Why Demandware Is Out in Front in the Digital Commerce Sector

Whether you call it e-commerce, e-retailing, digital commerce, or something else entirely, there is a veritable revolution going on in the internet commerce space. While consumers continue to seek and expect near-perfection in the digital commerce experience, vendors have been struggling to deliver what should be a seamless experience across channels. Demandware has been particularly assertive about tackling this, developing from a SaaS newcomer in 2004 into a leading omni-channel cloud-based digital commerce platform that is at the center of three major sectors: retail, digital commerce, and cloud computing. Demandware helps retailers design, implement, and manage customized digital commerce sites, with significant focus on the omni-channel experience, merchant empowerment, and the endless aisle.

What Makes Demandware Different?
Demandware (currently with nearly 300 employees) has grown from its founding nearly ten years ago and its IPO in March 2012 into a challenging competitor in the digital commerce space—the company recently reported that its customer base has grown to 156 live customers (up 42% year-over-year), and 630 live sites (up 57% year-over-year), while its revenues have grown from about $36M in 2010 to nearly $80M in 2012.

Demandware has been out in front with its cloud-based platform, while others still debate whether the cloud is ready for such critical direct-to-consumer processes. Demandware has responded with a resounding “yes”, and while there have been hiccups, such as the second thoughts had by $1.4 billion sports apparel chain Finish Line, Demandware's notable growth and customers like Tory Burch, adidas, Bestseller, Carter’s, Brooks Brothers, Pier1 Imports, Panasonic, and others attest to the durability of the Demandware architecture.

The focus of Demandware is on providing a multi-tenant, unified solution for managing all direct-to-consumer processes from a single Web platform. Delivering to the cloud via the cloud, the Demandware Commerce solution (which was released in 2005) has three components:

  • Commerce Center: controls the digital commerce experience across channels

  • Control Center: the operational and administrative control center

  • Development Center: the module that provides for customizability of Demandware’s environment


Demandware’s LINK program provides a rich set of plug-n-play partner solutions around email marketing, ratings and reviews, social, tax, advertising, and payment.

We cannot of course leave out Demandware's pricing model, which is subscription-based, driven by the revenue coming through the retailer's site. Demandware thus places considerable focus on GMV—gross merchandise value. Critics will say that this model means that retailers are giving up a percentage of their gross revenue, on an ongoing basis, to Demandware. From Demandware's perspective, they are responding to a long-standing desire in the market for technology vendors to have more, and more of, an on-going, stake in the success of their customers.

Although our conversation with Demandware covered a lot of ground, three themes emerged for us: the omni-channel experience, merchant empowerment, and the endless aisle.

The advent of the "omni-channel" experience is obviously quickly involving almost every consumer. A graphic from another vendor, Oracle / ATG, illustrates the challenge well:


As our world becomes more complex, more mobile, and more fast-paced, we as consumers expect the "user experience" to keep pace and become easier at the same time. Few consumers understand why their experience has to suffer as they try to make better decisions more quickly and across more channels of interaction.

A market leader like Demandware cannot help but be acutely aware of these challenges and aim to address them, and so it is natural, but reassuring, to see these as one of the core missions of Demandware.

At Magento’s Imagine 2012 conference, Katherine Brodie (C.Wonder), James Horne (Balance Internet), and Bernardine Wu (FitForCommerce) presented a slightly different way of looking at the same problem:


Regardless of which view or graphic better illustrates the issue for you, the challenge remains to make it as easy and seamless as possible for your customer to consume through their channel of choice, and even to begin and end any given transaction through different channels at different times.

Demandware tackles this challenge with its cloud-based approach, which enables the company to deliver a continuing stream of innovation to all of its clients through a rolling series of releases about six times per year.

Does this matter to retailers? Steven Keith Platt, director and research fellow for Platt Retail Institute (PRI), reports in recent research findings that, well, it does matter, albeit differently to different retailers of different sizes. While 43% of companies overall that responded to the Platt research survey report that they have underway or are planning an omni-channel marketing (OCM) initiative within the next three years, 83% of retailers within the over $500 million revenue band are already implementing or planning to implement an omni-channel strategy (Platt’s full 58-page report can be downloaded here.)

Merchant Empowerment
Demandware correctly assesses that one of the keys to the digital commerce space is to put more control and capabilities in the hands of the merchant. But what does this really mean?

Merchants are asking for—and getting—more capabilities for the creation, syndication, and publication of product information; more customizability in these areas across channels, customers, and geographies; greater flexibility in creating, modifying, configuring, and extending the system’s logic across multiple channels and devices; creating and customizing workflow and logic to differentiate the end-user experience; better, richer promotion capabilities; providing templates to assist the merchant; providing more views, from the shopper’s actual perspective; better, even mass, editing capability to make it easier to make changes to product selection, etc.; and more options for previews of a new page or Web site before it is launched.

Demandware is acutely focused on perfecting what is touching the customer, and is using internal development, as well as leveraging the capabilities of their LINK partners to deliver more empowerment to the merchant. And while this is part of the bargain for every digital commerce vendor, Demandware seems to be one of the vendors out in front in terms of merchant empowerment, a contrast to many vendors that initially often take a much more heavy-handed and control-oriented approach to working with merchants.

Endless Aisle
Rob Garf, Vice President of Product and Solutions Marketing, also talked to us a bit about Demandware’s endless aisle initiative which will equip in-store staff with a tablet-based solution that will apparently enable the store to augment in-store inventory with online inventory where necessary for better customer service. Demandware reports steady progress on this front, with customers likely to be going live over the next several months.

The concept of the “endless aisle” has been around for a while. We talked to clients about this concept as far back as 2007, with a focus, then, on the use of store kiosks. While the progress of technology has now advanced the discussion to include current technologies like tablets and other handhelds, kiosks are still part of the conversation.

Staples, for example, in its most recent quarterly call, talked about its plan, as part of its omni-channel strategy, to expand the use of in-store kiosks in an endless aisle customer experience initiative. One of Staples' first omni-channel stores has just recently opened in Norwood, Massachusetts.

The Landscape
This is not to say that Demandware is all alone in this space. Other players in the space are numerous and obviously not sitting still: IBM Websphere Commerce, Oracle/ATG, Elastic Path Software, eBay/Magento and hybris, Starmount, Digital River, and eBay enterprise (formerly GSI Commerce, e-commerce business process outsourcers), MarketLive, and Venda (hosted on-demand subscription services providers).

NetSuite announced the acquisition of OrderMotion, with at least some apparent motivation being to use the technology in tweaking Demandware. This seems to be a turf war that we should have been anticipating—cloud-based ERP aspiring to be a digital commerce system vs. a digital commerce system which may or may not care to be an ERP system. In Demandware’s latest quarterly conference call, CEO Thomas Ebling would not even dignify an analyst's question about NetSuite as a competitor with a direct response.

All of this makes for interesting goings-on in the digital commerce space. TEC is keeping a close eye on it, and we would enjoy talking with you about what you are trying to do in digital commerce, as an end-user or vendor. All I know is, SkyMall is now a Demandware client, which will make getting that ShirtWhiz Jersey Hanger an easier and more pleasurable experience than ever.
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