insights! episode #61: commercetools in interview: The innovative power behind modern e-commerce

Joubin Rahimi:

Great to have you back for a new episode of insights. My name is Joubin Rahimi and today I get to welcome André Menegazzi from commercetools. Hi André.

André Menegazzi:

Hello Joubin, many thanks for the invitation.

Joubin Rahimi:

My pleasure. Thanks for taking the time. We have known each other for quite a while now. I actually looked it up. It has been almost ten years that we have kept running into each other in the market. Always in your function or your role at commercetools. Maybe you could say a couple of sentences about yourself and about commercetools.

André Menegazzi:

Gladly. Yes, it is true that we have been in this industry for a very, very long time. I myself have been at commercetools for almost ten years now. In November it will be ten years. I am based here in Munich, at the commercetools headquarters, and started here back at the end of 2013 with employee number 28. Today – I mean, most people will surely know the commercetools story – we have grown very strongly during that time, become very successful over the past years, and in my current position I am responsible for the strategic accounts at commercetools as Director. In my previous roles I led various teams of very different sizes across EMEA on the sales side at commercetools and was able to accompany the entire growth and success of commercetools. It is still a huge amount of fun. A really cool and awesome company. Amazing founders who are still with us, still in the company, and great investors in the background who make this growth possible in the first place. At the speed we have kept up over the past years. And yes, I am happy to be able to share a few insights here today, a bit of a look inside commercetools and to put some meat on the bones.

Joubin Rahimi:

Great. First of all, you are a German company. I find that really charming. A software vendor from Germany, from Europe. Fantastic, of course. Some of us naturally know what commercetools does or where to place it. But there are certainly listeners who cannot place it yet. Would you give us a quick overview? Where do you operate in this digitalization circus?

André Menegazzi:

Yes, what is commercetools? As things stand today, commercetools is surely regarded as the most modern and most powerful e-commerce platform on the market. And probably, if you look at these modern technologies, the one with the highest level of maturity. That is of course also because we were the first in the market to drive and set up headless, commerce, API-driven commerce and cloud-native in this pure and puristic way. The platform itself comes in a B2C as well as a B2B variant. That gives me the flexibility and the option to run every conceivable use case on such a platform, and all of it highly scalable, of course. And those are really the core topics that bring our customers to us. Our customers are usually larger companies. That does not mean we do not also have startups or smaller companies running on our platform. But we do have a strong enterprise flavor, or large mid-sized companies that often internationalize. As I said, the platform has a cloud-native approach. We are globally available through this cloud approach and therefore usually cover very, very globally operating concepts with our customers.

Joubin Rahimi:

That is a lot. I think we have now caught up and brought along everyone who did not know you yet. Now of course you can say – and we touched on this in our pre-talk – I have Shopware in house or

Shopify in house or Oxid, should I go with commercetools or should I do a re-platforming, coming from XT Commerce, so from something completely different, and I look at Shopify and at you, or at Shopware and at you. We both say that if those two are at the table, it does not really fit. But where do you draw the line? Where do you see your sweet spot?

André Menegazzi:

Well, I think the sweet spot lies in the way we are built. People always like to talk about these MACH criteria. But we will surely come back to that later. We are a platform that is built in a very, very puristic way, as I mentioned earlier, and very, very lean. That allows us to offer our customers the option of introducing e-commerce functionality very elegantly into an existing architecture as well as into an architecture that is yet to be built, and thereby providing a very, very modern composable approach. And that is diametrically opposed to the companies and platforms you just mentioned in the market, such as a Shopware, which are more of a boxed solution, where with this template thinking and the frontend that comes with it I can certainly map – in quotation marks – simpler use cases very, very quickly. We stand more for the somewhat more complex and very, very large architectures that come with us. That, I believe, is the core difference that the market has come to recognize.

Joubin Rahimi:

And does more complex architecture mean because it is international, or what makes it more complex for you? What are typical customer cases that reflect that?

André Menegazzi:

Well, for one thing, we are fully headless. That means we no longer have a frontend at all. For us, the frontend is everything that interacts in any form with the end consumer. So of course we also have – and yes, everyone, or probably many, know the Audi e-tron as a use case. That was also one of the big milestones we had, where at the beginning of this platform we were able to play out its full strength.

Joubin Rahimi:

What was the case? I do not know it at all.

André Menegazzi:

You do not know it. Okay, then let us dive in briefly. Back then I got into a conversation with Audi and they were looking for an e-commerce technology that made it possible to map e-commerce inside the vehicle – and e-commerce not in the sense of buying a T-shirt or an accessory for the car from the entertainment system, but of upgrading the vehicle itself in an e-commerce model. At the time, Audi wanted to hold its own against Tesla in some form and launched this SUV, the Audi e-tron, which was then brought to market. And this vehicle comes out of the factory at a very, very high specification level, throttled back via software. And we are the enabler behind it that makes it possible for the driver to say while driving: I would like a better sound system in the car now because I want to listen to an opera, because I want to have who knows what great musical experiences. I would like to book a high-beam assistant. There is a similar case at BMW, which was also big in the press. I would like a heated seat for a certain period of time, and so on. And the vehicle is able to provide this. The driver then buys it either via an app connected to the vehicle or directly in the entertainment system. It has now gone so far that – let us take the example – a Swiss customer of Audi's, or of another car manufacturer for that matter, wants to enjoy functions on demand, as the technical term goes. In Switzerland that person drives, or is only allowed to drive, 120 on the highway, so they do not need full power. But when the customer crosses the German border at Lake Constance, for example, then of course they can really get the idea, then they want to put the pedal to the metal and book a performance booster. In the background the payment method is charged and ready to go. And that was of course a prime case back then that we mapped, or that we still map, of course. We had, or still have, an Audi e-tron. Back then we had one of the first ones that was also branded with commercetools. That symbolizes and characterizes very, very nicely what modern e-commerce technology is able to make possible: offering better interaction with the end consumer, mapping great edge cases. Yes, and that is what we stand for.

And you also just asked what larger architectures are. Well, as a rule it is the case that with us, with this composable approach that we of course also stand for, the tailored suit for the company, for the use case, comes into being. In plain terms, that means that alongside us many other technologies are of course brought together in this architecture, be it a suitable CMS, be it a CRM system, ERP system and so on and so forth. Recommendation engine, you name it. And based on the available budgets, the use case and the overall approach, the tailored suit really takes shape. And these days the whole thing can be connected so smartly with this API-first and API-only approach that I can even carry out conversions while such a platform is running, without destroying anything. That is exactly the difference from the traditional monolithic approach, where I very, very often suffered from receiving major releases, upgrades, updates and installing them. Then quite a lot fell apart. I had to rework things. We do not know any of that today. And our customers of course enjoy that too, because they no longer have to go through this whole hellish ride.

Joubin Rahimi:

Thanks for the explanation and thanks again for the Audi e-tron example. I was not aware of that at all. You certainly prevailed there against Porsche, who already had a platform like that. I do not know, we were allowed to take part in the tender but we were too small for the implementation – pretty silly that we took part at all. We were always sorted out. We came second, so first loser. That did not go any further at first because we were too small back then. And I would describe the difference like this. Either you have a shop system, so you have a web shop, you need a web shop. The customer says I need a web shop. Or you have a digital platform. Because I think that is quite a difference. There are also large web shops that are actually a digital platform. For one customer, for example, we implemented the web shop but also a call center application and the store application, because it was a retailer, and so it was really always one central commerce API that was called from everywhere. That makes a lot of sense, of course, because then the prices are the same, then the discounts are always calculated the same way, the rebates on discounts. We would call that a digital platform. Others simply have a web shop, so more of a single tier. Do you go along with that categorization or do you describe it differently?

André Menegazzi:

No, I go along with that. With the classic boxed solutions you of course have these islands. You still see that quite often in larger companies too, which have such solutions in use for the different countries, because the local barons there have sovereignty over prices etc. But the effort is of course extremely high. If I add it all up in a final calculation, at some point it no longer pays off economically. And headquarters are now moving toward really steering this from a central point. We of course meet that need with our approach, in that with the platform in a headless approach I can even run different brands, different frontends for the individual countries, to cater to the taste of the respective country or to its particularities, such as which way the script runs, etc. And yes, I believe that these boxed solutions, the monolithic approach, are a thing of the past anyway. And these boxed systems have their justification more for the really smaller cases, when it is meant to be standard e-commerce, just the other web shop.

Joubin Rahimi:

Then, as you already said, it is of course also more effort to change it – that is usually the case when you do it in a highly integrated way, and a tailored suit is always more effort than something off the rack. It has to pay off. But what are the points where you say those were cases where the extra effort I probably have – it always depends case by case – is actually worth it? Well, that is a difficult question, but the ROI is not that easy to calculate quickly.

André Menegazzi:

Exactly, that whole thing could fill an evening. In principle it is clear that if a customer goes into such a composable architecture, they of course have extra effort. They have to evaluate the various systems they want to see combined in the target architecture. They also have to conclude a contract in each case. They have to go into negotiations, etc. But once you are through that and have built your target architecture, the whole thing plays out its full strength, because you have maximum flexibility to just swap out a CMS, to just swap out your recommendation engine, and so on. Or to bring other adjustments into this architecture with your own code, your own modules, your own microservices. You simply cannot do that with a monolithic application. Even if they always suggest to you, at least on the slideware, that everything is super integrated with each other, super smoothly combined. I think after a year the customers know what the real advantages of such an architecture are. And what the conveniences are in the long run.

Joubin Rahimi:

Yes, here are one or two examples, feel free to correct or comment on them. One is – both are fashion, because you can grasp it so nicely. When the fashion industry was not yet so heavily digitalized, there were typically four fashion lines a year, namely the seasons. Now it is twelve plus two, twelve plus six, so many, many more. And that works because they digitalized their entire technology and IT, or rather digitalized the processes behind it, and are therefore more efficient and release things far more often, which leads to higher sell-through. Hard to measure. And the second example, because we picked it up from the outside and from conversations with employees – it is a bit older now. I think it has changed as well. The Inditex group, which Zara belongs to, had a very high level of digital maturity very early on, or like Decathlon for example. They do it really, really well. They know exactly which item is still in which store and where. Versus H&M, who saved a lot for a long time, because it also came up so often in shareholder reports to spend less and less on IT, and that just does not work. They also did not know what their stock levels were. They had to do a classic inventory count just to have any sense of whether an item was there. That is also why they could not do online pickup in store, because you did not even know whether it was there. And I think that shows so nicely that if you do not have it, certain options simply are not there later. And you do not catch up, because you do not catch up in one, two, three months or a year, you end up trailing three, four, five years behind. But people always have to make wise decisions there.

André Menegazzi:

Yes, the nice thing is that a couple of the ones you just mentioned are on a very, very good journey with a very good platform now, in order to catch up.

Joubin Rahimi:

Exactly, that is good too. One or the other could and would have liked to start earlier. I am referring to H&M now. I do not know whether they are your customer or not, but that does not matter.

André Menegazzi:

Yes, with some customers I cannot go into detail because of NDAs, of course.

Joubin Rahimi:

Perfectly fine. These are observations from the outside, to explain it. But exciting that you are active there. Yes. I have another question. German company – data protection is very important to us Europeans and especially to us Germans. Data sovereignty, meaning that the data is not somehow siphoned off. You are probably ISO 27001 certified. You presumably also have data centers in Europe.

André Menegazzi:

Well, data sovereignty first of all means the ability to access your data ownership at any time. With us that is of course guaranteed at any time, that is very clear. And also that it does not go away. That is, let us say, AWS and co. Yes, we run at these two big hyperscalers, so Google Cloud Platform as well as AWS. And the pattern globally is that in every large territory – the Americas, EMEA and APAC – our customers have the option to choose whether to run on GCP or on AWS. There is one particularity in China itself: in mainland China we also offer the platform natively on AWS. That is a special feature. There is no other technology that currently makes this possible. That is directly PIPL compliant in mainland China too. That is the Chinese GDPR. And yes, as you just said, of course we ourselves are ISO certified, as are our partners, quite clearly. We also have TISAX certification, which comes from the automotive sector. I believe that is the second-highest protection class you can somehow achieve. And the whole topic of data protection, data security and so on is of course taken very, very seriously at a cloud-native provider. That is clear. We have – for those who are interested in the details – there are dedicated white papers on our website if you look under Trust Center. On the one hand for that, as well as precise explanations of how we handle these topics of security, data protection, etc.

Joubin Rahimi:

Great. The next point for me, or the last one, would be: are there use cases, customers you can talk about and where you say they are simply a real blast, the world has to know about them? Customer segments, that is.

André Menegazzi:

Well, we are actually proud of all our customers, and that is the nice thing about the platform. It is so adaptable and so flexible that we fit into every use case. There is no particular focus here, on – I do not know – B2B or fashion or anything like that. We do not have that. Instead, I believe there are, in my opinion, two verticals where we do not yet have a use case. That is banking and insurance. Otherwise, clearly, we have a great deal of automotive, the entire Volkswagen group including the sports car manufacturer you just mentioned. We already talked about Audi. And the ones here from Munich. We of course have large customers in the USA, quite clearly, such as AT&T. I think somehow every third iPhone or so that is sold in the USA runs through our platform.

Joubin Rahimi:

Incredible.

André Menegazzi:

Yes, those are of course very, very large, striking use cases. But there are also – this is still one of my favorite cases. I do not know whether you know Boxing, the Toni Box?

Joubin Rahimi:

Yes, of course.

André Menegazzi:

Yes, they have been a customer with us for eight or nine years now and we were able to witness and accompany all that growth. And I still think that is one of the most charming and nicest use cases – how a company like that can grow with the support of the platform and how this use case was rolled out globally. The success you can accompany there is somehow, it is fun to watch and to keep hearing it in the feedback. But long story short, we fit everywhere, no matter which B2B case, no matter which B2C case. And you can build anything with the platform, and that is what makes it so interesting.

Joubin Rahimi:

That is also nice, with the Toni Box simply as an example. Started small and then they have the website, the app, they surely have other input channels and then worldwide too. Yes, magnificent. Yes, great. Which question did I not ask that I should have asked, so that you can come across even better? I know it is not agreed in advance, but I always like to ask it. Sometimes something else comes to mind.

André Menegazzi:

I believe that today the customers who evaluate us have an extremely high level of maturity. They know exactly what they are looking for in a new technology. And we are also seeing more and more – and that is a good thing, thank goodness – that companies no longer buy off the slideware. They did that for quite a while. There are enough big talkers in the market who promise a great deal. And many of the companies have of course been through the valley of tears with monolithic solutions over the past decades and now finally want to make the switch to a future-oriented architecture. So I find it hard to point out any further topics here – it is not supposed to be an advertising event either. I believe everyone would do well to look closely under the hood, not to buy something off some PowerPoint presentations or marketing buzzwords. Instead, we always encourage our prospects to do a hackathon or a POC with the platform, or an MVP, depending, and to really put the use case through its paces: can it be realized like this with the platform, does it deliver what it promises? And then we also know with 100 percent certainty that we have won a customer for an extremely long period of time. And I think that is the most important thing that we in sales – and I do wear the sales glasses – can and must provide, because I want to aim for a long customer relationship and not sell and oversell something come hell or high water and possibly even end up destroying a customer's career because they then have trouble integrating a platform they bought.

Joubin Rahimi:

That is a really nice closing word, or rather closing tip. Thanks for that. Thanks also for letting us look behind the curtain. Beyond marketing blah blah, as I like to call it. That is also how we always got to know each other and I think that is really great. Thanks for your time and we always offer that if there are questions or feedback we can probably comment on it below again. And that is exactly great. Interaction too, we always say it is the most important thing. You are all really approachable. You told me you are a Cologne lad. That always makes my heart beat faster. Even if you now live in Munich.

André Menegazzi:

I am reachable at any time, just ping me or ping you, then you pass on my contact details and we can dive deeper.

Joubin Rahimi:

With our two name combinations, people can always find us very easily on LinkedIn.