The notion of combining an online marketplace with a payment platform, a shopping cart and a robust backend is not new. But when the marketplace is eBay, the payment platform is PayPal, the cart is Magento and the backend is GSI Commerce, that is news. eBay calls this new collaboration X.commerce. We spoke with its general manager, Matthew Mengerink about the goals, and purpose, of that new initiative.
Practical eCommerce: What is X.commerce?
Mengerink: "X.commerce is a new division that's trying to address what we observe as macro trend. What we've observed is that consumers more than ever before are embracing technology as the way they shop. People talk about m-commerce, and e-commerce, and c-commerce, and f-commerce and the like. For us, all of those things disappeared and now it's just commerce embracing technology.
"For example, I've got five children and my oldest is 14. When she is shopping in the mall, she's shopping with her mobile phone. We'll be there and she'll take a picture of something, text a friend to see if they'll like it. She's done research before on the computer. If she doesn't buy it at the store, she'll go home, see if she wants to buy it elsewhere. So what we're seeing is that regardless of whether or not people want technology in the store, the consumers are driving it.
"Meanwhile, if we look at just the last three years, we went from no iPhone, and no app store to iPads, iPods, Android, and other mobile operating systems. All of these are exploding in the field. We recognize that we have all of these assets within eBay, Inc. We want to take to our partners this open network of developers and all the assets or capabilities of eBay, Inc., wrap them up nicely, and create an ecosystem where the merchants can tap into that technology and stay on the technical horizon. Put differently, merchants can go back to being merchants."
PEC: When was X.commerce started?
Mengerink: "X.com started as an initiative within PayPal, where we 'opened up' PayPal to our developer community. That started two-and-a-half years ago. When we did this, the developers were really excited. I mean here is finally an open payment platform. But they came back and said, 'Wow. To actually help merchants, to create even a great experience ourselves, we need a little bit more.' Just listening to them at the beginning of this year, we decided that we needed to go well beyond payments and opened up all of eBay, Inc. So that's where I'd say we went from the X.com to X.commerce. We said, it's way beyond payments, it has to be the full stack and we have to help in every way, shape or form we can to really help our merchants get ahead."
PEC: Let's say a merchant uses a hosted ecommerce platform. What does a merchant migrate to if he or she wants to be on the X.commerce platform? Does that mean that merchants use a Magento cart?
Mengerink: "That's something they could do. Now, what's really important to understand is other carts, other platforms winning doesn't necessarily mean we lose. We care mostly about PayPal, eBay, and GSI growing. We believe that the best way for that to happen is to serve our merchants and help them with their growth. So, first and foremost, we maniacally focus on how fast and how successful our merchants are and in that, what it says is if they wanted to come to Magento, that's a great platform. But if they're with a competitive cart or if they are on a different platform, migration is an expensive thing and that might not actually help them grow in the moment. So, we also offer all of these services a la carte. Folks who consider themselves competitors of Magento are welcome to come in to use the services we provide through the X.commerce platform — integrate with it — because they are also helping the merchants, and that goes to our primary mission."
PEC: Do merchants hire developers if those merchants want to work with X.commerce?
Mengerink: "There are various offerings that we have that go from the mom and pop sellers — where they could use Magento Go and create a storefront themselves — through a configuration interface. They can have a basic storefront with a lot of capabilities without any help from any technology. Now, oftentimes merchants have existing inventory management systems. They have a desire to customize and get ahead, and in that circumstance we recommend that they find a system integrator or a developer from within our developer network. These aren't going to be eBay Inc. employees. They're not X.commerce employees. We don't want to go into the professional service division. We want to have this be an open network, where the developers who are making money are the external developers. That when it's an ecosystem; it creates a market for the merchants where they can have the developers competing so they'll get the best price for the best product that they possibly could get."
PEC: X.commerce, as you mentioned, is largely comprised of eBay, PayPal, Magento, and GSI Commerce. Please explain the roles of those entities and how you envision them coming together for a greater whole.
Mengerink: "First and foremost, we have to look at the mission of eBay Inc., which is connecting buyers and sellers. Everything we do these days is focused on that. When we look at X.commerce, this is bringing the developers to the customer and helping them take these pieces to the merchant. When we look at what they offer, eBay marketplace brings a hundred million consumers globally distributed. So it's an important component in this multichannel world that we're seeing today. If we look at GSI, they provide wonderful services to large-scale merchants. If we look at PayPal, it's the number one online payment mechanism, which brings people extra reach and lift as well as protecting them from the fraud that exists in commerce. Behind that, there are many more brands — we have all of these acquisitions that we've done — each one of them with some fantastic commerce assets.
"The way to look at it is these major properties have all capabilities that they're not providing to the merchants to help with distribution, worldwide capabilities, and really address the mega trend of social, local, mobile, and digital."
PEC: Tell us what GSI does.
Mengerink: "GSI takes large merchants online. It does the capital investments to bring a merchant's inventory online to synchronize it, to bring it into the Internet. Then it does the sales component, the marketing, and the fulfillment of the product behind those merchants. The larger merchants appreciate the context and expertise that GSI brings. They all love the fact that GSI only makes money based on them making money. So, large service, large merchants and full Internet capability is what GSI brings."
PEC: eBay has presumably invested in X.commerce to make money. How will eBay benefit from all this?
Mengerink: "Fundamentally, it's about helping the ecosystem to grow. eBay helps bring companies global as we bring a hundred million consumers to them.
"There's a eBay listing to use and there's final value fee that we make; that's sharing in that growth. There are transactional costs of PayPal and then the service fees of GSI. As X.commerce works to help merchants grow, we hope that they'll end up using those large services of eBay Inc. We're providing huge value and if they look at the cost to value, they net out a huge win, but it's mutually reinforcing and that's a win for our company as well. So, while there may be hosting fees, there may be some fees for our revenue shares that we have with our developers on X.commerce, our primary focus is how do we grow and scale our three-core businesses and how do we do it in a way that the developers and the merchants external to eBay, Inc. will say 'this is the best possible thing that we could have happen or could have hoped for. They're helping us grow our business' or if there's a developer, 'they're helping us connect to the merchant and help them make a living.'"
PEC: The trend for many online merchants is all-in-one solutions, with good customer support, everything in a single ecosystem that's much simpler than the old days of finding a host, finding a cart, finding a security certificate, and so forth. You could say that X.commerce goes against that trend in that it's more complicated. Merchants have to hire developers, which are not always in a merchant's interest. Does X.commerce go against the trend with these all-in-one solutions?
Mengerink: "Yes and no. It's definitively against the trend of getting locked in to a single platform. Another thing some merchants might tell you is once they've invested in a platform they're stuck. If that platform doesn't keep up with innovation, then their businesses start to fail. They have to be able to be nimble. They have to be able to adapt. One of the recognitions we have is that no single company can do that anymore. There's no such thing as the uber technology company that provides all solutions successfully across the mega trends and across this industry. So, an open platform that allows developers to innovate is mission critical.
"Now, we did recognize that being able to have a simple interface, a simple starting point is also critical. That's why we talk about this being a 'commerce operating system.' It gives you the basis on which to build your business, but also the flexibility. We've taken further steps by looking at the contributions of our competing partners and developers within our ecosystem and challenge them to make it so that you can 'click on or click off' an innovation. If I want to extend my platform, I go to the app store. For example, there's a drop-shipping app for $1,000 that will turn your store into a drop-ship manageable store. But if you stop liking that service or you felt that that developer wasn't keeping up with his update to the innovation needs that the business have, at any time if somebody else came in you could click a button and turn it off, click another button and turn on a competitor.
"Now, the developers don't have a lock-in. Developers don't have relationships with merchants where they're holding them hostage with their technology because the costs are so great. Instead we're saying you have the ease of a single platform, but you have the wonderful competition and the flexibility of quickly and cheaply mixing and matching the technology that's out there so you can stay cutting edge. We really don't think that there's another strategy that works."
PEC: How will you be integrating with Facebook? What are PayPal's plans with Facebook?
Mengerink: "Facebook is an amazing partner and I have a tremendous amount of respect for Mark [Zuckerberg, founder of Facebook] and what his company has been able to do in the world. I would be remiss if I were to steal the thunder of Katie Mitic [a Facebook executive who is joining eBay's board of directors], who's going to present on October 12 at our Innovate Conference. Suffice it to say, we'll have to wait for her to tell the world exactly how we're working together. But let me just say that social is absolutely an important aspect of the future. It's a critical trend and it's very clear that Facebook is the leader and that the combination of social and commerce is an extraordinary promising space."
PEC: So, for purposes of this interview we can say there's big news with PayPal and Facebook on October 12. Is that fair?
Mengerink: "That's a very fair statement."
PEC: Can you tell us about the upcoming Innovate Developers Conference that your organization is putting on?
Mengerink: "This is a culmination of the work we've done, which is creating the technical components, creating an operating system that we call the x-fabric, and ensuring that as developers and merchants come together, that they can very simply understand how they fit in to what we've created. The fact of the matter is in order to be flexible enough to provide a solution for a single seller on eBay all the way to a Fortune 500 company on GSI, there's a complex space. At the Innovate Conference, with our demos, with our training courses and the like, we'll show each merchant where he or she fits into the ecosystem and how he or she can benefit.
"At this developers conference we're going to show the developers exactly how they can monetize their efforts and how they can connect with this merchant community.
"The conference is October 12 and 13 at the Moscone Center in San Francisco. Go to X.com, and there's a link to the registration right there. We're very excited about seeing as many developers and merchants as we can at the hall."
PEC: Anything else on your mind today for our readers?
Mengerink: "eBay Inc. is really aspiring to be the technology partner for merchants and developers. We have fundamentally built into our DNA the notion that we don't compete, we don't sell against our merchants, and that we provide the opportunities for our developers as opposed to trying to compete with them either. The aspiration — if there's something great that comes out of the work that I'm doing today — it's really creating an ecosystem where merchants worldwide say, 'You know, this was a turning point for commerce. This is where it became easier and cheaper to keep up and we finally had that open network we needed to differentiate and get ahead in an ever increasing technology background.' That would be it."