Headless Commerce: How Amazon Steals Christmas

Here's why Amazon owns 39% of e-commerce sales and why over 50% of shoppers plan to buy most of their gifts from Amazon in 2020.

The pace at which people are shopping online is nowhere near the same pace at which retailers are evolving e-commerce in 2020. Not because retailers don’t want to, but because they are technically incapable. 

Pre-covid, retailers could get by with outdated commerce technology. With the shift to online shopping gradually rising year-over-year, retailers could afford to gradually make a technology shift. But with covid having accelerated the online shopping shift by two years, retailers are now two years further behind from a technology standpoint. And the commerce platforms they’re using can’t scale alongside demand.

Enterprises are trapped inside the relics Salesforce Commerce Cloud and SAP Hybris, and even the dinosaur Oracle ATG. Meanwhile, mid-market retailers are stuck inside Shopify Plus and BigCommerce: platforms that are good for small businesses but severely limiting for larger businesses that need to quickly spin up new services—curbside, BOPIS, etc—that seamlessly integrate with existing services.

Of course, while many retailers are struggling to scale e-commerce with new services, features, and integrations, some retailers are scaling in ways that are baffling—even during times like Black Friday 2020 when online spending rose 22% YoY and foot traffic in physical stores decreased 52%. You may not be surprised that one of these retailers is Amazon. But how are they doing it?

From working at Amazon for seven years and growing everything from AmazonWarehouse to AmazonBasics, I can tell you that it’s not only because of their corporate culture (Amazon doesn’t rely on groupthink). It’s also because of their technology. More specifically, it’s about how they architect applications and make apps and services communicate with one another seamlessly. 

In this article, I’ll describe what this technology is at a high level and how you as a brand or retailer can adopt it to scale like Amazon does during the holidays.

Amazon is the OG of headless commerce

The application architecture that Amazon uses leverages headless commerce, a separation of commerce services on the backend (cart, payments, subscriptions, etc) from the frontend presentation layer, also known as the head. Since these independent services (also known as microservices) leverage APIs and are not tied to any single frontend, they can scale and extend to multiple frontends: websites, mobile apps, wearables, PoS handhelds, shopping carts, and other IoT devices.

I talk more about how headless commerce works in this post, but here’s a diagram that shows you how it works at a high level:

Amazon pioneered headless commerce and microservices-based architecture and they were constantly evolving during my time there. More microservices, more teams, and more APIs. During my time at Amazon, I experienced how Amazon’s agile and stateless setup could improve site experience, improve speed to market, and surface relevant products to the right people.

I took these learnings to Staples as chief digital officer and CTO in 2013 when we transitioned from the IBM monolith (Websphere) to a stateless, microservice-based architecture using Netflix-OSS with Springboot. We had to do this in order to stay relevant and ultimately become one of the leading B2B e-commerce businesses.

From a technology standpoint, headless commerce and microservices are why Amazon is winning in 2020 across nearly every category in e-commerce. It now owns 39% of total retail e-commerce sales and over 50% of consumers in the United States plan to purchase most or all of their gifts from Amazon this year. 

In comparison, Walmart comes in at second place with only 5.8% ownership of total retail e-commerce sales in 2020—but it’s trying to level the playing field by adopting a microservices-based architecture to scale commerce. 

Walmart’s current e-commerce application is built with commercial-off-the-shelf (COTS) monolith software and its principal architect admits that it does not scale. That said, Walmart is only good at following Amazon in terms of innovation (e.g. Prime, Marketplace) and struggles to be the leader.

For Walmart and other large retailers, adopting headless commerce and a microservices-based architecture is a good place to start to try to compete with Amazon. But if you want to compete with Amazon and grow by 10x like Walmart wants to, you can’t build all of these commerce services yourself. Amazon is just too far ahead.

Amazon currently has tens of thousands of APIs and thousands of developers managing different microservices. Fortunately, you don’t need to attempt to build tens of thousands of APIs to compete. Today, there are headless commerce platforms like Fabric that have suites of microservices and APIs that businesses need to scale commerce. Instead of building these things yourself, you buy them as software-as-a-service (SaaS) and connect them with existing services. This allows you to scale without replatforming.

How to compete with the juggernaut

While Amazon’s share of the market seems daunting, there is hope for other enterprises and mid-market businesses selling online. Remember, even OGs don’t stay relevant forever (sorry Ice T), and you don’t have to be the cringey mumble rapper of e-commerce to compete.

While the majority of shoppers are buying most of their gifts on Amazon, Amazon is not where they go first for product inspiration the majority of the time. They use a combination of Google, social media, retail apps, and retail websites. You can leverage this.

If I was a large retailer or brand I would leverage these channels to acquire and keep more customers. While building out an e-commerce solution that leverages headless commerce, microservices, and APIs, I would do the following:

• Use Google’s Content API to integrate your applications with Google Merchant Center so you can get your products listed at the top of Google and programmatically manage your products, inventory, orders, accounts, and more.

• Use Facebook’s commerce platform to start selling more on social. With new channels like Instagram Shops launching in 2020, social commerce is just getting started. To scale commerce here, you can integrate an order management system (OMS) with Facebook’s Order Management API.

• Drive more traffic to your site and increase conversions. Use a combination of paid search and SEO. During the holidays, optimize the titles of your category pages and PDPs with holiday-related terms. Also, increase conversions by using an API-based pricing and promotions engine.

As for adding the necessary microservices and APIs to successfully execute these tactics, you don’t have to build out the microservices and APIs like Amazon. Instead, you can use headless commerce services and APIs that are maintained and updated by third parties like Fabric. 

Anticipating the need for microservices and APIs by large retailers hoping to compete with Amazon, we created an event-based platform when we started building Fabric in stealth mode back in 2017.

This event-based model makes it easy to connect Fabric with SaaS from other providers, with custom apps developed in-house, and even with monoliths that have two-way APIs. This gives you the ability to compete without replatorming. Multi-billion dollar companies using outdated monoliths like Salesforce Commerce Cloud are already doing this with Fabric so there’s really no excuse to wait.

What are you waiting for? Christmas?

The easiest way to get started with headless commerce is to find one product with a suite of microservices and APIs. Integrate this product into your existing workflow and continue building out your microservices-based architecture. This is the approach many of our customers are taking today. They are innovating while keeping operations stable. 

The multi-billion dollar company I mentioned is starting with Fabric’s product information manager (PIM) because they have tens of thousands of SKUs. For you, the best place to start might be with a pricing and promotions product like Offers, especially if you want to create a large amount of promotions during the holidays. In either case, I recommend starting to break down your monolith today.