In so many aspects of commerce, B2C normally leads and B2B eventually follows. That is certainly the case with one of the biggest current trends in B2C: so-called ‘headless’ commerce.
Headless commerce is essentially a way of making the physical world as easy to work in as the cloud one. ASOS, Zalando, About You and Hello Fresh, to name just a few that have exploited it, are all examples of successful B2C e-commerce players who started development of their headless platforms in the early 2010s. Doing so has given them the freedom to add new interfaces, new features and functionality and help them become as big as they are today. And we are talking companies valued at maybe £200 million in 2010, and now valued at more like £20 billion.
The same development is taking place in B2B. In traditional business, the key objective has been to sell products and increase revenues by adding on maintenance, after-sales support, and charging for spares. But we live in a different environment now. It is almost impossible to compete on price alone, so manufacturers have started to switch how they are prepared to let a product enter the market. After all, anyone anywhere worldwide now can enter your market with a low-cost version of a product. To cope, B2B firms need a fresh approach and should switch to a more consumption-based model. When the product itself is no longer the differentiator, you need a different way of making money, which is essentially micro-rental.
So how can B2B brands make this change and use headless commerce to maintain and grow market share? Let’s look at some fundamentals.
Venturers Club roundtable: driving success within e-commerce
For Gartner, “traditional commerce applications require you to deploy the entire application each time you make a change or want to make a change”. Headless commerce means back-end e-commerce functionality is separated from the front end. Headless commerce makes changes into two separate and customisable elements — the business logic, such as APIs integrated for functionality ‘add to cart’, and the UI.
How does this work in the real world? A company makes a great piece of machinery, but smaller firms cannot afford it as an outright cost and benefit from its superior functionality. Such a purchase is even harder to justify if the machine is to be used for light workloads. So the manufacturer misses out on a sale. No-one is gaining in this scenario, which is why a move to subscription pricing and consumption makes a great deal of sense for all parties. For the manufacturer, offering the machinery on a subscription basis for a small monthly fee and capping the number of uses means that it generates revenue from a machine that would otherwise have been sitting latent.
Granted, this revenue would not be substantial at the start, but this model becomes much more viable if the manufacturer secures enough small users. The smaller firm leasing the machinery can fulfil orders, create employment and reap the benefits of working with cutting-edge tools. That’s the promise of headless, which is happening now because of the Internet of Things (IoT). It offers deep and accurate levels of granularity — granularity which is being picked up by nimble players in many fields who want to make revenue out of micro-rental.
Consider agriculture: constructors of expensive farming machinery offer pricing models so finely tuned that sensors in the fields know a machine is being used or not, all the way to knowing how many individual watts are used in the process. This IoT-powered visibility allows manufacturers to offer bespoke subscription models for expensive equipment that are highly personalised, typically pay-per-use, and tailored to suit a particular use case (you can see the clear link to mobile phone subscriptions). It is a powerful way of building customer loyalty, and also means you can access data about the customer, equipment and plant usage, before using that to improve and tailor the offering even further. There is a strong parallel between headless commerce and cloud here. Both allow B2B companies to expand their portfolio by adding mid-market customer opportunities into their sales model with their flexible pricing and usage models.
Mid-market companies will be the backbone of ‘Global Britain’
Effectively, this decoupling of front and back end gives B2B companies the freedom to create brand new composable services and products.
The challenge is that most of the e-commerce platform options available to businesses are monolithic, where the entire system is held on a single platform, and a lot of your business choices are held in one place and pre-ordained for you. This is beneficial for a small Mom and Pop-level business with no IT management resource available, but an ambitious or growing business will find themselves constrained.
These legacy infrastructures cannot manage the volume of variables such as checks on availability, updating pricing, and real-time inputs such as the data from IoT sensors. Headless commerce cannot happen at scale without modern B2B marketplace technology, but fortunately such options are now available.
Headless commerce has already had a significant impact in B2C, and it is starting to gain traction in B2B. Now is the time to see if it could work for your business.