The way we shop is changing all the time. Technology is rapidly being integrated into online shopping habits, and retailers are racing to keep up with these ever changing digital trends.
eCommerce is an active and expanding industry; eCommerce growing 23% year-over-year, with half of American shoppers saying that they prefer buying online which means creating an engaging and easy online customer experience is more important than ever.
So when Adobe announced that it is acquiring Magento for US$1.68 billion last week, it was big news for online retail. The scale of Adobe’s marketing products together with Magento’s Enterprise eCommerce platform is a match for streamlined end-to-end online retail solutions.
Software companies are realizing the importance of acquiring really good and established eCommerce solutions that they can integrate into their products and services. Rather than building their own software, buying a solution that is proven to work with an already loyal customer base helps software companies ‘jump the queue’ in online retail innovation.
In fact, Adobe’s purchase is just the latest in eCommerce news. In a funding round last month, BigCommerce, an online shopping platform, raised USD64 million. And in 2016, Salesforce bought Demandware, a cloud-based eCommerce platform, for US$2.8 billion.
But will Adobe’s recent purchase help the company compete with established companies like Salesforce and Shopify, and what does it mean for the future of eCommerce?
The competition: how does the Adobe and Magento partnership compare?
Speculation as to how the partnership will work is already circulating online.
It is clear that this partnership will be good for both Magento and Adobe customers as it will help them sell and market their online products in one place. Adobe said that buying Magento would help them to create a full end-to-end eCommerce package for both B2C and B2B customers.
But what will be particularly interesting is if the purchase will make working on the Magento platform easier for everyone, not just Enterprise customers.
Magento is a free open-source eCommerce platform, where developers can implement the core files and extend its functionality by adding new plug-in modules provided by other developers. Magento Commerce is underwritten by the same platform, but is licensed out to individual customers. So, you need to be a developer — or have the ability to hire one — to create an eCommerce store with Magento. This makes a plug-and-play solution like the ones available through BigCommerce and Shopify very attractive to smaller businesses which may not be able to afford one.
Magento 2, the most recent update of the platform, also poses some issues for the company. It was a big change from previous updates and made the platform quite cumbersome to work on — it could be why they lost some customers to Shopify. For example, one eCommerce store that does about $20 million a year in revenue, with a big warehouse, full team of staff and 10,000 products had to re-develop their whole website. It will be interesting to see what Adobe does to the platform to make the updates easier, rather than having online stores rebuild their sites.
What will be important for Adobe going forward is keeping Magento’s already active developer community engaged. Their global ecosystem of 315,000 developers and a network of over 1,150 technology and solution partners act as advocates for the brand. This strategy has worked really well for Shopify which built a community of partners, agencies and developers that build apps in their App Store.
Can past acquisitions help predict the future? Some things to consider.
Adobe has made 52 acquisitions since 1990. Can this help provide an insight into what Adobe might do with Magento?
Adobe acquired Business Catalyst, the company behind business software suite GoodBarry, in 2009. The company recently announced they were ending development for Business Catalyst; new sites will no longer be available for purchase starting from 18 June 2018, and Adobe will stop hosting existing sites on Business Catalyst on 26 March 2020. Was Magento acquired to replace the outgoing eCommerce software?
Will Magento retain its name and become part of the Adobe Experience Manager suite? A similar thing happened when Shopify acquired Kit, an automated marketing chatbot, in early 2016. It quickly became a feature of Shopify, available on their App Store as an official Facebook Marketing Partner for small business. Or will Magento be renamed to reflect Adobe’s brand awareness, just like Demandware was renamed Commerce Cloud after their Salesforce acquisition?
On the flip side, Magento’s past may shed some light on the future too; it is not the first time that the company was bought. In 2011, eBay purchased Magento for close to US$180 million, but in 2015, it relaunched as an independent company. Will the same thing happen again?
So, will Adobe take this opportunity to make building an online store easier and streamlined for everyone, or will they stick to focusing on Enterprise customers? One thing is for sure, the partnership will help shape the future of Adobe’s push in eCommerce in the years to come.