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Agility: The case for cloud platforms

May 19th, 2015

Jack Welch, famously CEO of General Electric during the period when the company was fighting for its survival once observed that ‘If the rate of change on the outside exceeds the rate of change on the inside, the end is near,’ – and never has that sentiment been more apt than now, for retailers in any sector.

The current rate of change at the customer interface is unprecedented and accelerating – driving e-commerce and marketing teams to adopt new technologies like cloud computing as well as new agile approaches to developing and operating the complex software systems that support a customer experience optimised for visual, mobile, social consumers, in any language and locale.

In L2’s recent report ‘E-commerce Agility’, produced in conjunction with Demandware and available to download here, the L2 team define ecommerce platform “agility” as a function of how proactively brands and retailers are able to manage their e-commerce businesses.

The L2 team used their proprietary L2 Brand IQ index to measure the relative level of digital innovation and nimbleness exhibited by 82 leading brands in all retail sectors, across three key dimensions:

  1. Content creation;
  2. Integration of new technologies;
  3. Market entry;

and then use the data to infer attributes powered by the underlying ecommerce platform, with a focus on ‘on-premise’, ‘in-house’ or ‘cloud’ categories.

According to the L2 research, brands using cloud platforms are more likely to incorporate blogs, product videos, and shoppable functionality into their content and commerce mix, more effectively unifying Content and Commerce than ever before.

Their conclusions reveal a clear trend in favour of cloud-based solutions to deliver high agility, particularly where rapid market entry is a key component of the growth story.

For example, the following diagram illustrates how Kate Spade, through the use of cloud ecommerce, increased revenue and margin through rapid international expansion:

The report’s commentary says ‘After launching its first e-commerce site in 2004, the brand enabled shipping to 13 countries by 2012. In 2013, Kate Spade supported the launch of a new line (Saturday) by deploying sites in Japan, China, Brazil and the U.S. and also began a brick-and-mortar Joint Venture in China. By 2013, the brand operated 20 stores in Mainland China, 14 in Southeast Asia, and six in the Middle East. In 2014, Kate Spade opened outlets in Hong Kong, Macau and Taiwan.’

The rapid expansion drove strong sales growth of 47 percent in 2013 and 41 percent in 2014 and even significant leap in operating margins (from 0 percent in 2011 to 7 percent in 2014).’

And crucially, across the entire data-set, retailers using cloud platforms are experiencing higher sales and margin growth than those using on-premise and in-house platforms:

So are cloud-based platforms for ecommerce the only game in town? Well the answer to that question is, as usual, it depends…. In the next part of this blog we’ll examine the case for in-house and on-premises based solutions!

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