The Expansion of Third Party APIs for Retailers: The Time is Now

Application Programming Interfaces (APIs) are sparking a technological and cultural shift amongst retailers of all shapes and sizes. They are the critical connectivity mechanism at the heart of today’s on-demand economy, powering today’s best-known SaaS applications like Amazon – AWS, Salesforce.com, Facebook and Stripe.

APIs have transformed industries for decades. Yet, the power of APIs has yet to be fully harnessed by logistics and transportation departments within the retail sector. With supply chain efficiencies at an all-time low and retailers struggling to meet the ever-evolving demands of today’s consumer brought on by on-demand services like Amazon Prime, modernizing legacy connectivity systems is no longer a ‘nice to have.’ It’s a must.

The Financial Impact of APIs

The financial impact of APIs is apparent:

  • Salesforce generates 50% of its revenue through APIs, eBay around 60% and Expedia almost 90%, according to an article in Harvard Business Review;
  • One-third of organizations with more than 100,000 employees expect to generate $10 million or more this year through APIs and activities directly related to API implementation, according to an article in Wall Street Journal;
  • The financial impact of APIs is influenced by the intensity of use, with the positive effect increasing with the amount of data passing through the APIs.

Fifty-eight percent of API strategies are driven by the need to streamline and integrate new and existing software systems. That’s because APIs are a set of routines and protocols that standardize how to build compatible software applications. Essentially, they normalize data across software systems, databases and applications, making for unparalleled efficiency and agility. By defining the type and format of communications that an application can make of an associated program, APIs are undoubtedly the fastest, most seamless way to retrieve real-time data.

A New Cultural Shift: Third Party APIs

Technology experts have reported a growing cultural shift within the API economy – the wide-scale acceptance and dominance of third-party API systems.

There are a number of encouraging examples that showcase how retailers can leverage external partners to access API connectivity within critical business functions. For example, retailers can turn to Checkr (payment), Riskified (fraud), Factual (location-based data), Twilio (communication), and project44 (logistics).

These third party API ecosystems deliver more immediate, cost-effective and industry-leading connectivity when compared to building networks in-house. Subscribing to an already existing SaaS network allows retailers to get to market quicker than building a custom platform and react to ever-changing IT requirements at a lower cost.

Faster speed to market at a lower cost is a huge advantage of third party API networks. In addition to that, retailers that allow third parties to focus on API connectivity can spend more time evolving their technical functionality and capabilities, ultimately advancing their core brand promise faster.

2017 API Predictions for Retailers

Dynamic start-ups providing API functionality to retailers will continue to attract attention from the investment community in the coming year. In fact, TechCrunch contributor, Matt Murphy, recently said in his article, “The Rise of APIs”: While the ecosystem for API startups is attractive today, we believe it will only become stronger. Over the last five years there’s been a broadening of interest in enterprise-oriented technologies like SaaS, big data, microservices and AI. APIs are the nexus of all four of those areas.”

The demand for more efficient global commerce systems will only increase as the on-demand, omnichannel economy continues to boom. Now is the time for retailers to implement the right API connectivity systems to meet evolving consumer demands. Retailers should look outside their four walls in 2017 and beyond for inspiration on how to adjust their API and connectivity focus. The benefits are without question.

Jett McCandless is CEO of project44

 

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