4 Challenges Digitally Native Vertical Brands Must Overcome for Success
Digitally native vertical brands play a massive role in the internet-driven global marketplace. With over 2 billion people shopping online already, the eCommerce market will surpass $4.11 trillion in 2023. That’s bigger than the GDP of every nation on the planet except for the US and China, respectively.
Online, the boundary between individuals and products has shrunk dramatically. This market environment offers the potential for huge profits for companies that connect best with their consumers and tap into the right growth models.
Thanks to eCommerce platforms like Shopify and Magento, it’s easier than ever to enter the thriving eCommerce marketplace. However, any digitally native brand that experiences exceptional growth—we’re talking $25 million and upwards in annual revenue—will face a series of challenges to overcome before further scaling to satisfy growth targets and investor expectations. These challenges aren’t about product or supply chains or economics, but rather the very platforms D2C brands have relied upon for eCommerce success in the first place.
- Thanks to their ease of use, monolith eCommerce platforms have helped many digitally native brands get off the ground fast. However, monolith platforms, like Magento and Shopify, quickly limit the growth potential of DNBs once your revenue reaches 25$ million annually and beyond. Feature scarcity, crawling speeds, data inefficiency, and a lack of interoperability, in particular, are high-impact pain points that are now driving the next phase of eCommerce development. So, when your brand hits $25 million in sales: do you go monolith, modular, or microservices?
- Likewise, as DNBs expand into domestic brick-and-mortar retail and leverage international online streams to keep growing and satisfy investor needs, monolithic eCommerce continues to inhibit growth. Monoliths don’t just hinder a DNB’s efforts to expand channels but also limit the potential a DNB has in other channels, retail and international commerce.
- Modular solutions, like headless, could be the best option for long-term growth and success as a mid-market DNB.
Challenge #1: How Monolith Platforms Stunt the Growth Potential of Mid-Market D2C Brands
Today, near the end of 2020, monolith eCommerce platforms severely undermine the growth potential of a mid-market D2C brand. Let’s explore the reasons why.
The first problem with the state of monolithic eCommerce today is feature development. It’s no secret that the development of new features has significantly slowed on major eCommerce monoliths. New features and core elements alike are not available. Additionally, the quality of the features has diminished, as has the pace of the release cycle. So if you want new, custom features, what can you do?
The most obvious solution is to follow the innovation train and buy off-the-shelf solutions or just build it yourself. But when you go down this route, you have to take the tech and integrate it, a process that often adds inefficiencies and stifles site speed. Very quickly, you can find yourself in a high-stakes conundrum. And this is only becoming a more common dilemma across merchants at similar revenue levels.
There are solutions to many problems on platforms like Shopify and Magento, but these solutions are few and far between. Because when you start cobbling together your infrastructure from disparate sources and plugging them into a system that does not prioritize interoperability, nothing will connect. There’s just a lack of control over the entire integration process. Really, it’s like you’re hammering parts together and hoping the car will run. But if one part of the system goes down, even something seemingly small like an interior light, that could bring down a host of others—and jeopardize your whole business.
And even if an integration has been built for your feature, it often functions like a hack. For example, all the data may not fit together, or you incur additional costs by patching or working around elements to get you back to square one.
So often, I’ve seen teams scratching their heads, asking: “There must be a better way to do this, right?” But when we go to diagram their infrastructure, you can see that the convoluted backend architecture barely holds together.
The current monolithic platforms that are out there aren’t identifying these limitations as a problem. They seem to think their current solutions will suffice. In fact, it’s really a tiny niche of their clients who are dealing with these challenges. Because when you look at the bigger picture, 80% of eCommerce businesses earn far less than $25 million in annual sales. Therefore, smaller companies are the core group of customers on monolith platforms. Small business is where monoliths make most of their money.
Even though reaching mid-market as a D2C brand is a huge feat, mid-market brands simply aren’t the priority of the platforms they rely on. And making mid-market brands the priority would come as a detriment to all the small businesses that use monolithic eCommerce platforms, and who are happy with simplicity and uniformity.
Unfortunately, feature building isn’t the only area of your business where monolith platforms stall growth.
Challenge #2: Why Magento & Shopify Get Slower Over Time
In eCommerce, the most constant UX pitfall is a lack of speed. Your website is your customer experience. And without an optimized architecture, the user experience is drastically slower.
If your page takes longer than 2 seconds to load, you lose sales by the millisecond. And guess what? Some tests have found that the average Shopify page load clocks in over 7 seconds! This is because monolith architecture runs every single shop—from $50-a-month side hustles to $25-million-a-year brands, all through the same backend architecture.
While a monolith’s backend architecture tends to be extensible and robust, it is so at the cost of speed. Speed is a huge problem for merchants across the size spectrum, but for the fastest-growing online retailers, it can cost millions of dollars a year in lost revenue. In fact, Amazon recently calculated that a one-second slowdown in page load would cost them $1.6 billion annually. So how much revenue is speed costing you?
If your site runs on Shopify or Magento, you’re likely well aware that their front-end themes are getting increasingly sluggish. That’s because monolith platforms keep building on their base model, which gets slower as the platform gets bigger. So over time, a monolith platform keeps adding more tech debt and time to its system, so as a result, hosted sites get progressively slower. What you thought was a snazzy speedboat when you launched is more like the Titanic by the time you achieve major growth. And, of course, there’s an iceberg or two waiting for you when you reach that milestone.
Site speed and load times are why many of the online big boys have switched to a headless architecture. Headless solutions untangle the front-end user experience from the backend tech, which means you get a huge speed boost. Truth be told, headless is currently the only way for online retailers to ensure a load time of under 2 seconds.
And this migration to headless is often the first significant departure fast-growing retailers take from their monolith platform. Headless is a modular solution that’s a sign of big things to come.
Challenge #3: Monoliths Can’t Get Your Marketing Data to the Right Place Fast Enough
Merchants can utilize a wealth of amazing marketing technology to target and connect with consumers. Brands selling more than $25 million annually need the most advanced platforms available to automate customer experience personalization, remarketing, retention, and loyalty mechanisms on a large scale. Those platforms need plentiful and available consumer data to understand customers and create the most effective marketing strategy in real-time.
However, when merchants attach marketing technology to a monolithic eCommerce platform like Shopify or Magento, the data integration does not flow with the speed or functionality required to succeed. The cutting-edge MarTech platform is left sputtering, and sales are left on the table. Whatever monolithic eCommerce platform you’re using simply can’t get your data to all the right places fast enough.
Data automations are just not the monolith’s field of specialization. And by all measures, these platforms are significantly behind the pace of development. Instead, retailers can look for off-the-shelf solutions to get the data tagging, but in practice, they struggle to integrate. Next-gen automated personalization is the frontier of digital marketing—a no-brainer for growing DNVBs to harness—but using a monolithic eCommerce platform means many are missing out.
Challenge #4: Monoliths Become Roadblocks to Channel Expansion in Domestic Retail and International eCommerce
According to Forbes, there are now close to 2000 digitally native brick-and-mortar retail locations. This is a charge led by brands with products as divergent as Tesla and Warby Parker. But expanding to domestic retail is a decision with complicated problems: How do you collect and handle customer data in the physical realm? How do you merge a customer’s online and offline profile?
In reality, there’s very little infrastructure to manage this kind of growth from digital to physical. Growing brands have the option of building the infrastructure themselves, or piecemealing together various apps and platforms into their existing eCommerce monolith — but a ton of weight is added to the process.
Even though we live in a digital world, going international as an online merchant is complicated. You have to tackle things like currency conversion, duty fees, foreign taxes, shipping the product overseas, re-pricing, launching third-party logistics, local customer service, translations—and that’s a lot to say even in one language.
A fast-growing DNVB only needs to maintain one single online shop with a few connected apps, and it’s up and running. Expanding beyond the monolith-approved box requires so many different systems that need to communicate and integrate… all the while, data has to transmit back and forth seamlessly to run operations. If one piece doesn’t integrate perfectly, it creates something of an operational nightmare.
Success and expansion have proven fissure points at which many wildly successful digitally native companies run into major problems in their eCommerce growth strategy—and the problem is almost always with the platform, not the product.
The Modular Solution: Is it the Best Option Between Monolith and Microservices?
To find answers to all of the challenges above, growing businesses have two main options: Hire in-house developers to build costly bespoke architecture or engage with an agency to find a strategy.
Internal devs are great at building functional tech, but the key to a post-monolith success strategy is all about perspective. At Anatta, we’ve interacted with countless standout DNVBs to iterate the most functional and sustainable architecture available. Through all of our work, we’ve been able to get a panoramic view of the problem. And from that vantage point, it’s clear which solutions brands are trending toward and which are actually worth implementing.
Current practices find monolithic solutions on one end of the spectrum and the microservices approach on the other. Microservices break down the monolith into a hundred separate mechanisms and build a solution for each component. That can work great. You can do amazing things. But companies find out very quickly that while they had one or two devs working on their monolith upkeep before, they might need upwards of fifty devs to put together and maintain their architecture with a full-on microservices approach.
You can imagine the cash flow that requires! A 50-person dev team can cost $5-10 million dollars a year. The platform will work great, but suddenly you’re not selling amazing shoes anymore. You’re a tech company with no actual tech product to sell.
Let Andy Dunn’s words serve as a helpful reminder…
The modular approach, which we’re seeing emerge as the best of both worlds—with none of the worst of either—sits between the two ends of the monolith and microservice spectrum.
Modular moves you from the monolith software towards a microservice approach, with a focus on the development you need, while also maintaining interoperability. You can even stay with a monolith, and instead, just use its tech for certain core services. The intention behind this approach is to break down elements of the architecture into large chunks: taxes, discounts, product information, all with their own modules. So instead of 100 microservices, you’re working on 20 modules.
With this approach, you can choose Avalara for tax processing, Klaviyo for email marketing, whichever CRM works best for you, and connect them at junctures that make sense.
A modular approach really is the logical next step for companies who have moved beyond the monolith approach, but don’t require the extreme detail and complexity of a microservice architecture. It’s sort of like legos. You can swap out individual blocks and change the colors, but the integrity of the structure will remain.
The move toward headless architecture is the lowest-hanging fruit towards a modular perspective. It’s the first step in the process, but you start seeing results immediately: internationalization, translations, faster speed.
At Anatta, we’re breaking away the pieces of the puzzle. Rothy’s, Athletic Greens, Four Sigmatic, and Molekule, for example, are all moving components away from the core monolith towards more streamlined tools and utilities. And now, with a modular architecture, a product inventory manager can manage inventory in one place rather than ten different Shopify sites.
Similarly, inventory management and order management across platforms are big opportunities for mid-market companies to streamline in a modular fashion. We see review platforms as a module, fulfillment and data collection, email service providers, etc. These are the first waves that we encounter most often becoming integrated in a way that creates a true module, interoperating with speed and efficiency.
But there’s more and more examples of this process. Companies like Glossier and Casper have done a great job of taking on this approach, and they bring in over $100 million in revenue annually.
In democratizing access to an online marketplace, eCommerce monoliths like Shopify have changed the world for the better, and helped create immense value for people worldwide. But today’s most outstanding digital brands require outstanding infrastructure — a need that is not urgently aligned with the hundreds of thousands of online stores that drive the mission of monolith platforms.
Modular solutions are the logical development to the resulting infrastructural disconnect, and acts as a solution that maximizes monolith functionality with the dynamic needs of individual brands. The result is a more mature and functional eCommerce infrastructure and, thus, ecosystem.
Thinking of Taking Your Brand Headless? Anatta can help.
At Anatta, we’ve helped brands like Four Sigmatic, Rothy’s, Athletic Greens, Molekule, and more — all move to an extremely fast, sustainable eCommerce architecture. You can learn more about our headless services here.
Or, if you have questions about whether or not headless is the right move for your brand, get in touch with our team to find answers.