“Many RFPs today address what companies should have done 10 years ago.” Interview with Spryker CEO Boris Lokschin.

Since its foundation in 2014, the eCommerce technology provider Spryker has attracted attention with concepts that support the design thinking approach in larger companies in the field of eCommerce. In various areas, both technically and conceptually, they take a different approach to other eCommerce providers. And they are successful in doing so. Reason enough to talk to Boris Lockschin, CEO of Spryker, about the development of Spryker and eCommerce in general.

(Reading time 10 minutes)

Hi Boris, you will soon have been CEO of Spryker for 2 years. I think you had quite a head start and there is a lot of traction for you in the market. Where are you today, how is Spryker developing?

Hello Alain, thank you for the invitation. We have had a very exciting and successful year in which we were able to grow significantly in the number of customers, solution partners, industry partners and employees who trust us. We are seeing a great deal of acceptance for the technical specifications of Spryker technology, but above all for what we stand for and what we try to convey: That technology needs to be thought of differently than in the analog world, as an asset and not a cost center. That for most product ranges, the actual product does not make a sufficient contribution to differentiation and margin generation. That in a digital-first world, ownership of your own code, data and customer access must be understood as the most important differentiating feature and that only “trial and error” with a high speed of iteration and innovation is understood as “best practice”.

(Boris Lokschin, Spryker)

With Spryker, we try to pack these and many other learnings into the Spryker Commerce technology. The aim is to create the required IT productivity, the ability of IT to be very fast, very cost-efficient, very data-driven and to think from the customer, not the ERP or store. This is because almost all differentiating competitive advantages today are of a technical nature. Regardless of whether you are developing new same-day delivery concepts, personalization, AI-driven features, mobile applications, voice controls or simply smart search and recommendation algorithms.

What was an exciting factor in systems and projects of the first and second e-commerce generation yesterday and ensured differentiation is now just a generally available hygiene factor and standard.

Although this type of insight requires a lot of market education for us and our partners, it is indispensable for the vast majority of business models, especially digital transformation projects. We are pleasantly surprised by how many “traditional” retailers, corporations, large B2B companies, manufacturers and brands respond to these arguments, which often do not seem immediately intuitive.

I’ve written about your pricing before, which I think is extremely clever. How did you develop it and what are the reactions from the market?

From our experience with the existing pricing, we were very dissatisfied with common enterprise B2B software licensing models. You often find multi-page and multi-dimensional pricing matrices from which only the sales rep can derive a price. We also found it important to license along the actual core promise of the Spryker technology so that the interests are congruent.

Our core promise and central USP is increased IT productivity. We say “With Spryker, your IT gets more output in the same amount of time!”. This output in turn enables the business to try out more, faster and more cost-effectively and to react more quickly to customers and the market. This is why we chose licensing along the lines of “developer seats”, i.e. non-personalized workstation licenses. In this way, interests are aligned: The more developers a customer has working on our technology, the more licenses they need. The fewer the fewer.

We think the best vendor lock-in is a good product, not a long contract. That’s why there are no 4-year contracts or similar. Every customer can pay conveniently on an annual, quarterly or monthly basis and choose their contract duration at equal intervals. So if our product does not deliver what it promises, there is no “protection” through over-licensing. In the same way, we are properly motivated to build the right solution for the market, unlike with classic sales, server/CPU, SLA, country or user license models, which cut into business vectors and decisions and often lead to distorted decisions. The price matrix therefore literally fits on a beer mat and contains no options, asterisks or the like. Even the updates and upgrades are free and included. Taking money for updates feels like “90s software sales”,

“We think the best vendor lock-in is a good product, not a long contract.”

But the key point is that we are big proponents of MVP-driven approaches, trial-and-error and hyper-agility. Spryker consists of +100 decoupled, independent bundles that can be freely used and assembled like Lego bricks. Depending on the use case. Each bundle has its own version and you can use it to build business models with 10, 35, 63, 100 or other combinations according to your own individual requirements.

Some customers start with a large number of bundles and keep the option open to purchase bundles with other technologies in the future. Others start their MVP for a country or product range with 20 bundles and then increase the number. The smallest customer uses a handful of bundles. Introducing Spryker technically is therefore not a binary decision as with other solutions. This approach also had to be reflected in the pricing model. If we propagated MVP launch in <100days, but had set the entry barrier unnecessarily high, many customers would find it unnecessarily difficult to simply get into “do, act, try” mode. The alternative of doing nothing is often certain failure.

Internationalization is certainly a big, long-term topic for you. What does your roadmap look like – especially with regard to the USA?

In 2016 and 2017, we are focusing primarily on Central Europe, with DACH, the UK and France as our core countries. We have acquired international customers in these countries as well as in the USA and Asia and are working closely with them to better understand these new markets.

We also receive an incredible number of inquiries from countries such as New Zealand, Brazil, Australia, Japan, China, Russia, Iran and Saudi Arabia, where we have had zero presence, footprint, community or the like to date. We are naturally very pleased about this. Strategically, we will develop with our partner ecosystem in these regions given the current high demand from the largest SI’s agencies and consultancies in these countries. We are currently doing a lot to prepare for this expansion. Especially with many of our internationally positioned solution and industry partners.

Alexander Graf, founder of Spryker, wrote in an article last year that “no one needs an online store” and addressed the increasing realization of many smaller merchants that having their own infrastructure is costly and that in certain scenarios it is cheaper to sell only via marketplaces. Even if larger merchants certainly don’t want to completely do without their own infrastructure at the moment, the topic of connection/delivery/integration of marketplaces is more present than ever? How do you address this with Spryker?

We see the technical and online marketing barriers to entry rising year on year. In many product ranges, a new entry in 2017 is no longer possible without sufficient, high three-digit sales prospects or ambitions. Just doing “a little e-commerce” is no longer an option today. The number and complexity of the necessary IT systems and tech expertise/DNA is extremely high. As is the required online marketing budget and know-how.

This is what makes it so difficult for many late-movers and increases the barrier for small retailers because it is almost impossible to build profitable models without the necessary scaling, lock-in effects and differentiation. We are trying to address the issue from several directions. Firstly, with built-in components that can significantly facilitate and accelerate the building of a marketplace. One of our customers is siroop.ch, a large marketplace in Switzerland backed by COOP and Swisscom, which managed to go live with its beta in just under 4 months! We also work very closely with leading industry partners in the marketplace environment and integrate all relevant extensions, portals, middleware solutions, brokers and the like. As it currently feels like every second request is a marketplace, it remains a strategically important topic on the roadmap in 2017, so you can look forward to further, very exciting innovations from us in this area.

Siroop in Switzerland is something of a lighthouse project for Spryker. Can you tell us a bit about other new customers and why they chose Spryker as their solution?

Many projects have a very high strategic importance for our customers from the corporate, B2B, manufacturer or brand environment, as they want to do things “differently/better” and therefore ask us to respect the necessary discretion. What I can say is that there are currently several dozen exciting and very large projects underway in sectors such as automotive, fashion, tools, insurance, food, electronics, furniture, DIY, pharmacies, sports and other exciting areas.

Corporations, large omnichannel retailers, manufacturers and B2B projects are strongly represented. Customers such as the international photo gallery chain Lumas.de, the pet food subscription business Petsdeli.de, the online wine retailer wine-in-black.de and the B2B tool retailer contorion.de are already well-known.

I had lunch with someone from the management of a leading merchant last week and was once again reminded of the importance of logistics. Today, I think that if you do real volume (1M parcels upwards per year) and really have logistics under control, especially from a business perspective, this area becomes an incredible USP and at the same time represents a kind of unfair competitive advantage. Smaller retailers can’t possibly keep up because they can’t afford the investment. What shortcuts and entry points does Spryker offer here? Are there any plans for this?

I agree with your assessment. Logistics is a challenge in itself. Many companies find it difficult to manage this in an efficient, customer-friendly, fast and scalable manner in both directions. At the same time, the big players in particular, such as Amazon, Zalando & Co, are investing and innovating. They have discovered the topic for themselves as a differentiator, driving down shipping times further with every year in the industry standard and entering new dimensions with same-day delivery, instant returns, drones and warehouse automation. This will make it even more difficult for non-technology-driven business models, as customers will quickly become accustomed to the new service level and penalize longer delivery times, more complex returns processing, annoying customer service, etc. twice over.

Spryker is not logistics software. We clearly integrate with leading industry partners, but also with new, more innovative and smaller players who offer new concepts. At the same time, with our “State Machine” concept, we offer a very powerful tool for complex process modelling and visualization. Especially when it comes to order management. In a digital-first world, you have to think carefully about what and which is the leading system for OMS, logistics, warehousing or inventory issues. The answer here is not ERP, as in the “old world”. Spryker’s “State Machine” can be a very effective tool for such models that also want to gain speed here, do not want unnecessary system breaks and want to keep the entire stack under the ownership of their own tech team and, above all, bring business, IT and Ops together.

Another topic is data. I keep finding that many merchants don’t have their product, customer and interaction data under control and can’t take advantage of it. There is often a lack of best practice and infrastructure. How do you see this area and is it something that is interesting for you?

Definitely. We say that control over your own code and data, especially customer-centric data, is and must be one or often the core asset. Only those who own their own customer access can monetize it and not risk becoming a supplier to others. We believe that it is no longer the pure SEO and SEA skills of the 2000s+ that are decisive for success or failure, but increasingly mature BI expertise. The number of touchpoints, devices, channels and services is constantly increasing.

Customers are volatile, channel-neutral and therefore more difficult to segment, target, group into cohorts and even more difficult to use for statistical and analytical AI/machine learning if you cannot guarantee a 360-degree view of the data. Calculating clean CLTVs, CRs or sales forecasts is not possible without these capabilities. Together with our leading industry partners, we are trying to address this issue very intensively. Starting with tracking, targeting, BI, prediction, recommendation, search and other tools, without which no relevant digital business can be built today.

I am a great advocate of the idea of not separating customers into online and offline segments and of developing solutions that are not limited to these two “disciplines”. Such “just commerce” solutions only exist in rudimentary form. There is also a lack of best practice and infrastructure. This is a huge issue, especially in retail, as I keep finding out. How do you see the future of commerce and where are you positioned?

We think that in a digitally driven “winner-takes-it-all” market, where a few control customer access and others have superior technical capabilities, it is increasingly difficult for anyone without sufficient ambition. Many RFPs today address what these firms should have done 10 years ago. They are not methodically, technically and strategically fast, consistent or customer-focused enough. The question “What’s in it for the customer?” is the central one, not cost savings or ERP synergy. “MVP over RfP” is the motto, and IT is not a cost center, but the primary value driver. With many segments becoming increasingly easy to compare and saturated, it is almost impossible to generate margins from the product itself.

“Many RFPs today address what companies should have done 10 years ago”

The powerful players in the market such as Amazon, Zalando, Uber, AirBnB & Co. are leading the way: Customer acquisition and retention are the more crucial skills. Retail models must therefore also be rethought accordingly. Along the customer USP, knowing full well that in most verticals, competitors or marketplaces can solve availability, product range and prices better. Just doing omni-channel is therefore not enough. If only because there are few examples worldwide of growth from these strategies. Even after hundreds of millions of USD in investments, these are primarily sales shift strategies.

It is precisely in this very exciting field that we are positioning ourselves and saying “Think from the customer, use the available data, be agile and fast”. Even ROI calculations are hardly feasible for a period of +18 months, because the pace of technical innovation tends to increase and RfPs written for months with +500 lines are waste as soon as they leave the printer. Once you have understood this and that the only recipe is to act, execute and try in a customer-centric time, then you accept change more easily, try more, faster, more data-driven. You make 10 assumptions and know that 8 of them are likely to fail. But you don’t need 9 months and 7-digit budgets for each of them, because then trial-and-error doesn’t work.

We provide our customers with the technical tool in the form of Spryker, the commerce technology which, thanks to extremely high IT productivity, enables IT to meet the high demands of business organizations and is no longer a “business inhibitor” as it was in the early days. Today’s tech departments, CTOs and product owners are the new rock stars. They are enablers of growth and help to find differentiation beyond the retail margin.

Salesforce bought Demandware for an incredible amount of money. To me, this type of transaction represents the madness that sometimes goes on in our industry. Demandware has never made a dollar and is, well, not exactly a bright light in terms of the solution. I’ve been dealing with an increasing number of Demandware customers wanting to migrate recently. How do you assess the situation and can you possibly profit from it?

We are no better or worse than other market solutions. We solve a different problem. There are no standard systems for an increasing number of non-standard business models and use cases. However, the market is increasingly demanding these in order to escape the price spiral in customer acquisition with an increasingly similar product range. If you have internalized what we discussed earlier, then this is a problem that did not exist 5 or 10 years ago, i.e. at the inception of many of today’s e-commerce solutions.

At that time, we were more ERP- or shop-centric than customer-centric as we are today. In the early days, it was systemically about a new channel from the ERP, with minimal business logic of its own, completely located in the IT department organizationally. In the second phase, a lot of functionality was moved to the (store) front-end system in order to accommodate new roles and the decoupling of the slow, rigid IT system. The systems developed in the respective phases also solved the problems and requirements present at the time very well.

Spryker again was created for today’s requirements for agility, productivity, ownership, differentiation, fast IT organizations and new, lean methodologies. These tasks did not exist 10 or 20 years ago and therefore every product is a reflection of its time. We try to address this with Spryker and believe in productivity vs. “featureritis”.

I think models that give customers more ownership and control over their asset, that allow them to see the product as their platform rather than a physical piece of equipment hanging in the warehouse, have a greater differentiation lever going forward. The days when you could say to customers “outsource your IT and take care of your core business!” are over.

The current platform itself IS the core business. The rest is interchangeable. Today, e-commerce is the actual product and no longer a project as it was in the early days! The buyer as a margin generator is increasingly being replaced by intelligent new products, customer acquisition channels, services and innovation based on customer added value. Which product, range or service you move through the digital channel, once you have created the opportunities for customer acquisition and utilization and gained full code and data control, is secondary. We believe that this way of moving forward will open up potential that many do not have today, and we are already seeing this in numerous replatforming projects.

Boris thank you very much for the interview!

Many thanks to you and your readers too, Alain, for your interest and the questions!