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Ecommerce APIs: The big opportunity

In Part Two, we look at the history of ecommerce API integrations, and the big, untapped opportunity we have today.

In Part One of this series, we defined ecommerce API integrations, explained why they’re important, and named key qualities to look for. 

In Part Two, we’ll take a look at the evolution of this landscape since its inception, and why that history matters for ecommerce channels and merchants today.

There have been four major periods of development for ecommerce integrations:

API-less: CSV exports and other manual processes (~2000)

Ecommerce platforms and backends started growing right around the start of the millenium. With growth came the need for different functions and services within and between different ecommerce entities. As those diversified, the need for fast, efficient ways to exchange information between apps and databases deepened. 

APIs enable that amazingly and efficiently, but before they existed, ecommerce companies used a mix of CSV exports, FTP servers, and EDI systems. Slow and far from error-proof, these early technologies dominated the first quarter of ecommerce integration history. 

Internal APIs: Slow, internal, and hard to scale (~2005)

The first ecommerce APIs were internal, used and consumed only by the merchant. Instead of opening communication to any 3rd party, these internal APIs were more like new closed systems. 

While it was a huge improvement to have APIs where there had been none, they were certainly not highly scalable REST APIs with well formatted JSON we see today. These were often SOAP APIs, really slow, poorly structured, and in some cases, platforms even built their own scripting language compatible only with their system. Developers literally needed to learn a new language in order to work with a given API. The design of these APIs made scaling very hard and had limited functionality. 

Modern Internal APIs: Cloud-native, fast, and feature-rich (~2010)

About a decade ago, the API landscape started to shift dramatically. First, they improved technologically. They became cloud-native, faster, and added more features. But more importantly, as online merchants outsourced more of their infrastructure to ecommerce platforms, the dependency on APIs increased exponentially. This led to the improvement of the APIs most crucial to the functions of ecommerce businesses.

As ecommerce platforms grew in sophistication and criticality, APIs grew and advanced along with them. By 2015 ecommerce had a strong ecosystem of APIs that were specialized, fast, scalable, and areas of prioritized investment for each platform.

While APIs had come along way by 2015, they were easily leveraged by 3rd parties. Usage was confined to the engineering teams at large retailers and DTC companies, or built internally by the e-commerce platforms themselves. This limited feature development, constraining growth, and causing a lot of duplicative effort and cost.

App Marketplaces: External, specialized, and open (~2015)

About three to five years ago, ecommerce platforms quickly realized that building out every merchant service in-house would be costly, time-consuming, and leave them open to competitive disruption. So they started to shift from an internal system to leveraging APIs to connect with an open market of external apps and services.

No platform’s story embodies this shift better than Shopify’s app store. Through their app store, Shopify has tens of thousands of external app developers creating new features and adding capabilities for Shopify merchants. Instead of tackling the development and deployment of every imaginable merchant service, Shopify centralizes all the different apps and services available in a single place for their merchants. APIs make that ecosystem possible. 

The big opportunity in the API marketplace (Today)

The real value of ecommerce API integrations has only just begun.

Until this fourth phase took off three to five years ago, merchants and a few ecommerce platforms captured most of the economic opportunity in ecommerce. Now that any app or service can integrate with these platforms, a whole ecosystem of apps, emerging channels, and economic value is opening up. For services like live shopping, curation, gifting, etc, the open API market now makes it possible for them to have direct connections and partnerships with merchants, and make a lot of money in the process. 

But two main factors constrain the majority of that economic opportunity:

  • Recency: The open market is still relatively new. Merchant websites today sit on many  different ecommerce platforms, with varying levels of API maturity. Only a few platforms have the robust functionality that Shopify does. Many other platforms are still catching up. 
  • Integration overload: For the open app marketplace to make good on its potential value, any app (channel in Violet language) should be able to integrate with any merchant or platform. But as headless commerce breaks ecommerce down into more and more specialized microservices and emerging channels proliferate, the number of possible integrations needed has grown exponentially. As we said in Part One, building integrations is hard, and very few companies have the resources to do it. 

So today ecommerce faces a conundrum: How do developers take advantage of the breadth of opportunity or potential integrations while delivering robust functionality to their users?

Cracking that nut is what we call the integrations challenge. In Part Three, we’ll look at why that challenge is growing, and how to solve it.

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6.22.2022
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