Over the past decade, many of the big software suppliers in ecommerce have been moving towards an "all-in-one" strategy, with seemingly everyone trying to become the one-stop-shop for retailers (i.e., inventory management systems adding order management capability, order management systems adding inventory management capability, marketing apps adding storefront functionality). The result has been the emergence of broad platforms that have a lot of features, but don't do anything great (jack of all trades, master of none; wide but not deep).

In the meantime, some solution providers have been a lot more focused and built out narrow, but best-in-class solutions for very specific problems like shipping integration, analytics, marketplace integration and more. While these products are very narrow in their feature set, they go much deeper in their problem space than the all-in-one platforms and have a capability lead that cannot be caught up to.

Historically, ecommerce has looked like this:

  • Small retailers would use a simple ecommerce platform (e.g., Shopify or Bigcommerce) with a selection of simple add-ons for each area of the value chain (i.e., an app for shipping labels, an app for analytics).
  • Big retailers would use all-in-one platforms and/or ERPs.

But, this is quickly changing. By focusing on a narrow set of problems, those simple add-ons used by the smaller retailers have become extremely full-featured. Nowadays, more and more large merchants are using a smorgasbord of smaller apps, integrated together, to build a custom solution. This allows them to use the very best app for each area of their business. Ironically, this is being enabled by the platforms—large merchants are adopting platforms like Shopify and Bigcommerce not for their feature set, but for their ecosystem of integrations. These platforms are becoming commerce operating systems on which best-in-class third-party solutions are built.

The technology stack of small and large merchants is converging around these commerce operating systems that allow merchants of all sizes to piece together custom technology stacks using point solutions from their ecosystems.

Headless commerce

Headless commerce is the logical extreme of this decoupling: where even the storefront, checkout and payments are fully decoupled from the ecommerce platform and potentially even decoupled from each other. For example, some Shopify merchants are using headless commerce storefronts like Shogun in lieu of the Shopify checkout, but still relying on Shopify to connect together their order management, shipping and inventory systems. Shopify's storefront API facilitates this. Stripe recently launched Payment Links, which enables merchants to sell products directly through Stripe Checkout without any integration effort. For many merchants with simple business models, this removes the need for a storefront entirely—they can easily add ecommerce functionality to an otherwise static site.

Where will this lead

I predict this unbundling will continue, with platforms like Shopify and Bigcommerce doubling down on their place as operating systems for online retail. This is a challenging proposition for them, as it hands a lot of power over to their partners in the ecosystem, something that Shopify in particular has struggled with. But, the risk associated with this can be mitigated by focusing on the problems that they can uniquely solve given their massive amount of capital, like logistics.

Additionally, I think the pendulum will continue to swing in both directions. The degree to which the commerce stack is unbundling creates unnecessary complexity which I think will lead to a degree of consolidation amongst the point solutions (e.g., the benefits of having inventory and order management housed in the same platform, given how heavily they both rely on accurate and realtime stock data, probably outweigh the benefits of being able to mix-and-match your IMS and OMS). To quote Marc Andreessen “there are only two ways to make money in business: One is to bundle; the other is unbundle.”

Lastly, and in spite of Stripe currently powering Shopify Payments, I believe a showdown between Shopify and Stripe is inevitable, with Shopify now extending Shop Pay beyond on-platform payments and Stripe owning more of the customer journey (i.e., Payment Links, Checkout, support for alternative payments and their investment in Fast). Though, with Shopify seemingly more focused on growth than profitability (a wise tactic, in my opinion, given how big the retail market is), they'll likely retain Stripe as their provider for the foreseeable future. With the utility of Shopify becoming thinner as more functionality is handled by the ecosystem, it'll be natural for Stripe to try to take their place as the operating system for commerce.