What the Scaffa? Just the Paperwork cocktail & What longer replacement cycles for commerce platforms means for the commerce tech market
Issue No. 12 - Exploring the ramifications when commerce platforms are no longer leading the charge.
First, let me thank all the new subscribers to Cocktails & Commerce. My subscriber numbers have really jumped recently, and that primarily comes from shares, repostings, and recommendations. If you did that for me recently and are reading this now, thank you! I really appreciate it.
In today’s issue we explore a delicious room temperature cocktail - that some may call a ‘scaffa’ - with the great Just the Paperwork cocktail from the legend that is Sother Teague. And when we get down to business, we talk about what the lengthening replacement cycles for commerce platforms means for commerce tech.
I look forward to your comments and thoughts - I know there will be some - just make sure you have the cocktail before you tell me what you think about either the drink or the analysis!
And how about that headline?!? I may well be breaking a lot of best-practices and conventions with the length and complexity of that headline. But I know you can handle it - you are commerce people! Who like cocktails! That means you are awesome.
Thanks again for reading and I hope you enjoy! Cheers!
This Week’s Cocktail: Just the Paperwork
Just the Paperwork is a cocktail worthy of a lot of discussion. It represents an all but forgotten class of cocktails, the scaffa. Scaffas are mixed drinks made and served at room temperature. They have been around since at least the nineteenth century, back when ice was pricey and hard to come by - so you could make an argument that scaffas are closely connected to the very earliest cocktails.
In fact, early scaffa recipes can be found among the founding documents of mixology, such as Jerry Thomas’s 1860s “Bartenders Guide.” Trader Vic’s 1948 book by the same name describes a scaffa as “an old time drink, enjoyed more by men than by women, since they are merely mixtures of strong liquor pointed up with a bit of liqueur or cordial or a dash of bitters and served without ice.” I know that is not true, and probably never was. There is no room for bias at this bar! (Well, unless we are discussing Aperol)
Scaffas are traditionally made from a mixture of undiluted spirits such as liquors, amari, and liqueurs, as well as the occasional bitter, tincture, or shrub. Think of them as the quick and easy cocktail with what is laying around in the cupboard, which is fitting since the name ‘scaffa’ comes from an informal Italian word for “cupboard”.
And scaffas are great for the flask. When I head out camping, fishing, or to a tailgate I will basically do just that. Some amaro, some whiskey and a few dashes of bitters. A cocktail on your hip! A scaffa!
Warning! Most amari and vermouths and many liqueurs are low ABV and may spoil after opening if not refrigerated. So digging in your grandmother's cabinet and pulling out a 20 year old Cinzano vermouth - or even a year old for that matter - and tossing in your scaffa or any other drink has its risks. It will not kill you, but it may not taste that great. So get smart and keep your amari, vermouth and other low ABV “tools” in a dark cool place - like your refrigerator!
But what the scaffa? Is a scaffa even a cocktail at all?
Some would argue that a cocktail must include water. The original “Cock-Tail” was defined as a simple mixture of spirits, sugar, bitters, and water. Typically that comes from the dilution of ice when a drink is shaken or stirred. Some may even argue that is the only real rule when it comes to defining a cocktail.
Toby Maloney, founder of the esteemed The Violet Hour bar in Chicago and author of The Bartender’s Manifesto did just that when he wrote, “The only rule of cocktails, with no exception, is that there can be no cocktail without water content.”
Of course, that is undeniably true since technically water is the basis of all spirits, liqueurs, bitters, and juices, and most cocktails get added water from melting ice or juice. But let’s be honest, this is a silly argument, semantics really - and should we really care when we could be drinking!
Don’t worry, Sother has your back - a scaffa with room temperature water
This week’s cocktail is from Sother Teague’s great book I’m Just Here For The Drinks. The story behind this one is that Sother frequently mixed it up for himself when he closed his bar - Amor y Amaro - each night and sat down to do the books and the proverbial and necessary paperwork.
It makes sense. Quickly mixing a great drink for yourself that you are going to sip while you work. Why not just have it at room temperature from the start, and dilute it to where you like it and stop there. Delicious and smart, if you ask me.
To be honest, I am a bit of a Sother fanboy. Sother and his bar have been very influential in contemporary American mixology and in many ways - both direct and indirect - for my love of amari and bitters.
Before Sother started his New York City bar Amor y Amaro, which focused on amari and bitters (With no juice! Because you don’t need it!) bartenders and customers alike rarely focused on these amazing classes of ingredients the way we do now. Sother deserves a lot of credit for changing that. Amor y Amargo is still going strong, and is still great - intimate, down to earth, and with fantastic cocktails. Sother also happens to be a really nice guy, and still very much a part of the bar.
With this cocktail, even paperwork can be enjoyable! In my book, a drink that is room temperature and built in the glass not only meets the standard of a cocktail, it is worthy of being a part of the scaffioso - whether I put a splash of tap water in there as I walk past the sink or not.
Cheers!
Just the Paperwork spec, serves one:
1.5 oz (~45 ml) - Amaro Nonino Quintessentia
1 oz (~30 ml) - Cognac (Pierre Ferrand Cognac 1840 recommended)
1 oz (~30 ml) - Cocchi Americano (Bianco)
.5 oz (~15 ml) - water (room temperature)
2 dashes - orange bitters (Regan’s Orange Bitters recommended)
Garnish - orange twist
The process:
Build in a rocks glass. Squeeze twist over the glass and rub it gently on the rim of the glass. Serve neat.
Cocktail notes:
For the cognac here I am recommending Pierre Ferrand Cognac 1840 Original Formula. It is a great, straightforward cognac. Very nice, but not picky and much more reasonably priced than many. It is also typically very easy to find. You can go much higher end on the cognac if you want to, but it will not really benefit the drink.
One last point on the cocktail, I know it can seem daunting to have to procure all these various ingredients - and I have heard from at least a few of you about that - but everything in this cocktail should be in your “tool shed”, aka liquor cabinet. You should have Amaro Nonino and Cocchi Americano in your collection!
Amaro Nonino was of course in the last issue, so you hopefully already have it. It is a delightful, well integrated entry point into the world of amari. Aromas of orange & chamomile, with blood orange, borage, and a touch of botanical bitterness. This is a tasty, balanced amaro with well-integrated flavors.
And Cocchi Americano is a delicious Moscato wine-based aperitif with gentiane, quinine and citrus for a flavorful, bitter, refreshing finish. In Piemonte it often is served chilled with ice, a splash of soda and a peel of orange. Great for ending a meal and a great addition to your mixology tool set.
Article Resources and Citations:
“The only rule of cocktails, with no exception, is that there can be no cocktail without water content.” from The Bartenders Manifesto, by Toby Maloney, p. 39
“No Ice, No Problem: Scaffa-Style Drinks Make the Most of Your Liquor Cabinet” Katie Brown, Vine Pair, July 25, 2021
The Oxford Companion to Spirits & Cocktails. Oxford University Press, 2022
Analysis: Commerce platforms are no longer leading the charge, the ramifications of longer and longer replacement cycles on the commerce tech market
When I was an analyst at Forrester covering the commerce tech market from 2008 to 2012, the average replacement cycle for an enterprise commerce platform was four to five years. From a vendor perspective, that meant that 20-25% of the market was in play every year. That made for a vibrant and competitive market, and one that was one helluva ride for those involved in the software and services market there to serve rapidly growing e-commerce businesses.
This was driven by the rapidly evolving technology landscape of the time - it was early days for cloud and SaaS - and the significant growth and scaling of e-commerce businesses across retail and the economy as a whole. The advent of the mobile channel, omni-channel strategies, and the rapidly growing sophistication of e-commerce organizations were accelerants as businesses scrambled for tools and capabilities they needed to run efficiently and serve customers with better experiences.
Fast forward to today though and we see that replacement cycles have effectively doubled, to every eight to twelve years.
Kelly Goetsch, CSO at Commercetools, recently shared the below graphic on LinkedIn. It is an interesting and somewhat unusual examination of the causes for replatforming, but some of the only data I have seen on this in the recent past.
While the 8.3 average jumps out here, if you drill into the businesses making changes for fundamental business strategy and a need to respond to “market disruption”, the replacement cycle extends to twelve years. For vendors, that means that today only 8% percent of the market is “in-play” in any given year, and a large number of them may still decide to do nothing.
Why have commerce platform replacement cycles have extended so far?
There are a number of factors contributing to this lengthening of the replacement cycle, all of which are natural extensions of a maturing market, but also a weak retail economy we currently see. Factors include:
E-commerce businesses are now far larger and thus there is far more risk of business disruption associated with replatforming. Back when replacement cycles were short, e-commerce accounted for 10-15% of retail sales at most omnichannel retailers. Today, that number could easily be 40-60% or more, and of course much higher for digital native direct to consumer brands. Numbers like that mean that making fundamental changes to the commerce platform upon which that business depends represents significant risk - to the tune of tens or hundreds of millions of dollars. A business leader, even one whose organization is experiencing significant cost overhead and pain in maintaining their existing stack is naturally going to be cautious about putting their business at risk. There are of course ways to mitigate the risks, but there is a lot to overcome to hit go on a project like that.
Business benefits to replatforming the commerce platform may be intangible. When CommerceNext surveyed American e-commerce business leaders a little over a year ago only 14% of e-commerce leaders felt a new commerce platform had potential to drive growth. When compared to the many other investment areas a business can focus on that have a clearer ROI, delaying investment in a commerce platform can make easy business sense, even if it limits agility or may be a drag on the bottomline. By the way, the top solutions areas to drive growth in that survey were personalization (52%), mobile optimization (45%), and perpetual favorite site-layout/redesign (38%).
Existing “legacy” platforms have been highly customized and integrated into enterprise systems - leading to high switching costs. While marketed as commerce platforms, the reality is that platforms like ATG, IBM Websphere, or hybris were effectively development platforms. That was a benefit at the time, and over time these platforms have typically been extended and customized significantly by customers. Services providers benefited of course, as did internal IT organizations that grew to support them. This of course also represents a huge reason TO REPLATORM, as these spaghetti platforms are often poorly documented, require loads of testing, and generally slow down innovation and business agility. But ditching these unique capabilities and processes built into these legacy systems - or replicating the integrations required to implement a new platform - are complex, and again, risky. Businesses are now extending the life of legacy solutions by making them headless and exposing capability and data via API, but are in effect making them homegrown, bespoke platforms in the process. This can have its benefits but also comes at a high cost - maintaining and supporting legacy code, while trying to move faster on the front-end and innovation in customer experience and business strategy.
Business processes have grown up around the existing platforms and change is hard - or just plain resisted. The ways e-commerce merchants, marketers, content people, and developers work have typically grown up around how the existing systems and technology work, including their limitations. Moving to a new platform can mean a lot of change, and even to different skill-sets required to be effective in a new platform. This is in some ways even more true now than ever, as composable and MACH architectures lead to potentially many more specialized vendors in the mix - each with different business and developer tools. So it may not be just changing from one platform to another, but rather from one platform to many tools. There can be massive benefits reaped - improved site performance, greater agility, multiple touchpoints or “heads”, and the specialized solutions needed to mote the business and experience forward - but the running of the business will change dramatically in the process as well, and it is natural for organizations to resist change. Training and change management should not be overlooked in any project of this scale, though it unfortunately often is, and business leaders have scar tissue from previous failures to do so.
Business conditions are leading to conservative tech investment plans. While the consumer economies of the United States and Europe have avoided falling off the cliff, consumer spending has migrated to travel and services - such as dining out - which together are up 12% from a year ago. Meanwhile retail spending and business results arguably show we are already in a mild “retail recession”- especially when you factor in inflation. The U.S. Census Dept. just released Q2 2023 retail numbers that show retail up only 1.6% from the same period in 2022. Factoring in 3-4% inflation that means we are seeing a shrinking retail market in the U.S.. And when you exclude gas, autos, building materials and food services the numbers are even worse. Bloomreach’s Commerce Pulse data shows U.S. e-commerce sales down 8.68% YTD in 2023, though individual sectors’ results vary considerably (I include more on that below, check it out). in the U.S.. What is really telling is that e-commerce traffic YTD is down 8.9% In the U.S. as well, though that traffic is not heading into physical stores - because traffic is down there as well (see U.S. Softline Retail Physical Store Traffic graphic below). Meanwhile in Europe the Commerce Pulse numbers show a positive 10.06% YoY e-commerce result, but we need to remember that a year ago European numbers went down significantly following the Russian invasion of Ukraine and the shock to energy and commodity prices smacked Europeans and the U.K. in the wallet. So again, with inflation and the annualization off that drop a year ago we should recognize that the retail economy in Europe and the U.K. is very challenged. In fact, Europeans are just consuming less overall - with population loss, economic conditions, and changing tastes and norms all contributing to what is effectively a zero-growth consumer economy.
Overall U.S. Retail Results (not inflation adjusted)
U.S. Softline Retail Physical Store Traffic - One year trend
The commerce tech market used to be led by the commerce platforms. Point solutions that would plug into these environments would always in a sense have to wait for the core commerce platform to be selected by a prospect - and often to be implemented - before a prospect would consider their solution. That is no longer the case.
The commerce tech market has shifted to specialist “point-solutions”
While the commerce platform market may have slowed somewhat - or a lot, depending on your definition and intention - the market for commerce tech has not. Businesses need all kinds of point solutions to complement whatever it is their running - legacy platforms, homegrown, composable, or highly modern and MACH. Those solutions run the gamut - from order management, to content management, to personalization, to search and merchandising, to product information. In fact many MACH commerce platforms play nicely in this way, offering services that run specific capabilities and which can play nicely with others. One example of that is Commercetools PIM, which is often where Commercetools customers start, adding Commercetools services from there, alongside others from other vendors or which customers write themselves - which BTW, Gen-AI is making much easier today than ever.
So the path forward from here is for commerce platforms to in a sense decompose and offer specific services in a similar way the specialist software solutions do - cohabitating with and complimenting them - while delivering simplicity and synergies for clients who want a relatively quick way of getting started with them when and if they do replatform. This is not an easy bar to hit, and puts pressure on the commerce platforms to refactor or further their roadmaps in this direction while their business may be incremental versus experiencing the rapid growth of previous decades.
Having been in the commerce tech and platform market for many years, I have seen the pendulum swing from “point-solutions” to platform a number of times. We are now in an era where many are advocating for platforms in part due to the impetus for vendor consolidation and cost reduction on the part of buyers. In my opinion, this is a relatively short-term condition, and the long-term will favor the platforms and point-solutions that offer composability and an API-first, plug-n-play capability to enhance and support customers' digital commerce and marketing evolution longer-term.
For businesses reading this, what is your takeaway?
While the factors contributing to lengthening commerce platform replacement cycles all make sense, and for businesses can be both prudent and logical short-term, but there are a host of trade-offs that can lead to traps. Businesses need to be cognizant of the downsides:
Legacy systems logically require expensive maintenance, including patches, repairs, and workarounds. As technology advances, finding experts with the knowledge to maintain these legacy systems can also become challenging and costly - and what developer wants to focus on older technology? Not many. This increases dependence on off-shoring, which short term may be cost efficient, but longer term these costs will only increase, and can create a drag on the bottom line while slowing innovation and productivity as well. Fundamental needs like ensuring scalability and security mean that supporting legacy technology will always require investment, whereas moving to more modern, SaaS, API-first solutions will offload much of that to your software vendors supporting capabilities behind their API, and should prove more efficient.
Agility and innovation will be stifled. Agility in digital commerce is an amorphous term, meant to drive concern that future disruptions in the ways customers engage and buy. Working with third-party or off-shore teams half the world away slows the process of innovation and certainly can reduce agility in and of itself. Staying with older technology - even in the back-end - can hinder businesses from keeping up with competitors who are leveraging modern tech stacks for improved efficiency, and develop better and innovative customer experiences. In an era when the customer experience may well evolve rapidly toward conversational experiences and new, important digital touchpoints a lack of agility could prove lethal. Digital commerce and marketing stacks are already relied upon to support experiences across all channels - including stores - and agility and ability to both experiment and create adaptable business processes and customer experiences will prove critical. A tradeoff to stay the course with legacy commerce platforms will eventually turn into an onerous tax on innovation.
Internal teams supporting legacy tech create a gravitational pull. Internal teams spun-up to support application development and support become organisms that naturally seek self-preservation and growth. It is almost like a law of nature. This can happen in all kinds of areas within the business - large teams charged with support and evolution of legacy tech will be far more prone to advocate for bespoke application development. In digital commerce and marketing this would include areas like deciding to build their own order management, search, or customer data platform (CDP). The challenge of course is that the vendor community is not only highly specialized, but they are incented to think about the whole of the product - from business user tooling to easy integration with third party data sources and everything in between. Granted, they are looking to satisfy the needs of a variety of customers - that cross market segments and verticals - but in a highly competitive environment they will have to invest. Internal IT organizations historically have struggled with areas like these, in part due to expertise and in part due to incentives. Internal IT organizations long term are seen as a cost of doing business and are incented to keep costs down.
For business people, you need to be in control of these decisions - of course partnering with IT and you development teams - and avoid the gravitational pull of large internal teams that in their own right can become a drag on the bottom-line and innovation. You need to advocate for and invest in the evolution of your platforms toward a composable and more agile tech stack.
This can mean incremental evolution as you look to improve key areas - looking to the modern API-first specialist providers as you do - while also understanding that fundamental change in the legacy tech stack will be necessary at some point. And for those businesses on simplified cloud-based commerce platforms that seek to limit that ability, in my opinion it will necessitate evolution as well if your business is to grow and compete longer-term.
So where does all that leave us?
The commerce tech market has been undergoing significant evolution in recent years. The advent of API-first SaaS solutions built upon cloud infrastructure with modern tech stacks of their own has led to a welcome shift in the availability of composable capabilities for businesses to adopt as they themselves mature, grow, and evolve.
What has shifted from an industry perspective is that the commerce platforms are no longer leading the charge. The slowing replacement cycles in sense necessitate that, as does the ability to charge into a larger and larger addressable market as digital commerce and marketing tech becomes the back-bone of the modern economy and customer experiences.
I look forward to your thoughts and comments!
Thanks, Brian
We started this early in the pandemic and it has become a great resource for e-commerce benchmarking. Every quarter, Bloomreach provides a read out of e-commerce results aggregated from customers. NA and UK/EU results, as well as reporting by segments like apparel, luxury, grocery, home, and B2B are included. For the Q2 Commerce Pulse I was joined by Salesforce’s Rob Garf - who also went through Salesforce's Holiday 2023 predictions. Check it out!
Listen to Bloomreach’s Q2 Commerce Pulse here and or watch it and register for Q3 here.
Join me and meet at these upcoming events:
Events and conferences are entering the summer hiatus, but there is one more important one to have on your radar:
Bloomreach Edge Summit - Napa Valley - August 24-25, 2023. Join us in beautiful Napa Valley, CA to explore the impact Generative-AI will have on digital commerce and marketing. Get educated, discover key use-cases, and have a POV on the impact on your business and clients. If you can’t make the physical event, join us for the digital livestream.
If you are looking for me online, you can find me here, here, and here.
Thank you for reading. Be well, be safe, and here is to good business!
Cheers! - Brian