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Salesforce gears up for e-commerce with Demandware deal

CRM and cloud platform software company Salesforce is set to acquire Demandware -- taking its cloud-commerce software offering with it

The retail space is fast becoming a battleground between those digitally enabled and those left behind, with customer data being the ultimate weapon.

At Demandware's 2016 XChange conference in Miami, Demandware CEO Tom Ebling cited the importance of adapting to customer demand, labelling retailers who fail to do so as "losers".

Months later and Salesforce has announced it will be acquiring cloud-commerce software provider Demandware for a net value of approximately $2.8bn.

Known for customer relationship management (CRM) and cloud-based software systems, Salesforce claimed it would use Demandware to extend its Customer Success Platform designed to help companies improve customer relationships.

The transaction is expected to be completed in the second quarter of 2017.

Salesforce chairman and CEO Marc Benioff called Demandware an "amazing company", as well as a leader in cloud and digital commerce.

"With Demandware, Salesforce will be well-positioned to deliver the future of commerce as part of our Customer Success Platform, and create yet another billion-dollar cloud," he said.

Advancing in the retail space

The retail space is a rapidly evolving market as high street players play catch-up with pure-plays such as Amazon, Uber and Airbnb. In purchasing Demandware, Salesforce will see the benefit of Demandware's e-commerce technology as well as its many customers.

As part of the Salesforce acquisition of Demandware, the firm aims to add to the new Salesforce Commerce Cloud, using Demandware technologies such as e-commerce and its point-of-sale system to improve its e-commerce offering, filling a gap in the Salesforce portfolio.

Miya Knights, head of global retail technology practice at Planet Retail, claimed the Demandware purchase gears Salesforce up for an organisational change.

"The acquisition could maybe help explain, and justify, the price hikes Salesforce imposed on customers late last month [May 2016], turning it from a CRM company to a transactional one, with e-commerce, point-of-sale, and ERP [enterprise resource planning] components," she said.

Although purchasing Demandware will mean also acquiring its customers, Knights explained that this particular venture is more about filling a software gap for Salesforce.

"It should be a good strategic move if it aims beyond just acquiring the Demandware customer base," she said. "The two vendors have complementary roadmaps. So I'm sure Salesforce will be looking to exploits this opportunity to develop a more competitive product and services portfolio."

Connecting customers

Over the past year there has been an increased focus on the need for retailers to collaborate to properly serve and understand consumers.

Knights admitted there has been a trend towards retailers working together to use customer data and provide better customer service, something the new relationship between Salesforce and Demandware might drive.

"Planet Retail has identified the need for retail brands and merchants to work more closely together in future to win and foster customer loyalty, and marrying customer records and transactions in one system would certainly have its advantages," she said. "But this is just one aspect of the joint roadmap the newly expanded Salesforce must capitalise on to maximise the potential opportunities in acquiring Demandware."

Demandware's Ebling stated in a blog post that both Demandware and Salesforce have a focus on increasing the success of its customers -- the core of most business strategies.

Ebling said of the acquisition: "Becoming part of Salesforce will accelerate our vision to empower the world's leading brands with the most innovative digital commerce solutions that enable them to connect 1:1 with customers across any channel."

At Demandware's 2016 XChange conference, the commerce platform provider's emphasis was on a unified experience for the retailer fuelling a seamless journey for the consumer.

To enable this, Ebling claimed sharing non-identifiable customer data is something its customers actively participate in to ensure they are keeping up with trends and competing with the likes of Amazon.  

"To really execute successfully on the vision of omni-channel, you want to have no barriers between what the consumer experience is in the store and what they experience in e-commerce," he said.

"It's a general part of our contract that they agree that data can be shared for the benefit of the platform. Amazon has tons of data and is using it, but by themselves they only have a fraction of data. Demandware won't have as much as Amazon, but we'll have a lot more than it would have alone."

Read more about omni-channel

  • Virgin Media is using Salesforce to offer a single customer view irrespective of the channel the customer uses to talk to the company
  • A Retail Business Technology Expo panel likened the current omni-channel movement to the dial-up stage of internet connectivity

Taking on the pure-plays

But although addressing a gap in the market and taking on pure-play brands is important, Webloyalty northern Europe managing director Guy Chiswick explained there's much more to e-commerce and omni-channel than just covering all bases.

"If retailers want to take on the pure-plays, they need to get the customer experience right," he said. "Millennials are driving change in the retail space and demand that high street retailers expand their offering to include things such as click and collect, returns and online price match. But this comes at a price, and there are huge supply-chain costs associated with this that pure-plays won't have to contend with." 

However, despite the hardships that may come with complex supply-chain management and the need to increase consumer services, Chiswick said the ability to use Demandware to handle its "transactional side" will put Salesforce in a "strong position" by giving the firm a chance to "provide an all-in-one solution for its customers" and use the consumer data of its customers.

He added: "Salesforce will be in a good position to review and leverage consumer information and help its customers remain relevant and competitive. Software providers have huge insight into consumer habits and there is huge value in the data they hold."

This move towards omni-channel is causing a shift in the offering of many software providers as well as the retailers who purchase their products. Independent retail analyst and Retail Connections chairman Chris Field stated that though Salesforce is using Demandware to gear up for the future of retail, the relationship might be "challenging".

"Salesforce is a B2B [business-to-business] CRM company while Demandware is B2C [business-to-consumer], all about helping retailers and brands reach consumers. They are not the same, but I am willing to concede that perhaps Salesforce has spotted that the lines between B2B and B2C are blurring," he said.

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