Setting up an eCommerce Store? Here's Total Cost of Ownership (TCO) in eCommerce

Headless commerce aka Composable commerce has emerged as the next-generation architecture of online retail & ecommerce brands.

Crafting exceptional and personalized shopping experiences while driving visitors into conversions, requires innovative and modern methods

Composable commerce  decouples the storefront (frontend) from backend services like order management, PIM, CRM, CMS, etc.

Since the architecture is MACH-based, the complete communication between frontend and backend(s) is achieved via APIs.

This provides unhinged flexibility, control, and velocity to improve performance, and growth(return on investment).

However, a crucial part of managing any business module is TCO calculation.

Benefits of Headless Digital Ecommerce

There are many benefits of headless digital ecommerce:

Omnichannel Experiences - Consistent ecommerce experiences across web, mobile, in-store kiosks, etc.

Developer Flexibility - Frontend can be built using modern JS frameworks like React, Vue, and Angular.

Accelerated Innovation - Independent frontend and backend evolution enable rapid iteration and reduces Time-to-Market (TTM).

Scalability - Storefront and backend services scale independently to accommodate traffic surges.

Personalization - Real-time data from backend(s) power personalized digital ecommerce experiences.

With its agility, scalability, and omnichannel capabilities, headless commerce is driving the next wave of disruption in digital retail & ecommerce.

Brands are embracing modern ecommerce platforms to engage customers across touchpoints and maximize growth.

A headless commerce architecture consists of various decoupled components:

Headless CMS - A headless CMS (Content Management System) acts as the centralized repository for all content including product descriptions, articles, images, videos, etc.

Front-end Presentation Layer - Brands can build a presentation layer (headless storefront) that can be designed and developed to offer a stellar and immersive customer experience and journeys built using JavaScript frameworks like React, Vue, and Angular.

Integration Infrastructure - The flexibility of a headless architecture enables e-com & retail brands to connect diverse systems like CMS, ecommerce platforms, CRM, PIM, etc. under one hood.

Product Information Management (PIM) - These systems are often used by e-com & retail brands who have a very large product catalogue. PIMs enable product managers to manage product data like pricing, inventory, metadata, etc.

Digital Asset Management (DAM) - DAMs store, process, and optimize high-res product images, 3D models, videos, and other digital assets.

Customer Relationship Management (CRM) - CRMs capture shopper data across touchpoints and create customer personas and segment them accordingly to build centric and personalized experiences to maximize conversions.

Payment Gateways - Swift, effortless, and highly secure payments are key to ensuring recurring customers and saving on fraud, threats, etc.

Global Commerce - Composable commerce enables global tax/tariff calculations, currency conversion, language translation, etc.

Content Delivery Network (CDN) - These distribute cached content globally for high-performance content delivery resulting in an extremely fast digital experience and also greatly Improves page load times.

Caching and Image Optimization - Storefront performance optimizations like image compression, lazy loading, HTTP caching, etc.

With this modern approach to ecommerce, your e-commerce business gets the best-of-breed components, and a competitive edge over e-commerce websites, online stores, and brands.

You get to have this flexibility, innovation velocity, and lots more without having to pay hefty ownership for an ecommerce platform.

Calculating an accurate total cost of ownership (TCO) for a new platform implementation requires thorough analysis and planning, based on several usage factors:

Peak Traffic Surges - Major promotional events like Black Friday, Cyber Monday, festivals, etc. can drive massive spikes in site traffic that traditional online businesses struggle to handle.

With headless commerce, auto-scaling cloud infrastructure is critical to ensure storefront stability and prevent outages during peak sales. The infrastructure costs must account for at least 2-3x the normal traffic capacity.

Number of Product Pages - A key driver of headless CMS costs is the volume of product pages that need to be authored, managed, and delivered. More SKUs means more product detail pages.

Millions of product pages can be supported in a headless CMS but require planning for sufficient capacity and computing power. Reusable page and component templates help optimize content creation and management at scale.

Rich Media Content - As shoppers expect more immersive experiences, supporting rich media types like 3D models, AR, lifestyle imagery and video in product pages requires significantly higher storage, hosting, and CDN costs compared to simple text and images.

The infrastructure sizing and content delivery costs must account for the media complexity.

Integrations Development - While headless commerce promotes loose coupling between systems, significant development effort is still required for integrating the headless CMS with ecommerce platforms, Product Information Management (PIM), Digital Asset Management (DAM), and other backend systems.

These integrations require ongoing maintenance as needs change too.

Infrastructure Provisioning - High-availability hosting, optimized CDN setup globally, robust caching, and performance tuning mechanisms require upfront investment and expertise to ensure the storefront remains performant even during peak loads. Cutting corners here can massively impact conversions.

Global Content Distribution - Delivering a localized shopping experience with currency, language, taxes and product content tailored to each region requires significant investment in global content distribution.

Seasonal Traffic Spikes - Planning infrastructure capacity only for average traffic leads to costly outages during seasonal spikes and other holiday shopping events. Capacity must account for at least 2-3x additional bandwidth during peak seasons.

Storage Needs - High-resolution product images, 3D models, lifestyle photoshoots and other rich media assets need adequate storage capacity and delivery bandwidth. Optimizing media files without affecting quality reduces costs.

Carefully analyzing each of these usage factors and their infrastructure impact is key for accurate calculation of cost of ownership in ecommerce, when planning the switch to headless commerce.

When selecting an ecommerce platform for running your ecommerce business, it is critical to evaluate the various headless platform vendors and services, on the following criteria to optimize the total cost of ownership and boost your ecommerce ROI:

• Flexible Scaling - The solution must provide auto-scaling support to handle unpredictable traffic spikes and catalog size changes cost-effectively.
• Usage-Based Pricing - Favor pay-as-you-go pricing models over predefined usage tiers. Only pay for actual resources utilized, perfectly aligned to business growth.
• Serverless Hosting - Evaluate serverless hosting options for CMS, commerce platforms, and functions to minimize infrastructure costs and leverage true consumption-based pricing.
• CDN Options - A content delivery network is mandatory for optimal performance, global reach, and lower hosting costs. Evaluate CDN pricing models carefully.
• Commerce Integrations - Look for pre-built integrations and connectors between commerce engines and CMS, PIM, CRM, etc. to reduce custom development needs.
• Webhooks - Platforms must provide real-time webhooks and event streaming for efficient decoupled, event-driven architectures across systems.
• Localization Support - Commerce platforms must support multilingual content, currency conversions, localized pricing, taxes, etc. for global digital retail.
• Global Content Distribution - Optimally priced global content replication and edge delivery capabilities improve TCO.
• Developer Experience - Assess SDKs, documentation, and community support for diverse programmer languages to accelerate development.

Evaluating headless vendors thoroughly on these parameters results in solutions tailored to optimize and lower TCO for owning and operating an ecommerce platform at scale.

You can further make your TCO lower by choosing open-source ecommerce components and an open-source platform for digital commerce.

This removes the dependency and limitations of third-party costs, platform license fees, etc.

As a headless e-commerce model has different components, system(s), etc. combined together, calculating accurate TCO can become a bit tricky.

There are some hidden costs that can affect your TCO analysis, and often bloat your costs with headless commerce:

• Traffic Overage Fees - Unexpected traffic spikes driving overage charges on hosting and CDNs.
• Unplanned Integrations - Last-minute or undiscovered integration needs leading to custom development.
• Slow Page Load Times - Poor performance hurting conversions and revenue.
• Duplicate Content - Recreating content due to lack of content reuse and a single source of truth.
• Bloated Assets - Unoptimized high-res images and videos consuming excess storage and CDN costs.
• Seasonal Downtime - Inadequate capacity planning leads to downtime during peak holiday sales.
• Maintenance Overheads - Complex integrations requiring significant rework during upgrades.

By monitoring usage closely, planning for uncertainty, optimizing assets, and maximizing reuse. These costs can be avoided with an optimal TCO.

Headless commerce does provide greater flexibility, it also requires carefully managing the Total Cost of Ownership (TCO) owing to various aspects of ecommerce.

Some proven optimization strategies include:

Incremental Rollouts - Launch an MVP first with just core product catalog content and minimal integrations. Progressively roll out advanced capabilities like personalized recommendations, rich media content, etc. in phases. It also prevents upfront overbuilding, enhances ecommerce marketing, and more.

Leverage Cloud Scalability - Use auto-scaling cloud infrastructure that can spin up and down capacity on demand to handle traffic fluctuations in a cost-efficient manner. This helps you avoid fixed provisioning and save resources.

Optimize Content Delivery - Effectively utilize content delivery networks (CDNs), lazy loading of images, HTTP caching headers, and compression techniques like image transcoding to reduce hosting and bandwidth costs. This also makes operating your ecommerce easier.

Automate Content Workflows - Reduce dependence on manual efforts by automating content aggregation into the headless CMS from PIM, DAM, and other systems. Automated hooks on source content changes help faster distribution and execution of work.

Reuse Components - Build reusable React components for layouts, UI widgets, modules, etc. Prevent rewriting common elements. Create a component library that enables reusing, thus, saving time. Costs, and fueling faster rollouts.

Modular Templates - Develop modular, dynamic page, and content templates that can be reused across products for faster page building at scale.

Right-size The Stack - Continuously monitor usage metrics across CMS, CDNs, and infrastructure to optimally balance capacity and costs. Scale up or down as needed.

By taking an incremental rollout approach, monitoring usage data closely, maximizing reuse, and leveraging cloud scalability, headless commerce TCO can be optimized for superior ROI even at the enterprise scale. Keeping costs in check should be an ongoing priority.

Headless commerce offers immense benefits but requires careful TCO planning. Key takeaways:

• Headless is critical for unified commerce across channels.
• Thoroughly calculate TCO specific to ecommerce use cases before adoption.
• When evaluating vendors, prioritize flexibility, scalability, and performance.
• Focus on solutions purpose-built for digital commerce and optimized TCO.
• Consider both obvious and unrevealed costs like integrations and downtime.

The Time to Cut Costs Is Now

Much of the e-commerce tax remains hidden from the view of even the most seasoned finance professionals and executives.

It is safe to expect the rapid rise of TCO of software, continuing to wreak havoc on profitability.

And with much-needed IFRS accounting changes still years away from being adopted, this trend will likely continue for the foreseeable future.

But the buzzword of digital transformation shouldn’t paralyze CFOs and CIOs with inaction.

Huge cost savings achieved by slashing the e-commerce tax can easily be used to pay for any transformation efforts.

Furthermore, choosing the right modular e-commerce platform can create a super short and efficient payback period, thereby improving profitability.

There are trillions of dollars shifting online in this digital era. To deliver exceptional ecommerce experiences you need comprehensive cloud-native modules and APIs while simultaneously reducing TCO.

Weather it's an enterprise B2B, B2C or D2C, WPSteroids enables you to increase profitability, giving you the right tools to scale your business.

Book your Discovery Call now.