E-commerce software providers like Shopify have made opening an online store as easy as just a few clicks. But simplicity has its downside.
“There’s a lot of sameness in e-commerce out there and the typical buying funnel is still relatively unchanged from the invention of e-commerce,” said Kelly Goetsch, chief strategy officer of e-commerce software firm Commercetools. “What we’re now seeing is folks really wanting to differentiate, and they want to invest their money in differentiation.”
Platforms like Shopify play a major role in e-commerce today, powering everything from website design to order fulfilment, and likely always will. But some digitally native start-ups that leaned heavily on software providers to jumpstart their businesses are reducing their reliance on these services.
The reason driving this still-burgeoning change is simple: With more competition, offering a unique online shopping experience helps to win customer loyalty. That’s easier to accomplish when a company has more control over how parts of its site are built, allowing them to collect their own data and make changes quickly. For DTC brands, the need to make their e-commerce feel more distinct reaches a greater pressure once they have reached a milestone of $100 million in annual sales. They’re squarely out of start-up territory and facing competition on both sides — from new emerging brands and legacy players — to acquire customers. Plus, they now have more resources to build the internal tech teams necessary to develop and manage at least some of their e-commerce operations in-house.
“When you do out-of-the-box solutions with just Shopify, you’re not going to get as far as you want to get, particularly when it comes to having an edge on a competitor,” said Lawrence Lees, co-founder and chief executive of womenswear seller Outcast Clothing, which is on track to hit $100 million in annual sales next year. “When you want to take it that step further, you have no choice but to customise the experience.”
Outcast Clothing is currently redesigning its mobile app — where it sees its highest conversion rates and customer loyalty — to offer a tailored shopping feed based on a customer’s browsing and purchase history, eventually replacing a Shopify tool it currently uses.
In that quest to differentiate, there are cautionary tales. Glossier, for instance, tried to build its own app where customers could identify and purchase products from users’ photos. That project was scrapped, and the company laid off around 80 staffers, including from its technology department, in 2022. Glossier did not respond to a request for comment.
But Shopify and similar services are dominant in e-commerce because building a website is expensive and difficult to get right. Since most brands today are too focused on profitability to have grand tech ambitions, they are developing features in-house that are less expensive to create, such as their website designs, and partnering with software platforms like Shopify to manage the more complicated parts of e-commerce like checkout and logistics.
“Thousands of high-volume brands have moved to Shopify for our flexibility, speed, and value,” Josh Rice, Shopify’s vice president of Enterprise, said in a statement. “Brands … are building on Shopify to help them grow and scale.”
What brands need to do is figure out what features are worth prioritising to build on their own, which are better outsourced, and how their budgets can accommodate each.
“Where start-ups really struggle is tackling too much or trying to do too many things too soon,” said Anshuman Jaiswal, vice president of growth strategy and operations at software company Nextuple, which does online and offline order management for retailers. “Do it really small and make it really successful before you branch out on a variety of things.”
Taking Control
When brands reach $100 million in sales, the uptick in order volumes and customers’ expectation for a personalised experience force them to outgrow Shopify’s standard user interface tools, such as those that power the main shopping feed or product display pages. The natural progression is to then develop features to manage the increase in activity and stand out from competitors.
But brands also have to consider what elements of their e-commerce are worth the hassle of developing internally. Even companies that already operate most of their own e-commerce still resort to outsourcing.
A good rule is to develop easier-to-manage tools like order fulfillment in-house and partner with firms that offer software that may be time consuming and expensive to perfect, Jaiswal said. Luckily, many software providers, including Shopify, allow brands to pick and choose which features they want to use and tailor it to their specific needs.
Eyewear maker Kits, for instance, pivoted after two years of trying to create its own virtual-try on feature, outsourcing the service to software firm Fitting Box, which provides virtual try-on technology that could more accurately render frames onto user’s faces. Kits’ in-house developers, however, remain in charge of how the feature appears on the site and which pages customers can access it on, said Tai Silvey, the brand’s chief development officer.
“Focus on what really moves the needle based on your business model and really try to excel at what is core to you and outsource the stuff that doesn’t matter to you,” Jaiswal said. “Maybe what you outsource today, you can bring it in-house later.”
Building an Ecosystem
Taking ownership of e-commerce operations can lead to cost savings and increased profits — if a brand is able to build the right team to run things efficiently.
Fashion start-ups creating a tech team for the first time should start by hiring for a specific project since engineers often specialise in certain areas of software development. Outcast is hiring its first in-house developer to redesign its mobile app, because a full-time developer can dedicate more hours to the project and more deeply understand its particular goals than an external e-commerce agency, Lees said.
“There’s a wide web that brands can cast in terms of hiring ‘tech talent,’ but that tech talent is specialised,” said Juan Pellerano-Rendón, chief marketing officer at e-commerce logistics start-up Swap. “They really need to be specific and targeted in terms of where they want to invest their resources and why.”
Ideally that first hire can attract and train talent over time, though tech teams at fashion brands don’t need to be large to be effective.
Apparel start-up Pact — which is on pace to end 2024 with sales up 30 percent to $115 million and at least $9 million in earnings before interests, taxes, depreciation and amortisation — has a four-person tech team, which handles everything from designing product pages to facilitating drop shipping through retail partners like Macy’s and Amazon. If the brand used an external platform for those features it would need to hire additional staffers to manage the systems that connect its site to other retailers, said TJ Horlacher, Pact’s vice president of technology.
“The way that brands rationalise it is, in theory, a one time expense to bring it in-house and then over time you amortise those costs,” Pellerano-Rendón said. “They see it as like ‘we’re going to have this major capital expense this year and then over time it’ll require less and less because we have done the overhaul.’”
