Under The Hood: VTEX Unified Commerce Platform

Paul:

Hi everyone, and welcome to our most recent episode of the re:platform podcast. Today I’m joined by Jade and Rafael from VTEX.

VTEX:

Hello guys.

Paul:

Great. So VTEX is an eCommerce platform, most famous and most commonly used in the Latin American markets. I’ve heard a lot about VTEX over the last few years, but I haven’t seen too much of the platform itself until just now when, Jade and Rafael very kindly gave me a demo and walked me through the platform. So, why don’t you start by giving us a bit of an introduction to VTEX and how the company formed, some of the brands you work with and some of the key features etc.

VTEX:

Perfect. So first of all, thanks for the invitation. I’m happy to be here.  VTEX was founded in 2000. I can say that it was not the best year to found an IT company, but, until 2007, we were a small startup in Latin America. Of course in Brazil – as you can notice from my accent, I’m from Brazil. In 2007, we were a small start up there. And in 2007, we won the contract of Walmart Brazil to build their first store outside of the US. And this changed everything for us. We want on to build more clients, local clients in Brazil. We then won a huge bank there and an airline as well. Everything changed for us in 2007 as we started to expand to new new countries. Then in 2012 we moved into Argentina, Chile, Colombia and others with similar languages.

VTEX:

So it was our first expansion. Then in 2015, we started to expand to the US. It was our main bet. The same year, here in the UK, we organically grew since 2017 because we started small steps to move into the country. We then won the first few contracts here. Again, growing organically and now this year we are going to push more because as you might have seen, we received investment from SoftBank and we’re going to put some pressure on this market. We’re going to accelerate our expansion in the local market here in the UK. In terms of our clients, we have some really big brands. The global contracts that we have include Motorola, which is actually originally from the UK.

VTEX

We have more than 3000 clients using us in 28 to 30 different countries. The main client, or the target that we have right now is retailers doing between 10 and 15 million pounds online. Ideally the business would also have omni-channel challenges. When a retailer is turning over £10m+, that’s where VTEX starts to be a good solution. And the omni-channel strategies they want to implement could include things like in-store pick up points, ship from store etc.

Paul:

Yes, that makes sense. So with those 3000 customers, you obviously B2C, B2B, marketplace – what’s the rough split of that 3000 customers?

VTEX:

82% is B2C right now. So, we are mainly a B2C company. Most of our marketplace clients are in Latin America, because we all are afraid of Amazon. We built a huge ecosystem in terms of marketplaces since 2014. So most of our clients in Latin America are B2C, but are in marketplaces as well. Okay. Today we have a huge client using us across all three – black and Decker. They are using us for B2C, B2B and for a marketplace.

Paul:

Okay, great. So we’ll come on to a B2B and marketplace a little bit more later on – but that’s really interesting. So you’ve got a really big market share in Latin America – when did you come into Europe and how do you plan to offer something different to the platforms that are in this market at the moment?

VTEX:

Following the investment we’ve received, the idea is to accelerate our expansion to Europe. We started our expansion to the US and we have, I think 16 or 17 clients there. Okay. But the idea for the investment is to accelerate Europe and mainly the UK. In order to enter this market, we’re going customise VTEX to allow for local retailers and brands to create an optimal experience, e.g. the checkout process. 

Paul: 

Okay. That makes sense. I guess the next point and one of the biggest questions I had about the platform was, with you offering an end to end platform (OMS, WMS etc) – tell us a little bit about how these modules / features tend to work together as well and maybe how the UK customer might be a little bit different to a Brazilian retailer for example.

VTEX:

Yes. The idea is that our software serves as an end-to-end solution. You don’t need to have other third party systems – that’s the idea in the concept of the software. If you imagine that you want to go into a new market and you want to open a store in, I don’t know, Poland – maybe you don’t want to deploy your current ERP there. That’s where VTEX can act as an interim platform on that side too. You can use one module or 100% of the platform. We don’t charge for usage of additional modules. That’s the pricing that we have right now.

VTEX:

So if the client needs to sell via an eCommerce store, marketplaces, B2B, in-store, physical stores etc – we need to control all of this client, but we then need to control all the internal systems that the brand has. So the idea is to offer a software solution that can orchestrate the channels and internal processes. We need to have the OMS because at the end of the day, if you want to have the customer starting a refund through your eCommerce platform, you must have OMS features available on the eCommerce platform. You can also integrate your current OMS and you can use VTEX for initial order management. You can have your existing OMS, but we need to have a certain level of order management in the platform. The idea of the software is that you can use all the modules whereever you need – as well as integrating existing solutions and systems.

Paul:

I think this is really interesting because it’s obviously a very different proposition to some of your competitors, but during the demo that I just had, I was really impressed with the OMS offering, so it’ll be quite interesting to see what the take up is of that in the UK. I think it’ll fill quite a few holes for some retailers. 

Paul: 

Tell us a bit about the platform itself in terms of core features and differentiators. You showed me a little bit around things like search capabilities and some other areas in the platform. So tell us about some of the real selling points in terms of merchant features.

VTEX:

We are used to saying that VTEX is very good when you have omni-channel challenges. If you are talking about handling multiple prices, different catalogs, if you want to have different pickup points, ship from store, international shipping, multicurrency etc – this is where VTEX is very good. So if you have just one simple website and you want to just go live and use the one carrier via a single pickup point with one warehouse etc, VTEX won’t be the optimal solution. But when you start to need complex scenarios around omnichannel and internationalisation, this is where VTEX is very good.

VTEX:

It’s also easy for you as the admin user to set everything up. You don’t need to customize anything – you just go to the backend of VTEX and you can quickly click and configure changes and new stores. You can add a new pickup point or a new inventory location or you can add a different pricelist or customer-specific promotions. So this is something that you can do pretty easily and you can do without any customization of the software.

Paul:

That’s all very interesting. I’ve already touched on this a little bit, but we work a lot with Magento and our average Magento project would probably feature a third party solution for search, personalization, we might use something like shipperHQ to manage complex shipping logic etc. It feels like when you’re pitching a retailer, you’re pitching a bit of an all-in-one solution. Would you say that’s the case or would you generally still bring in third parties?

VTEX:

Yes, the idea is this exactly – to be the one stop shop to the customer. So you don’t need to have different solutions integrate with VTEX – if we are talking about search, if you want to have RichRelevance for example you can integrate. If you use reach relevance and you want to carry on using it, that’s not a problem. But VTEX will provide a solution and we believe it’s important to provide all core functionality to sell online. If you want to use a specialist third party for more advanced personsalisation that is ok. You can integrate almost most third party solutions – we just try to provide a solution within the platform.

Paul:

Just to dig into that a little bit more, I guess taking search as an example. Some of the big players in the UK market, particularly in the mid market where we tend to work, are Klevu and Algolia – how would your search offering compete with those guys? What kind of features do you have within the search?

VTEX:

I always like to say at the end of the day it’s a matter of conversion rate and a matter of revenue. So one thing that is very important to highlight is that VTEX has a module that you can run A/B tests natively across everything, not just the front end, but the backend as well. So imagine that you want to create a promotion that is a flat 10% discount and you want to test if the 10% will increase your conversion rate and sales. So we can create these on the backend level. We can split up traffic into 20% and 80%, something like that. And you can leave the system to identify if whether the promotion would increase our sales or not. This can apply to search and using a third party too.

VTEX:

You can integrate your search solution – let’s say Rich Relevance and you can use 50% of your traffic for this and 50% for VTEX or even another solution. And after, I don’t know one month or two months, you can compare the sales and you can then choose. In terms of VTEX, our search can cover most of the features that you’re going to want. So filters, advanced search, you can have boosting scores that we were talking about. So imagine that you have a product that you want to boost on your search, you can create these boosts and you can show this product first. You have dictionaries, so you can add some words. You can create auto-corrections etc. You can then also a/b test us vs a third party for a really complex store.

VTEX:

Just to add to this, we are continuously making investments into the platform, especially in this part of our product. So for example we’ve recently bought a search and personalization company. And that’s going to be integrated within the core product itself with the investment that we recently received. We are going to be putting in a lot of focus on AI within the platform itself. But I think we’re starting off with search and personalization to make a lot more of that.

Paul:

Very interesting. I will come onto international in a little bit, but before I do, we talked a bit about the investment you received and it was obviously a lot of money that you raised – this was pretty big news in the ecom platform space. So you tell us a bit more about what you’re going to do with this and how you’re going to invest in the product and different markets and generally what the plan is.

VTEX:

First of all, it was great that we got this. I think, it’s really going to help us accelerate into new markets. As Rafael mentioned earlier, we’re, we’re looking at this from a two prong strategy. One is investing in our global expansion. So we’re already leaders in the Latin American e-commerce market. We’re going to be investing quite a bit into our US growth as well as the European expansion, including the UK. The second prong of that approach would be looking at it from a product development perspective, looking at things like integrating AI within the core of the product, looking at a lot of other innovative improvements within the product itself. And you know, I, I can’t really delve into more of that, but you’ll hear a lot more from us in the next few years.

Paul:

It’s very exciting, I think. Um, yeah, obviously like it’s, it’s a lot money and I think the products already looking really strong and I think, um, yeah, it’d be interesting to see how the next couple of years ago,

Paul:

The next thing that I wanted talk about that we looked at a bit in the demo was the international capabilities of the platform. In particular managing content and product data across different stores and then also multicurrency and handling pricing across different currencies and territories. So can you maybe give us a bit of an overview on what the features and capabilities of the platform look like in this area?

VTEX:

Yes, we have two different approaches on that. The first approach is when you want to open a new or test a new region – you can simply create a new occurrence. That’s what we call it on VTEX. You can simply open a new occurrence and then you can apply a rule to your product. So you can say – if you are going from the UK market to selling in Brazil, you’re going to apply plus 300% and this will be the exchange rate between pounds. VTEX will increase the prices up automatically – but you can also go and you can set up your prices that you want for each product. Pricing is pretty easy to manage. Then you can translate your entire entire product catalog. You can either use existing or manual translations or this can be automated. 

VTEX:

If you want to open a new region in this way, you can set up a new price list and you can translate automatically or manually. You can go then localise delivery options. You can also allow for international shipping by adding new shipping options and assigning rates etc. You can also use the geolocation module which allows you to create regions for different options.

VTEX:

So now I can ship and I can deliver to the specific areas in Brazil for example. So this whole process is pretty straight forward. It might take like one week to do all of this for a new region. The second stage of that is to open a different version of our code. It’s like a copy of your store. You’re going to have two different backends of VTEX, one for the UK and another one for Brazil. And then you can completely change the way that you’re going to manage your new store.

VTEX:

You can have different teams managing it, you can have different access etc. You can create different front-ends – so it’s almost a different instance of VTEX. And you can manage everything from scratch. The most important thing is that you can keep the assortment and the inventories attached to it. So if you sell something in Brazil (of course Brazil is not the best example right now), but imagine that you’re going to Germany and you’re going to have the same warehouse serving Germany and the UK. You can keep the inventory attached to the new store. So if you sell something on your German store the UK stock will be reflected. You can also then create different categories etc. It’s a different system. It’s essentially a new instance.

VTEX:

So I just want to add, with the geolocation feature – you’d be able to just draw a polygon around the area you want to ship to and assign rates and carriers etc. The other thing I wanted to add is payments – because it’s close to home for me, I used to work in payments. In the UK, the main payment methods would be credit cards – although you have some installment payments coming up in the market etc and then you also have PayPal, right? Quite simple. Then you go into a new market such as Brazil and without a number of local payment methods, you really are missing quite a bit of the market there. And so with VTEX, we integrate with the gateways, payment methods, issuers and acquirers within the platform itself and we’re also PCI certified level one.

Paul:

From the demo, one of the areas that I was really impressed with was the rule based management of these areas. So it was really clean and simple to set up and allowed for rule-based payment options, currencies and shipping options etc for people within a specific region, which is really impressive because that would be a lot harder with some of the other platforms. So I’m going to ask you about three core areas of the platform now and if you can just give us a bit of an overview on each of them. Say to start off with, maybe if you can talk about about B2B and some of the features you’ve got that side?

VTEX:

Every year we are participating in Gartner’s magic quadrant and Forester reports etc. So Jade leads this so is best to answer on this one.

Absolutely. So B2B, as Rafael mentioned earlier, is not as big as our B2C offering, but it’s growing. It’s probably one of the fastest growing ones, especially in markets where we are kind of more prominent / saturated in the B2C markets, such as Brazil for instance. So we’re seeing quite a bit of growth around B2B. In the US one of our bigger clients, Stanley Black & Decker uses us for B2B in most of their markets. So because of how flexible and extensible that platform is, we were able to easily modify quite a lot of the B2C features to suit the B2B clients. So there’s certain things like request and approval workflows, which you don’t necessarily need in a B2C feature-set but then you have things like multiple price lists and catalog segmentation for clients.

VTEX:

You can also do B2B specific marketing promotions. So that’s completely different from your B2C offering. We have native integrations to the likes of Avalara, for instance, for tax calculations. You can do bulk order uploads. You can also look at things like sales team apps for supporting sales processes. Our product is PWA ready, so you can customise things and create external interfaces for different scenarios like that.

VTEX:

Another thing to highlight is customer credit management. So that’s something that is very good that you don’t necessarily need for B2C. There’s quite a number of things that are really, really powerful when you talk about B2B that is not as exciting to see brought up in your average sales conversation. But at the same time, we have customers like Whirlpool that use us for both B2C, B2B as well as marketplace – and they’re using it on the exact same platform. That also means that all the systems are talking to each other. So you share things across channels, so you can share the same inventory for instance, but then you have different price lists. So if you’re talking about a B2C customer versus B2B customer, you probably have bulk orders and discounts for bulk orders, whereas the B2C customer might not get the same.

Paul: 

Moving onto marketplace, how big is this for you?

VTEX:

Yes – marketplace is something that we started many years ago, again, because we are afraid of Amazon. So in 2014, Walmart Brazil selected VTEX – we won this project in 2007, but they then hired us again to build a marketplace solution for them. So the current platform offering that we have right now, we can offer marketplace via VTEX again because we want to orchestrate all the channels for our customers. So we need to have the B2C, B2B, marketplace and whatever else. But we can be just a marketplace. We have clients right now that are purely marketplaces and they have their sellers connected via our platform. Or you can be a B2C retailer with a marketplace.

VTEX:

So it’s something that VTEX can offer from scratch. And we have a lot of marketplace features to serve the clients. One important thing to highlight is that, in the UK, we are not so big right now, but in Spain we have more clients and marketplace clients among them. So imagine that in Brazil we have 200 marketplaces and I don’t know, 2,500 clients where now they are integrated among them. So if I am a brand in Brazil and I want to convert my store into marketplace, I already have 2,500 sellers integrated with VTEX. I don’t need to integrate them. So it’s pretty easy for you to run a marketplace using VTEX. But if you want to integrate new sellers into this platform, you can integrate Magento, you can integrate Shopify, you can do it for BigCommerce, it doesn’t matter. You’re going to use the API that we have and you can convert your data into the format for marketplace.

VTEX:

I think just to add, one thing that’s really interesting about this is that it enables you to open up more product lines and it even enables you to kind of play around with another part of the business where you may have never thought off. So rather than you wanting to go into this new product, but then you’re just not sure if that’s going to be in line with your strategy, you don’t want to invest too much in the product itself or holding the inventory, you can actually just explore, you know, have a partnership with that particular provider or other retailer, open up some of the product lines within your store and then see if that works for you. And then maybe later on that opens up a new market for you. Or you can just maintain that as a marketplace.

Paul:

Very interesting! So the next one I’m actually going to change and I’m going to go off piste a little bit. Earlier during the demo you talked about the API coverage around the platform and a common use case being headless. How big is headless for your currently and how much of a focus is it?

VTEX:

So, we built the core of the platform, we call it the foundation, for headless commerce too. If a client wants to use just the foundation of the software, they can just use it. And again, all customers have access to the same APIs that our developers are using to integrate and to build the system.

Paul:

Yeah, that’s really interesting. And we’ll come on to competitors on that side a little bit later on, but it sounds like you’re in that realm of the kind of best in breed API first platforms. Second to last question. So you’re obviously a SaaS platform and from the conversation we had earlier, iit sounds like you’ve got a similar proposition to someone like Salesforce. I know you’re GMV-based in terms of pricing, but give us an overview of how pricing works and what it might look like for maybe a £20m retailer and a £10m retailer.

VTEX:

Yes, the pricing model that we have right now is based on a percentage of sales. You can pay as you go, you can pay every month if you want or if you prefer, you can pay in advance. So the pricing will depend. If we are talking about a £10m retailer, this might be between £160k and £200k per year, something like that. Something that is good to highlight is that all the modules are included. So we don’t have upsells etc and this includes unlimited stores.

VTEX:

For us – we are proud to say that we are not hiding any costs, you know, because at the end of the day we don’t want to. In fact, we want you to sell more. It’s where VTEX will make more money. So our entire pricing model is based on a % rate based on your total revenues and the contract that you want to have with us might be monthly or if you want, it might be five years, something like that. So we’re going to decrease based on this as well.

Paul:

I guess with the GMV model, you’re obviously incentivised to help retailers grow. What level of support do you provide with the platform?

VTEX:

With us getting a percentage of the turnover is not a matter of what type of support we’re going to provide, it’s the survival of our company.. So for the enterprise components that we have, we have one customer success person and the role of these people is to increase sales and decrease operational costs – and of course, if we have some problems with the platform, we are going to talk with the IT department and we’re going to solve the problem for you. I think that is one advantage when we are talking about support because at the end of the day, it’s not just support, it’s a kind of your employee and it’s up to him or her to increase sales and to make things happen.

Paul:

That makes perfect sense. Last question. Who do you consider to be your biggest competitors and what type of customer are you targeting?

VTEX:

Right now Salesforce for sure – and Magento. Salesforce is not so strong Latin America – but Oracle is. So in Latin America, Oracle and Magento would be our main competitors. But globally speaking, Salesforce, Magento, Oracle, SAP, they are the main ones right now.

VTEX:

I guess in terms of target customer, it’s a retailer with multiple channels, likely international that has some level of complexity in their operations.