The first thing you'll notice about Gartner's Magic Quadrant for Digital Commerce 2017 is that it's crowded. Very crowded.
Although it lists 21 vendors in the MQ, Gartner suggests we ain't seen nothing yet.
The Stamford, Ct.-based analyst firm predicts the space will grow by 15 percent per year until 2020 (if not beyond), with spending expected to hit $9.4 billion the same year and deployments split almost equally between on-premises (53 percent) and cloud (47 percent).
Gartner currently tracks more than 90 vendors in this space, with only those meeting its selection criteria making it into the quadrant itself.
However, the report notes:
“There are several noteworthy, more narrowly focused vendors that met our inclusion criteria, but fell short of those included due to either serving a narrower niche industry/target market or having fewer customers due to being late to market.”
And the demand is there.
Eighty percent of respondents to the report's end user survey said they intended to increase their digital commerce IT budget for 2017. North America accounts for 47 percent share of the digital commerce platform business, with Europe trailing at 28 percent and Asia 15 percent. Gartner predicts growth across all regions with the highest growth — of nearly 19 percent annually — expected in APAC countries for the foreseeable future.
Magic Quadrant for Digital Commerce 2017
What this also means is intense competition in the market, with six vendors making it into the Leaders’ Quadrant, one in the Challengers’ Quadrant, 10 in the Niche Player’s Quadrant and four in the Visionaries.
- Leaders: Digital River, IBM, Magento, SAP Hybris, Oracle, Salesforce
- Challengers: Episerver
- Visionaries: Apttus, Cloud Craze, Elastic Path, Intershop
- Niche Players: Aptos, BigCommerce, Inisite, Kibo, Koomo, NetSuite, Sitecore, Shopify, Unilog, VTEX.
The report notes (subscription required) the transition digital commerce platforms have gone through, starting in the 1990s as standalone ecommerce websites, but now coming in multiple application deployment models that span the enterprise. Gartner defines digital commerce as:
“Buying and selling interactions among businesses, people and things for products/services via digitalization technologies. These interactions result in a valued transaction to the customer, based on a combination of factors, including good customer experience, inexpensive price, timeliness, ease of use, clear policies and others.”
Digital sales revenue, digital channels and customer experience are high on CEO's agenda according to the 2016 Gartner CEO Survey. Expectations are also running high, with three specific demands for digital commerce applications:
- To develop superior customer engagement and generate more revenue value
- To do more business and create more business through digital channels.
- To generate a greater proportion of business through digital channels
6 Takeaways on the Digital Commerce Market
According to Penny Gillespie, Gartner Research VP for Digital Commerce and co-author of the research, there are six major takeaways from the report.
1. Market Growth
While more players continue to emerge in what seems like an already saturated market, Gillespie said they are approaching the market from multiple perspectives. She cited four different approaches:
- Vendors that approach the digital commerce space with a modern platform, composed of microservices where the vendor is selling both the platform and microservices to clients using other vendors.
- Vendors that approach digital commerce by providing an Amazon-like infrastructure. This enables brands to deliver commerce experiences with Amazon-level service — especially from a logistics perspective — such as promising delivery of 98 percent of packages within 2 days via standard ground shipping.
- Vendors that approach digital commerce from a sales force automation perspective, creating a tool that supports self-help for clients’ customers.
- Mega vendors that are moving downstream through hosted managed services and creating hybrid solutions that combine multi-tenant SaaS with software. At the same time vendors catering to small-to-medium (SMB) businesses via multi-tenant SaaS are trying to move upstream with more sophisticated product offerings.
2. Headless Digital Commerce
The emergence of headless commerce platforms continues to proliferate. API-centric commerce platforms have become a major focus for many vendors.
“API-centric commerce platforms enable a richer customer experience through the development of a highly unique user interface, often based on web content management (WCM), that integrates back to the commerce platform through application programming interfaces (APIs). APIs and headless commerce were a common theme among vendors,” Gillespie said.
3. Industry Focus
Niche vendors are moving their focus from a broad set of capabilities to more specific use cases.
“We’re seeing a shift in vendor focus from exclusively traditional retail and branded manufacturing (long time majority users of digital commerce applications) to some being more focused on well-defined industry needs using “fast start” kits and “industry accelerators’,” Gillespie said.
“Among all the vendors in the MQ, most SIC [Standard Industrial Classification] codes have some representation. We’re seeing modules for grocery and financial services.”
4. Supporting Business Objectives
While feature, function and price evaluations still play a big part in client's decisions, Gillespie said Garter is starting to see more emphasis on how a specific commerce platform can support the organization’s business objectives and customer experience.
“Platform criteria today focus instead on agility, customer experience, embedded commerce, ease of use and total cost of ownership,” she said.
5. Transactional to Experience
Both from the vendor perspective and the client perspective there has been a shift from digital commerce being more of a transactional platform to more of an experience platform. Gartner believes the internet-enabled price visibility will make digital customer experience the key differentiator for organizations starting this year.
6. Integration Problems
Digital commerce is only becoming more complicated. The increasing number of integrations required to deliver the desired customer experience have converged with confusing IT delivery models and multiple pricing options to create headaches for businesses.