Why DTC brands like Article own their ecommerce stack
Direct-to-consumer brands like Article are going against the grain, forgoing out-of-the-box ecommerce solutions on the market to build custom online selling tools from scratch. It's a bold move, but one that allows them to control the entire customer experience.
The pandemic has forced much of the world home, leading to a massive increase in ecommerce sales. And with the pandemic likely not abating anytime soon, those numbers may continue to rise.
But some direct-to-consumer brands are going against the grain, forgoing out-of-the-box ecommerce solutions on the market to build their own custom online selling tools from scratch. It's a move that allows them to control costs and how exactly they sell their products. When uncertainty is the only thing that's certain these days, there's some value in being able to control what you can.
This approach comes with a unique set of challenges, including building checkout workflows that don't break and hosting issues that can lead to site crashes if not monitored properly. It also requires a significantly higher investment of the two resources most precious to any business: time and money.
If you ask Chris Cantino of consumer VC firm Color, these realities make developing proprietary ecommerce software highly prohibitive for most brands. "When you're running a startup, time is precious," Cantino said. "This is why major ecommerce platforms have plugins and integration marketplaces that reduce barriers to entry."
But that doesn't mean building proprietary ecommerce software is completely off the table. In fact, Cantino said he believes that customization, when done right, can offer online brands significant competitive advantages — but he doesn't recommend it unless the build is truly a "moat" that offers the company a significant, long-term competitive advantage.
It can be done: DTC furniture brand Article is one example of how the owned ecommerce approach can create a competitive advantage by making the company far more agile. The company, which was founded in 2013, has been profitable since 2015 and is on track for 70% year-over-year revenue growth in 2020. Article has taken a digital-first approach since day one. "We made the conscious choice to build proprietary software to fit the needs of our business — from sourcing and purchasing, to warehouse management, to checkouts, order management and more," Article co-founder and COO Andy Prochazka told Protocol.
Prochazka said going it alone allowed Article to be more adaptable as the company grew. Flexibility was especially critical this year when online interest around home goods dramatically surged during shelter-in-place mandates. Salesforce data indicated that digital revenue grew by 51% within the industry during the first quarter of the year, and the trend has continued in the quarters that followed.
Thanks to an ecommerce model powered by proprietary software developed in-house, Article was able to capitalize on this surge in interest and quickly introduced new, relevant ecommerce features (like default contactless delivery) within a 24-hour window. Since Article's software also works directly with its in-house distribution network, the brand was also able to optimize delivery logistics and order fulfillment as well. This all creates a more seamless customer experience, according to the company.
But this level of agility does come with a significant price tag. In Article's case, that was a tradeoff the company was willing to make. The reason: They wanted an ecommerce presence with more specialized core features — like robust warehouse management and advanced product filtering — that would allow them to deliver a top-tier customer experience.
Prochazka said the leadership team was unsatisfied by the out-of-the-box functionality presented by third-party systems, which they felt were too generalized for mass-market appeal. Instead, they wanted custom software that could be integrated into the company's ecosystem of applications and directly connected to its inventory system, allowing them to provide things like highly accurate delivery timelines on individual product pages. Article does use third-party software for more marginal functions like accounting and payment processing, but the bulk of their ecommerce presence is custom-built.
While it would've been far less expensive to outsource development or to leverage an existing online selling tool like BigCommerce or Shopify, the brand's founders instead decided to leverage their engineering backgrounds and take software development into their own hands.
"We believe that building real, sustainable value lies in doing what's hard," Prochazka said. "While it required more work on our end, we decided to make the investment in our own technology because it would help us create a remarkably better end-to-end furniture-shopping experience for our customers."
To offset these costs, Article is saving in other ways. As a DTC brand, it has no overhead associated with brick-and-mortar stores. "Because we don't do physical retail, we're able to pass on those savings and benefits directly to our customers," Prochazka said.
For now, Article's approach seems to be paying off: Their customer satisfaction rating is on the rise, already up 9% compared to 2019 year-to-date. And the company isn't alone in forging ahead with its own tech — other DTC brands, including Patch Plants, Warby Parker, Glossier and Everlane have all built at least part of their tech stack in-house.
So is building a proprietary ecommerce solution the way to go? For most, the answer is still no. Despite the success Article has seen in owning its ecommerce stack, this strategy is still beyond reach for many startups.
Brendan Witcher, a principal analyst in digital business strategy at Forrester Research, says that building a custom ecommerce platform is often a poor use of capital that could be more wisely spent on building brand awareness and winning customers. "Why spend millions building something from scratch when you can do it for one-tenth the price?" he said.
"Using a commercial solution is a much smarter approach than building something that needs to be designed, created, maintained, managed and continuously upgraded," Witcher added. "Brands should focus on selling products, not creating new versions of a commerce platform every five to seven years."
Custom ecommerce platforms also require handmade integrations for solutions around personalization, chat, shoppable video and payments, among other things, Witcher said, which only adds to the long-term costs associated with building a custom platform. Starting from scratch with an ecommerce offering, even in the middle of a pandemic, is easier than ever before.
While Article may be unique within the DTC space, its against-the-grain decision to do a custom-build that leveraged founders' expertise may help the company in the long run.
As more consumers shift their buying habits online (at least as long as the pandemic rages on), online retailers will likely have increased needs around functionality, customization and agility. But whether custom solutions prove to be worth the price remains to be seen.