Mark Lavelle has been in e-commerce for about as long as e-commerce has existed. Lavelle started out in the mid-1990s pioneering some of the first-ever online credit card payments, co-founding Bill Me Later, a payments company acquired by eBay and now known as PayPal Credit. Lavelle spent years in various positions overseeing strategy and business development at PayPal and eBay until 2015, which is when eBay sold off its eBay Enterprise business and rebranded it Magento Commerce, with Lavelle as CEO.
Magento's open-source and enterprise commerce platforms currently hold around a 26-percent worldwide market share across more than 260,000 sites, which processed more than $101 billion in total sales in 2016. The company is also beginning to heavily invest in business-to-business (B2B) sales, rolling out a new B2B Commerce Cloud earlier this year as well as a business intelligence (BI) platform. Lavelle's got a lot on his mind these days at Magento.
PCMag: You've been working in the e-commerce space since around the dawn of the internet, which is a very different internet today than that of the first dotcom boom. From an e-commerce standpoint, what have been the hallmarks of that evolution?
Mark Lavelle (ML): My first observation is that having the descriptor "dawn of the internet" tied to my career makes me feel rather ancient! In a very real way, that's an important hallmark of the age we live in; everything now moves at internet-speed. It was in 1997—20 years ago—that I took the very first credit card application from the bank's new "World Wide Web site." It fell into my hands on a curly piece of paper from a fax machine, and I handed it to the data entry department to see if it would get approved. It was the start of what would become our founding of Bill Me Later in 2000, a $150-million investment from Amazon (their single largest minority investment at the time), the sale of the company to PayPal for nearly $1 billion in 2008, and my spinning out Magento as a private company in 2015 when eBay and PayPal split apart.
When it comes to what we used to call "e-commerce," that separation is very symbolic of where we are today. The payments industry has paced the commerce industry when it comes to leveraging the massive capabilities of things like the internet, broadband access, Moore's Law, and the increase in devices in the hands of billions of people. PayPal and its many competitors operate globally with services that transcend devices, and have truly changed the way consumers interact with payments. Think of how millennials use Venmo or how Chinese consumers use WeChat. In commerce, we are just getting started. Only a very small number of companies transcended the digital age. Amazon has certainly changed the game, but this new era is only getting started in places like China, India, and South America. Alibaba is a juggernaut that dominates the world's second-largest economy—an unnatural position that is just beginning to change as businesses and consumers seek greater choice. During my career, I've learned that payments and commerce must go hand in hand, and I think that commerce is set to make some serious leaps in the coming years.
PCMag: Let's talk about the state of the retail landscape in 2017. Brick-and-mortar sales continue to decline precipitously, while retailers turn to online sales and various in-store technology and integrated marketing strategies to evolve along with consumers. What do businesses need to do to survive the new age of commerce?
ML: There's very real disruption occurring in retail. "Over storing" in the US created too much physical capacity. The "Amazon effect" shook nearly every industry. There has been a tremendous increase in consumer expectations of what a buying experience should be. All have inflicted significant pain on traditional business models and this will continue into the next decade. But this dismal picture does not match what it feels like to be a consumer in 2017: optimistic, empowered, and open to new opportunities. Consumer confidence in the US is at an all-time high. India and China's populations of middle-class consumers are enormous. And they all walk around with powerful devices in hand, connecting them to the internet and dominating their attention.
This is what businesses need to focus on; invest in a brand that resonates with a global target market and make sure the experience translates and has consistency in the digital age. That means physical stores, social platforms, messaging apps, marketplaces, and websites—and developing an internal culture that is fluent in the technology and data science [that's] mandatory in today's new reality.
PCMag: Deconstructing that a bit, I'd like to tackle four of the most integral components to a successful digital commerce strategy. What would you say are the most important factors for businesses to focus on when it comes to the following four things? First, what are some tips for maximizing e-commerce conversions through your website, shopping cart, and payment processing? And second, what are some tips for crafting a responsive and engaging mobile user flow on smartphones and tablets?
ML: These functionalities should be inherent in your platform. They need to innately evolve with the dynamic environment of online shopping and be inherently mobile-first, or more accurately, "device-aware." Most modern commerce platforms will have the basics covered. Magento has very powerful, out-of-the-box functionality that allows merchants to be current and use best practices. But I worry that many retailers are looking for panaceas. They are attracted by e-commerce aggregators that promise everything: a "one-size-fits-all" format or the idea that the aggregator will take care of driving ever-higher sales and margins. This might be the right approach for some businesses but, if you agree that success in the future will be defined by how a brand differentiates itself through digital experiences, then I predict that the winners will be companies that own every aspect of that experience. We take a fundamentally different approach, which allows for merchants to leverage innovation from our vast ecosystem while molding the platform in ways that suit their unique needs and aspirations.
PCMag: And now, for the third and fourth compoments integral to a successful digital commerce strategy: What are some tips for driving foot traffic to brick-and-mortar stores using digital strategies? And tips for keeping the in-store experience current and engaging at the point-of-sale (POS)?
ML: Number three might not be the right question to ask! What if you could grow your business faster and more profitably by closing some of those stores (as Zara is doing)? What if the purpose of your store is purely to drive your customer online (like Bonobos, for example)? What if you invest so heavily in your digital experience that you only open stores to gain more share of your existing customers' spending (as Amazon is now doing)? But to directly answer your question, look no further than what "click-and-collect" has done for retailers in the UK. Any merchant that has a solid digital strategy and a geographic footprint should be doing omni-channel fulfillment. The technology is readily available. It's just a matter of implementation and getting the store operations right.
I love the point-of-sale question. This is where the future lies for truly great commerce experiences. By opening Apple Stores that perfectly blended and enhanced the brand's digital and physical identity, Steve Jobs and Ron Johnson started a revolution. Last year, I bought a Tesla online. The large-ticket purchase took less time than booking a flight from SFO to JFK. But the buying experience extended to a visit to their modern showroom—which was in a shopping mall, by the way—where I was impressively onboarded as a Tesla customer. Major mall operators are investing in "destination experiences" to draw people into their shopping enclaves, making a store purchase a secondary goal of mall visitors. The Frankfurt Airport allows inbound passengers to pre-order anything from the 300 retailers at the airport, with couriers delivering the goods right to your gate. Thriving in this new world is doable for all brands but it's not easy. It starts with a dedication to digital experiences and the realization that, even in-store, the customer is always connected and expecting consistency.
PCMag: Payments is another rabbit hole. What are your thoughts on all of the emerging payments methods available that aim to replace plastic? PayPal and Venmo, services like MasterPass, Apple Pay, Android and Samsung Pay, and even RFID-enabled Internet of Things (IoT) payments devices. How can businesses make sense of what they should invest in?
ML: Payments was my first love when I got into the industry. The credit card did wonders for consumers, merchants, and global economies. I used to be very frustrated with the pace of change in payments while working in the credit card industry and building Bill Me Later. But, as I said at the start of our conversation, looking back over the past two decades, electronic payments have excelled at leveraging the disruptive technologies that brought us to this digital revolution. It may not feel like it in the US and most of Europe, but in the rest of the world, consumers aren't running around with wallets stacked with redundant pieces of plastic. They've skipped that step and are using mobile phones to access public transportation, buy movie tickets, split the dinner bill, and send money to loved ones. And, I'd contend that it's much easier for a merchant using a service like PayPal's Braintree to take payments in dozens of different countries than it is for them to ship products or localize their digital platform (unless, of course, they're using Magento!).
PCMag: Magento itself has also begun to heavily invest in B2B commerce experiences in addition to business-to-consumer (B2C) with the new Magento Digital Commerce Cloud for B2B. What opportunities do you see in the B2B space for Magento and other e-commerce providers that have traditionally been customer-focused?
ML: The B2B opportunity is enormous: a $6.7-trillion e-commerce space. And B2B businesses want the experience they enjoy online as consumers—one that's rich and personalized online, from 24/7 ordering to flexible payment and control over delivery. But B2B brings fresh challenges that many software vendors can't handle, such as massive order scale, system integrations, complex catalog structures, purchasing workflows, quoting, negotiated pricing, and tailored contract terms—all unique to each B2B.
PCMag: I would be remiss if we didn't touch on personalization and contextual commerce. Shoppers nowadays expect retailers to know more about them, to personalize their experience by using data and preferences. How do you manage that data? What sort of BI and customer insights does it feed back into the business?
ML: Magento has a number of personalization tools that merchants can deploy. It's important to get the basics right, such as customer segmentation rules and predefined actions. We also offer Magento Business Intelligence, which enables sophisticated segmentation and analytics so that merchants can know what's working and how to adjust their strategies. But this space evolves quickly, so a key advantage of Magento is that we allow for easy implementation of third-party technology such as Nostro, which can further advance proprietary algorithms to automatically predict the best products for individual customers.
The more information you have about your customer, the better you can serve them. It's also true that knowing your core customer helps you identify more of them. There's a lot of hype out there about artificial intelligence [AI] but, as the industry chips away at how to use data to personalize commerce and automate decision making, businesses will know how to better serve their customers.
PCMag: On that subject of contextual commerce, is there a line? How do you weigh personalizing a user's shopping or advertising or marketing experience with the perception that their digital privacy is being invaded?
ML: Personalization and privacy are flip sides of the same coin. If you think about it, we've come to routinely share quite a bit of personal information for greater convenience. The important thing here is for companies to be transparent about how they use personal information, and to empower customers with the choice to opt out.
PCMag: Chatbots are another emerging digital tool for interacting with and engaging customers in a contextual fashion, be it on Facebook Messenger, Skype, and Slack, or within an e-commerce experience itself. Chatbots are already being used to complete transactions, be it booking travel or buying all manner of products. What are your thoughts on chatbots and is Magento experimenting with them at all?
ML: As the role of social channels in commerce evolves, chatbots are yet another example of new territory and opportunity. Leading brands anticipate and experiment with these technologies, with companies like Facebook expanding their capabilities around augmented reality (AR), virtual reality (VR), and chat, carving a path for new modes of interactions between merchants and consumers. Our recent launch of Magento Social signals our own readiness to support these goals for brands on our platform. Chatbots are an important component of how merchants will stretch their models to offer new experiences, changing the transaction processes of the past for the new wave of commerce in the future.
PCMag: I want to end on a broader note. What trends are you seeing in the e-commerce landscape that strike you as more important than people realize?
ML: There are two trends that really impress me. The first is, how broadly we see the demand for our commerce software. We think of e-commerce in terms of books, shoes, soft goods, etc. But at Magento, we're onboarding leading businesses across every industry vertical—financial services, entertainment, education, government, transportation, energy—everyone's stepping up their digital commerce game. The other is the breadth of channels across which we're seeing clients deploy Magento. Websites, social platforms, shopping malls, physical stores and kiosks, even major airports. I think it's time we dropped the "e" and just called it "commerce."