Headless Ecommerce 2.0: Handling Platform, Mid-Market Issues

In two years, there’s been a flurry of investment and innovation in  ecommerce driven by what McKinsey termed “the quickening”—a 10-year adoption to online retail in a three-month span. Although many innovations are forecast to change the ecommerce landscape, one leads the early-stage VC cash grab: Headless ecommerce. This is seen in the funding announcements that occurred last year.

Headless ecommerce is a separation of a site’s front end (what customers see) and the back end (where inventory and APIs live). The investment thesis for headless ecommerce:

  • Ecommerce platform costs decreased, opening the field to mid-market brands—increasing the market’s size.
  • DTC continues to grow as customers go “online-first”—an opportunity for enterprise-level change.
  • Ecommerce customers are willing to invest in performance, as speed improvements result in outsized ROI for online brands.
  • Headless ecommerce solutions deliver better performance and faster time to market than their monolithic brethren. This drives adoption away from integrated platforms, toward high-performance alternative front ends.

The supporting data for points 1-3 is solid. The online retailer market exploded, especially in the mid-market, where they’re springing up faster than ‘90s dotcoms. The DTC story continues for enterprise brands, as they build stronger online relationships with customers post-pandemic. Site speed remains a key component and advantage in the race for customer dollars.

Despite these tailwinds, headless ecommerce production deployments are slim. Looking at publicly available systems that analyze the production infrastructure used across the web, it’s clear that even well-funded players have few internet-facing customers. Why?

Headless ecommerce is driven by developers and appeals to developers. Despite years of effort and billions of dollars, the customers (CMOs, ecommerce executives) aren’t ready to abandon their existing functional solutions. For ecommerce, two factors hold back adoption — one pertaining to the platform and one to the mid-market.

The Platform Problem

Online stores require many systems to deliver their goods. Inventory management, tax reporting and more, make an online store functional—not just a website. The platforms step into this void, grouped into enterprise solutions (Oracle, SAP), and the newer ecommerce-as-a-service platforms (Shopify, BigCommerce). In addition to the platform’s core offerings, an adjacent app ecosystem with many vendors provides solutions to accommodate customers where the platform falls short.

Headless solutions don’t attempt to provide the core services these platforms do. In fact, they depend on the platform’s API to power the front-end experience.

The platform problem becomes three-fold:

  • Headless companies must develop a robust abstraction for multiple platforms, and constantly update these – and initial integration AND ongoing development effort.
  • The platforms offer a front-end solution for merchants. This requires headless solutions to demonstrate significant value exceeding the zero marginal cost solution already in place, because of the additional complexity and cost of going headless.
  • The app ecosystem of the platform does not integrate with the new headless solution. This requires increased development effort on the part of the merchant or headless vendor to build out a myriad of features that are better performed by the thousands of other specialist companies.

When evaluating the investment in going headless, a merchant must assess 1) the cost and complexity of doing so and, 2) the platform itself won’t provide a future integrated alternative. Headless solutions are, fundamentally, competing against a platform they won’t replace and which offers an existing (albeit less performant) solution at zero marginal cost.

The Mid-Market Problem

Ecommerce is exploding, with 1.6 million companies on Shopify alone. The growing middle is this market’s major appeal, as specialized DTC brands compete with generic business-to-consumer models. The adoption of as-a-service solutions in the mid-market helps new technology vendors launch by speaking the customer’s language. Smaller companies — i.e., mid-market customers — are used to adding subscription-based solutions because that’s how their tech stack works. This distribution of ecommerce platforms demonstrates that the as-a-service offerings appeal to merchants at every level, but especially to the mid-market.

The difficulty: Headless isn’t a turnkey solution. It’s not software, it’s a software framework. This helps developers start from the third floor, but doesn’t offer a seamless, self-onboarding solution for customers. This complexity makes the mid-market an expensive area to approach, as merchants lack the developer resources to start from even robust frameworks. Drag-and-drop solutions have historically succeeded in this segment for this reason.

To overcome this challenge, customers must engage with outside developers to make the headless transition, dramatically increasing TCO and time to market. The average total cost of implementing a headless solution was $2.6 million—an unrealistic investment for most mid-market brands.

The Market Response and Alternatives

The good news: Going headless’ core values resonate with customers. In that WP Engine survey, respondents said the largest driver of evaluating headless technologies was delivering “better overall performance/faster load times.” The ecommerce boom continues, showcasing the importance of driving better performance.

Rising Tides Lift All Speed Boats

As headless companies poured money into the core infrastructure required to deliver faster user experiences, infrastructure innovations became available for everyone. Example: The rise of advanced edge computing functionality provided by content distribution networks. These new “JavaScript at the edge” systems allow firms to develop more advanced “edge-side” functionality for online stores, such as performance optimization, dynamic rendering and “edge-side” A/B testing.

Better, Not Different: Next-Generation Headless 

This new set of core infrastructure advancements yielded alternative “next-gen headless” solutions, which solves the platform problem by allowing customers to keep their existing platform experience and website workflow, and enhances instead of replacing the storefront with new technologies originally designed to support headless 1.0.

Next-gen headless companies are quickly developing solutions to enhance existing websites with new features and performance levels. Ecommerce brands can now deploy seamless edge acceleration, serving content powering the storefront from distributed servers worldwide with the click of a button. These next-generation, CDN-style experiences allow technology vendors to meet the mid-market customer at affordable levels of investment, and rapid deployment schedules measured in minutes. Thus, solving the mid-market problem.

Customers who depend on and are integrated with their existing ecommerce platforms but need faster site performance and the increased control with edge-based delivery are going next-gen headless.

Jake Loveless is CEO of Edgemesh