a level of technical understanding and knowledge to build, implement and maintain that is beyond what merchants can offer. So I see this responsibility not at the merchant end but with shop systems or specialized service providers – with some exceptions for the top 1% of merchants.

      And then we come back to the open question I asked: will there ever be a new shop system leading innovation?

      There are specialists in almost every surrounding area of e-commerce and from what I can see shop systems never succeeded to be market leader in one of them. Just take newsletter as an example. Who is using the built in newsletter tools from the shop systems? I don’t know a single merchant who does. Instead many SaaS services are available and the preferred choice is a specialist like MailChimp. The same is true for search, recommendation and an ever-growing number of areas.

      Modules and Add-ons allow merchants to connect shop systems with these services but always require installation, testing and maintenance in the shop system. So now merchants have to maintain and update their on premise code base and modules to be able to utilize these services and make sure their customizations or updates of the shop software won’t brake any connection. Here I see the APIs and ways to integrate with the established players far from being perfect.

      Concerning Shopware I do agree that Bepado did sound exciting when they announced it. I was hearing many merchants who said how great it would be to sell their own products in other shops, too. However I never came across a merchant that actually added products via Bepado to the own shop. Do you have any information about the adoption or know merchants that do use it in this way?

  2. thanks for sharing your thoughts about the dilemma. i also noticed that the speed of innovating new features was reduced extremly at magento. but it isn’t so surprising… on some point, every company needs to earn cash…

  3. Hi Alex, thanks for mentioning my post and picking up the discussion!

    @Andi: I think when it comes to innovation, you’re missing the point. Especially in the tech world, the only chance for businesses to grow and to be successful in the long run is to innovate. According to Schumpeter (http://de.wikipedia.org/wiki/Joseph_Schumpeter), innovation is one of the driving forces of competition. At the end of the day, the effect is the one you mentioned: those companies are performing well. Apple is a very prominent example: they didn’t invent mobile phones, tablets or digital music. But the way they were packaging this into new products and services – and even their timing – turned them into the most valuable company within only a handful of years. And while you’re mentioning BMW: of course they did not come up with the idea of a car in the first place, but the way in which they heavily invested in producing the i3 is something that make them stick out.

  4. What about spreecommerce as a solid basis for innovative e-commerce projects…? I would have louved to have somethin like this when a had to build a platform for like that a few years ago (magento was alpha that time)…
    The only problem with spree (which seems to already have a proper community) is that it is build on ruby on rails – which makes it hard and even more expensive to find devs. But for shure worth a look.
    Back to topic: in my opinion companies like shopware a doing a good job! All of them are delivering a really really great solution for their customers…

  5. Roman,

    I don’t think I miss the point. I think we have just a different view on innovation and constant improvement and who should be innovative.

    The flow of money determines who is the innovator. From my point the innovator is the one who tries to sell goods online and not the software company whose shop system he uses.

    It is just wrong to see it from just one part of the value chain.

    For me, technology is just one of many factors. Can a company be innovative using Word 2003? Yes, of course.

    We are talking about standard software that should help you get rid of 80% of usual problems with approved best practices. The innovation lies in the other 20%. If an innovation becomes standard, then it is not innovation anymore.

    Again: Innovation is your job, if you run a company. Not the job of a piece of software that you use.

    And even if a shop software would come up with the innovative features that Alexander misses – I cannot believe, that you hold the opinion, that it would be sufficient to install an innovative piece of software for a compoany to be innovative. That would be a little too simple, right?

    A near bankrupt company upgrades to office 2010 and will no florish? Come one.

    That is one part of my point.

    The other part is, that you should judge a Software Company that builds Shop Software by how much of the 80% they contribute to their customers, the merchants. Those 80% change. And in case of Shopware the argument was a little too shallow in my opinion.

    Merchants struggle with Amazon. That is a fact.

    Alexander may be of the opinion that it is just a matter of some fancy features to distinguish yourself and strive again.

    But I don’t believe that. Not a single second.

    Amazon lists like 35.000.000 SKUs and implements prprocesses that are so efficient that they can operate on the thinnest margins. Addionally there is some solid brick and mortar infrastructure of warehouses. How can you compete with that?

    Shopware came up with the idea of bepado and I think this approach is legit and pretty innovative. Let’s check it out on the next community day.

    Andi

    1. Hi Andi,

      valid points! Of course it would be naive to suggest that installing a piece of software can turn a merchant into an innovative one – by the flick of a switch, as it were. What I do believe, however, is that depending on new logic, new looks etc. a merchant wants to provide his customers with, he needs to choose the piece of software that best supports those strategies. And if he gains a competitive advantage by using Word 2003 – because his competitors don’t and are much slower for example – this is indeed innovative.

      I think what it comes down to is one’s definition of ‘innovation’. What might be a nice little spin or small feature for one might hold mind-boggling innovative power for others. Let’s discuss this at Ahaus beach next month, what do you think? :)

      Cheers,
      Roman

  6. Hey guys,

    great discussions. I want to Invite you to discuss this topic at the Inside eCommerce Talk. Would be great if you guys drop by in Cologne at the 15.5. Please let me know.

    Cheers,
    Adrian

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