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OceanX and the E-Commerce Subscription Wave

By Denis Pombriant
Feb 8, 2019 5:00 AM PT
oceanx provides support for e-commerce companies that want to adopt a subscription model

Until recently, becoming a subscription provider was a big and expensive task. To get into the game, a vendor needed to build a subscription business model right next to its traditional businesses, so to speak, which typically involved building an e-commerce Web store and member site, organizing an online price list and catalog, and figuring out how to handle subscription business receipts, as well as shipping and dealing with returns.

There's more, too -- like using analytics to understand the business and its relationship with customers. For example, businesses that send unique or curated bundles periodically need analytics to determine the best possible recommendations to ensure customer delight and avoid costly returns.

Early on, vendors had to do all this themselves, and many resorted to piecing together multiple systems available in the market. That was hard enough when e-commerce was a new thing, but any business entering the market today must do so knowing that its competition is already up to speed, so there's little room for mistakes.

Not surprisingly, e-commerce is commoditizing, with vendors now offering most if not all of the things that businesses need to get going and to remain in the subscription business. OceanX is an interesting company in this regard. It offers an easy way to take any retail business into the realm of subscriptions.

OceanX saw high barriers to entry as an opportunity. If it could build a scalable platform that supported direct-to-consumer retail, then it would be able to lower the costs and, importantly, reduce the risks involved for any company developing an e-commerce business.

Making It Work

Like many startups, OceanX chose Amazon Web Services (AWS) to support its vision. That was nearly three years ago, and the company saw success almost immediately.

One of OceanX's early advantages was that as a platform it can offer integrated business processes, from on screen shopping to cash. Equally important, all its platform apps capture and share customer data with other apps in the portfolio, and this analysis gives partners important insights at all critical points in the customer journey -- something that's harder to do with a piecemeal approach.

In e-commerce especially, understanding the customer journey is paramount, and having data that partners can analyze is critically important to producing a personalized customer experience.

We can broadly define this as experiences that satisfy customer needs and that keep them coming back -- two critical elements of success in subscriptions.

Getting Specific

Supporting a subscription e-commerce model is harder than this general description suggests, of course. For instance, there are two basic subscription models: curation and replenishment. A curated model sends a selected, or curated, box of goods to a subscriber each month, based on information the customer initially supplies, which is augmented later in light of purchase history.

A company engaged in sending curated clothing to subscribers obviously needs to know style preferences, sizes and colors, but also what recently has been recommended and purchased. Sending two pairs of hiking boots in rapid succession is not a winning formula. Neither is offering boots too soon after a rejection.

The curation model is the fastest-growing part of e-commerce, according to the Subscription Trade Association (SUBTA), which estimates that about 65 percent of subscription services use the curation model. So, subscriptions to curated goods provide a great opportunity but also great challenge.

The second model, replenishment, may be more familiar. From shaving supplies to dog food and quite a bit more, subscribers can "set it and forget it," receiving a just-in-time delivery each month. They still have the opportunity to change order parameters, like content, frequency and quantity. Importantly, only 14 percent of subscription vendors use the replenishment model.

Within these two models, you can see the need for all the components of e-commerce, including data collection for later analysis, member portals, order and change processes, and returns. OceanX provides its partners with a solution for all -- one that they don't have to develop and maintain.

At the same time, it's important for partners to maintain control of processing, so OceanX runs warehouse and distribution systems, and it picks and packs goods for its clients. However, payments are credited directly to partners' bank accounts. OceanX is paid by its clients, just as any other subscription supplier would be.

Ideal for Brick and Mortar?

You'd be right if you thought that brickand-mortar retailers could take good advantage of the subscription model. After all, the retailers already have a brand, customers and supply chains, and they know retail and merchandising.

In many ways, this is an ideal setting for an omnichannel approach. However, retailers still have to deal with things like pickups and returns, and such situations as buy online but pick up and return in store. OceanX's technology extends to all of this.

Importance of Analytics

A lot of any subscription business depends on Key Performance Indicators, or KPIs -- measurements that can tell a vendor how many customers come back and what percent leave, for instance.

High retention rates (90 percent-plus, depending on the industry) indicate the vendor is doing well, which limits the investment needed to replace revenue that goes away for organic reasons.

Other measurements include customer lifetime value (CLV), annual recurring revenue (ARR), and much more. Each measure provides insight into the health of the business, both now and in the future, and each depends on having a complete view of every customer and every process. It all comes back to collecting customer data and having the right analytic tools.

Enter Oracle

OceanX initially was successful with hosting its business intelligence and data platform -- parts of its entire system -- on AWS. It still uses AWS for orders and other parts of its platform.

However, success handed OceanX what you might call a high-class problem. It needed more horsepower for functions like business intelligence, reporting and analytics. That's why the company began searching for a cloud-based solution that could give it more performance than AWS.

"We were faced with severe performance issues in our data loads and cube builds," said Vijay Manickam, VP data and analytics.

"We were left with an option to increase the CPUs (with AWS) that would have cost us more license fees," he recalled. "To scale from there would have cost more. Oracle Exadata Cloud Services enabled better performance at a lower cost. We proved this with a POC (proof of concept) before we embarked on the migration. At a high level, there was a 3x performance gain and about 30 percent reduction in TCO."

With the POC in place, OceanX selected Oracle to support the lion's share of the business intelligence platform in the Oracle Cloud. It relies on Tableau for analytics, and takes advantage of Oracle data transformation engines, thus enabling it to maintain a single view of the customer across two clouds.

OceanX's Vision

The reasons for moving to Oracle Exadata Cloud Services can be summarized best in Manickam's words: "Our business depends on giving our clients, who are sophisticated brands and retailers, complete visibility into their customers. At the same time, we know how important it is to provide a personalized experience to customers. Both are highly dependent on having a single view of all customer data, and being able to analyze it quickly and accurately."

Those were the twin drivers at the company's inception, and the vision for building and operating its platform. However, success also required a platform and infrastructure that could expand easily and provide the performance needed to do all of the back-end processing that few people see but everyone misses when it's not present. The platform also had to support the greater security needs OceanX faced as a vendor itself.

OceanX's journey with Oracle is still in its early stages. The company has not yet made a decision to move its order management modules over from AWS, for example. Still, Manickam feels that directionally it is on the right track.

"We help our customers to continuously track and analyze all facets of their businesses, so we do the same with our business," he said. "We chose Oracle because of their experience in high performance systems."

So far, it appears that was a good decision.


Denis Pombriant is a well-known CRM industry analyst, strategist, writer and speaker. His new book, You Can't Buy Customer Loyalty, But You Can Earn It, is now available on Amazon. His 2015 book, Solve for the Customer, is also available there. Email Denis.


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