What Frictionless Commerce (Really) Means Today

Episode 1: Achieving Frictionless Commerce Podcast Series

Vertex Automation for Tax

Episode 1 Summary

The introduction to the Achieving Frictionless Commerce podcast series provides IT professionals with the foundational knowledge they need to understand how frictionless commerce is changing, and the major way tax plays a part. With commentary from Peter Olanday, Director of Retail Consulting at Vertex, this episode reviews the challenges and benefits of frictionless commerce, how friction has been accelerated over the past few years, and what it means for IT professionals today. 

Achieving Frictionless Commerce: Helping IT professionals tackle friction within their organization.

Introduction (00:01): Welcome to Achieving Frictionless Commerce, a podcast series brought to you by Vertex, where Tax and IT experts discuss how you can create a frictionless buying experience that will better support your customers and drive future growth for your organization—as well as the surprising way that tax plays a part.

Jeremiah Owyang (00:29): Developing a smooth buying experience is a necessity for today’s businesses; it’s no longer an option. For IT leaders that are challenged with making this happen, the good news is that there is help out there. 

Jeremiah Owyang (00:41): Welcome to Achieving Frictionless Commerce! My name is Jeremiah Owyang, a technology analyst and entrepreneur based in Silicon Valley and your MC. Join me and my guest, experts from Vertex, a leading global provider of indirect tax software and solutions in our six-part podcast series. Together, we will discuss what that term frictionless commerce means right now, what you can do to minimize any barriers in your customer journey, and the best steps to take that will lead to long term organizational growth. We will also take a deeper dive into the somewhat surprising ways that tax plays a major role in reducing friction—and give you powerful examples of at least one retailer who used tax software to do just that.

Jeremiah Owyang (01:29): Today I'm joined by Pete Olanday, Director of Retail Consulting at Vertex. Peter joins us to help you understand what frictionless commerce means today, how it's changing, and how tax plays a role. Pete, welcome to the show.

Peter Olanday (01:44): Thanks, Jeremiah.

Jeremiah Owyang (01:46): I had a chance to look at your very impressive background, but I'd love to hear from you about your role within IT, retail, and even consulting. What brought you to this place in life?

Peter Olanday (01:57): It's a great question. It's a very loaded question, Jeremiah. I am the Director of Consulting within Vertex Consulting. My group is responsible for what we call vertical solutions, and what that really means is anything that's industry specific. So, that means (obviously) retail. I also am responsible for our professional services in the areas of leasing and telecommunications. 

I've been with Vertex for going on 11 years now. And prior to that, I spent 10 years at IKEA responsible for their point-of-sale systems in North America. So, I come from more of an IT background. We were a Vertex customer, so that's how I kind of got looped into the Vertex world, but most of my experience has been within the retail space.

Jeremiah Owyang (02:39): Yes. And that's an amazing retailer to come to at great scale. So, I have a question for you, Pete, just to help frame this for the audience here. What does it mean when we say frictionless commerce?

Peter Olanday (02:53): Yeah, I mean, it's a really prevalent buzzword right now. So, I think maybe a little bit overused, but we could probably start by just defining what friction is. And we define friction in the context of retail as every extra step in the shopping experience that stands between the customer and the intended purchase. So, anything—some of it is necessary, some of it is redundant, some of it is inefficient—but friction is any step along the way.

Peter Olanday (03:19): So, that said, what's frictionless commerce? In simple terms, the goal of frictionless commerce is for any customer to buy a product or service whenever and wherever they want with as few clicks or steps as possible. It's got to be easy; it's got to be seamless; it's got to be to the point where it's almost intuitive; it's just it's a natural flow of things. So, removing those points of friction and making it efficient is sort of the ultimate goal of frictionless commerce.

Jeremiah Owyang (03:47): Pete, how does frictionless commerce affect the customer experience?

Peter Olanday (03:52): Maybe the opposite way to look at it is how does friction itself affect customers? It can leave them frustrated. It can leave them frustrated to the point where they abandon the shopping cart or worst case is the customer that doesn't come back at all. So, you think of customers—and we're all sort of accustomed to this sort of digital way of shopping nowadays—customers who don't need that extra time or support to make their purchase. It's something they've bought before. You're a retailer that they've purchased from before because they're repeat customers. So, you think of, one extreme, like Amazon's one-click buying. I mean, you can't get any simpler than that. So, from a customer experience standpoint, it really is just, I don't even have to think about it. I just…I want it, I buy it, and I don't have those extra clicks, as we talked about, standing in my way.

Jeremiah Owyang (04:39): You might have just answered this, but we'll go with this again. What does efficiency and consistency look like?

Peter Olanday (04:44): Yeah. And that's another great question. And it's one of those things where you don't realize it when it works. It really becomes evident when it doesn't work. So, when things are not efficient, then it really sticks out nowadays. So, you think of like, I mentioned Amazon's one-click, but you think of things like ride sharing apps like Uber and Lyft. You just basically request a ride. It knows where you are. It sends you the make, model, and color of the car that's coming to pick you up. It's so natural nowadays that if it were to be anything less than that, it would really stick out.

Peter Olanday (05:16): So, other examples are like renting a car. You show up at the airport, the app tells you what parking spot it's in, what make, model of car you have, and away you go. You don't even need to stop at the rental car desk. So, it's experiences like that where the customer experience, again, is seamless and as simple as it possibly can be that it sort of almost integrates into your everyday life, you don't even think twice. It just kind of flows with the natural progression of things.

Jeremiah Owyang (05:43): I get you. You know what this reminds me of, is kind of like public utilities. I turn on the light switch. The powers on, the lights are on. I turned the faucet and the water's there, the hot water's there, the cold water's there. And that to me is frictionless. To achieve that, I mean, we've had thousands of years of engineers building public utilities, but how would retailers, how would they do this? And what are the challenges that they're struggling with to achieve frictionless commerce?

Peter Olanday (06:09): Jeremiah, that utility analogy is like, spot on, is perfect because you turn the water on, you turn the light switch on, there's a lot of things that happen behind the scenes. But it's come to a point where those providers sort of have knocked down the silos that exist in getting that water to you and getting that electricity to you. I mean, if you look at, think of friction to the customer, it's usually caused by friction within the internal processes. There are different disparate systems having to communicate with one another. And there's probably a lot of back and forth between those systems. And maybe the process takes a long time, or there are too many disjointed steps. I like to use the word “clunky”, when I'm on a website and it just doesn't make much sense, or the steps seem out of order. I'm having to enter the same information multiple times at different points in that checkout process. It's not a great customer experience.

Peter Olanday (06:56): All of that friction internally is inevitably visible to the customer. Whether there has to be silos—and probably there's a necessity to have silos within the organization— making those invisible to the customer, I think, is the biggest challenge. But when it works, it works. Like I said, when it doesn't work, it is so obvious. So, having those internal processes and internal systems work and play well together internally will translate into the customer having a very seamless experience in turn. It's got to start in the back office. It's got to start behind the scenes.

Jeremiah Owyang (07:31): Well said, Pete. As my friends like to say, a lot of paddling beneath the surface even though the duck might be looking very smooth, just gliding along the water. Now speaking of that, making things look easy or paddling hard, the last two years have been a significant amount of changes with the quarantine and COVID. How do you think that has impacted, whether it's helped things or accelerated frictionless commerce in shopping habits in general?

Peter Olanday (07:56): Great question. The pandemic—with the shift from digital to cross channel shopping experiences like curbside pickup and contactless checkout—has forced retailers to streamline almost every part of that journey and integrate channels in ways they've never really had to before, or never really been pressured to. At the beginning of the pandemic, at the start of the lockdowns and the store closures, I think customers were a little more patient with this clunkiness, if you will, because they knew that these new ways of shopping were new to everybody. Customers were trying to get used to this whole digital-only type of world as well. And we, as customers, were a little more forgiving. We weren't upset that there weren't dedicated parking spots for curbside pickup at my local Target, but now you start to see that like whole aisles with painted lines and everything like that. 

Peter Olanday (08:42): But now customers, I think, are no longer viewing this sort of seamlessness as a differentiator or a nice-to-have. It's almost become an expectation or a requirement. Shopping was previously, most of the time, a pretty single channel experience. I walked into a store, or I bought it online. Now I could start in one channel and end in another channel. So BOPIS, you know, buy-online-pickup-in-store, where I start online and end up at the store, or the reverse, where I start my journey at the store, they don't have what I want in the color and style and size that I need—and then I end up having the store ship it to my house. Sort of this endless aisle concept that was started years ago, but now has kind of really come to the forefront as we're dealing with supply chain shortages. 

Peter Olanday (09:29): We're dealing with retailers trying to minimize the physical footprint of stores. We've all read about the demise of shopping malls, etc. So, it's a different world. I think these things, of course, these problems and challenges existed before, but the pandemic accelerated these things and really magnified the cross-channel opportunities and, in turn, magnified the friction points.

Jeremiah Owyang (09:51): You bring up a lot of great points. I also noticed that even just with point of purchase, now mobile payment has just become a standard, at least in my region, which is a form of frictionless, right? And you have a background with that with point-of-sale. All right. So maybe you can help us give some practical tips to those that are listening. What about flexibility, scalability, and security, removing those barriers or friction between the physical and digital experiences that you were just talking about? How could we make commerce easy?

Peter Olanday (10:22): I think what has happened is obviously there's those hard, tangible things that have changed, these channels and new ways of shopping and things like that, but I think the pandemic also brought sort of a different mindset. The pandemic accelerated the move to digital and omnichannel cross-selling opportunities, but it also made retailers realize that there are endless possibilities. You can use channels in any combination, and there are constantly new channels still emerging. You think of internet of things like smart devices, like refrigerators, where I can purchase a gallon of milk right from my fridge, in-car apps, services like the food delivery services. I mean it's just opened up Pandora's box of all these different ways of buying things. And all of these solutions have to be flexible and scalable, of course, and secure while still maintaining that seamless, frictionless customer experience.

Peter Olanday (11:11): But I think one of the biggest takeaways, at least in my opinion, my observation, is that the pandemic forced retailers to rethink their processes, to stop being so reactive to disruptors—like the pandemic—but envision new opportunities to meet their customers. They're almost anticipating mixing and matching these different channels. What kind of new combination can I come up with? And all of that friction that existed within the channels, they need to be removed, of course. But then you have to start looking at the friction between the channels. And having that seamless customer experience starts with having a seamlessness between the channels and all of the systems within those channels.

Jeremiah Owyang (11:50): Pete, let's bring this to life. Let's imagine, and I need your help to articulate this, let's imagine we're going to go through a customer buying journey and let's talk about what a friction experience would be versus a frictionless. So, before we shop, what's actually happening in the customer's mind?

Peter Olanday (12:04): If you're talking about shopping online, obviously there's advantages to shopping online than in person, that the search capabilities are there. I don't have to physically walk the aisles of the store and find my product. Other things that are helpful to customers in an online environment is customer reviews—it's huge. So, anything that, and this isn't specifically speaking to the friction part of it, but there are parts of an online journey that you might want to have multiple touchpoints, or you might want to have extra steps that you wouldn't have in a physical experience. So, having those customer reviews that I can read, and I use those all the time, I don't know anyone who doesn't.

Peter Olanday (12:47): And then also, we've all shopped online and seen those suggested related products, people who have bought this item have also bought this item. So, that's also another part of that online journey that it can cause more friction, but if it's done right, if you do integrate it with the experience… I think that's the key to frictionless commerce is not removing functionality or removing parts of that journey, it's integrating it in such a seamless way that it's just a natural progression of things. So, I'd go to check out or I go to fill my shopping cart online and all these suggestions pop up and they're kind of related. I'm like, "Oh, yeah. I can definitely do that." Or take it a step further, is bundle it. So, for one price, you can get the monitor with the computer, with the mouse, with the keyboard or whatever you're buying. So, it kind of opens it up to more selling opportunities for retail, and if you do it right, the customer doesn't realize that you are actually upselling them—it's just an extension of the purchase. I think there's a lot of opportunities and it all starts with reducing the friction. You just want to mimic the customer's thought process, you want to steer them in a way, without them feeling like they're being steered. If you know what I mean.

Jeremiah Owyang (14:00): Makes total sense. Pete, how does tax play into the items that we just discussed?

Peter Olanday (14:05): Tax, of course, is part of that shopping experience and especially in this digital world. The correct tax calculations, depending on multiple factors—what you're buying, where it's being shipped from, where it's being shipped to, or where is the customer picking it up if it's in a BOPIS type of scenario—but because the sales tax calculation is based on all those data points that were already determined, and it's happening at the end of that checkout process, it is ripe for friction. Can all of that previously determined information be leveraged seamlessly into the tax determination? I already know where I'm shipping the order to the customer, because obviously I need to get the customer their order. I need to also leverage that same information to determine the tax jurisdictions that I need to calculate tax for… items in the cart, are there discounts involved? All of those things that kind of happened along that checkout process need to be incorporated in the tax calculation. So, it's kind of taxes at the end. It's got to accumulate all that information to provide an accurate tax calculation. 

Peter Olanday (15:03): Also, it needs to be—and I talked about the across the channels—it also needs to be consistent across those channels. Does your sales tax solution support both your digital channels as well as your brick-and-mortar point of sale? Because historically retailers were very siloed with the channels. So, point-of-sale had its own tax calculation solution, e-commerce might have its own tax solution, maybe I sell in a marketplace as well, and they have their own tax calculation solution... So, to bring all of those channels together, you need to start with the things that are common and taxes, obviously, are common across all of those types of purchasing. So, that's how tax can play a role in reducing that part of the friction.

Jeremiah Owyang (15:45): So, what does this mean for our friends, the IT professionals?

Peter Olanday (15:47): Yeah. I mean, having a single unified tax solution across all the channels means consistency to the customer, but to the IT team, it also means efficiency and removing friction internally. And to IT—and I've lived that world where I've sat in those shoes—there's nothing like nails on a chalkboard, like redundancy. Like having multiple systems doing the same thing, it's painful because now I have to maintain two different systems. And if they're doing the same thing, it's inefficient. Frictionless tax means that a single source of the truth for both rates and rules. So as rates change, jurisdictions increase their rates—they rarely go down but they go up—I have to change it in X number of systems. So, it's having a single tax solution means one place to update the rate changes, one place to update the registrations of the retailer.

Peter Olanday (16:41): For those familiar with the tax world, Wayfair kind of redefined how you determine nexus. It's not just based on physical presence anymore, it's based on economic nexus, which means number of transactions or dollars in sales in a certain jurisdiction will force that retailer to register. So, all these things, kind of these moving parts are all changing. You know having that single tax solution means a single source of the truth, not just for rates and calculating tax, but also on the compliance side, the source of truth for transactional data. A consolidated holistic view across all of your channels in a particular jurisdiction. Give me all the sales tax I charge in California, not only for my brick and mortars, but also for e-com… maybe I have a mobile app that's sort of a separate channel, marketplaces, etc. So, all those channels having that holistic view for compliance, those monthly filings with the jurisdictions, audit defense, internal analysis, etc. It's just a more efficient way to do it.

Jeremiah Owyang (17:42): How can Vertex help with these amazing ideas that you just put forward?

Peter Olanday (17:45): We provide a portfolio of solutions that are using combinations as flexible enough to be integrated with eCommerce, order management, point-of-sale, ERP, wherever you really need tax calculation. We provide API's and a variety of ways to integrate with our solutions in real time. So, like you would see in an eCommerce type of scenario where you need tax calculated in real time through something, maybe a shift, maybe you're shifting towards a microservices type of architecture.

Peter Olanday (18:15): We also provide data-only solutions where we would provide tax rate and rule content for you to import into something like a point of sale and use an existing tax calculation engine but powered by Vertex content. And finally, we've just released an offline containerized tax engine if you're looking for an edge solution. So, you kind of have the best of both worlds, a hosted solution with something local or on premise to alleviate all of the latency that's associated with networking, network traffic, and things like that.

Peter Olanday (18:46): But regardless, if you want our solution on premise or hosted in the cloud, a huge differentiator for us is our content, which supports product taxability for whatever you're selling, whether it's food and beverage, clothing, health and beauty items—you name it, we have content for it. And then also, so not only whatever you're selling, but wherever you're selling, we cover the globe with our content. And specifically in the retail space, non-traditional taxes like environmental fees… we're seeing a lot of those… disposable bag fees and recycling fees and all these types of things as well as sort of nontraditional events like sales tax holidays. So that said, we have all of that content.

Peter Olanday (19:27): And then lastly, to put it all together to determine which of these solutions best fits your organization, and then to partner with you to actually implement that solution, Vertex is unique in that we have a professional services organization—the part of the organization that I represent—that solely focuses and specializes in retail. Most of our folks come from industry. They've worked in retail. They understand all the challenges that are unique to the retail space. They've walked a mile in those shoes, so that's pretty unique to us. And we pride ourselves in being able to understand and sort of talk-the-talk and walk-the-walk when it comes to retail.

Jeremiah Owyang (20:07): Thank you so much, Pete. It's been a pleasure getting to know you. Everybody, thank you so much to Pete Olanday for coming to the show today and being our first guest to discuss what frictionless commerce really means in today's retail landscape. 

Jeremiah Owyang (20:21): Don't forget to join us on our next episode when we discuss the steps you can take to do a health check on the status of your IT ecosystem including determining what friction your organization currently faces. Subscribe now so you don't miss it. I'm Jeremiah Owyang, your MC and thank you for listening.

About the Podcast Series

Are you a retail IT professional who is looking to learn more about frictionless commerce and how you can achieve that within your organization? If so, check out the Achieving Frictionless Commerce podcast series! Hosted by technology analyst and entrepreneur Jeremiah Owyang, experts from Vertex discuss what frictionless commerce means today, how you can discover and overcome roadblocks, and what you should do to prepare for future retail growth.

Featured Speaker

Pete Olanday

Pete Olanday

Director, Field Consulting

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Pete Olanday is Director, Retail Consulting, responsible for the integration of Vertex's Indirect Tax solutions in the retail space, specifically with Point-of-Sale systems and e-commerce platforms. Prior to joining Vertex, Pete worked for IKEA and EY. Pete has a B.S. in information and decision sciences from Carnegie Mellon University.

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