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Welcome to the API economy: Everything you need to know

illustration of two people talking, one with a smartphone in their hand and the other in front of a laptop. shipping boxes are stacked in the background.

In 2021, the digitization of ecommerce and logistics shows no signs of slowing down. And its APIs (Application Programming Interfaces) that are keeping the foot on the gas.

The emergence of open APIs is certainly nothing new, but we’re reached a saturation point where just about every interaction on a smartphone or website requires the cooperation of multiple APIs for a seamless user experience. 

Picture logging into your Spotify account and seeing the array of login options for your convenience; Facebook, Google, Apple, and more. Every single one of these requires its own API – and that’s before you’re even inside the app.

This is the API economy; a growing ecosystem of open APIs that allows businesses to find new ways to meet consumer needs, enabling better user experiences, organization, and data insights.

We’re going to take a look at what this means for the worlds of ecommerce and logistics at large – and how Whiplash is leading the charge.

The rise of the API economy

We’ve all heard the saying that two heads are better than one. Now imagine having hundreds of heads at your disposal to create fresh business solutions.

Some of the world’s biggest B2B and B2C companies, from Salesforce to Amazon Web Services, used this philosophy to fundamentally change the software landscape. Seeing the success of this model, it wasn’t long before other providers followed suit by bundling together APIs to create much more compelling services.

But it wasn’t all that long ago that subscribing to software platforms came with a pretty big caveat: That one system was unable to talk to another.

Unless the platform chose to build integrations with other systems, closed and monolithic API structures meant enterprising developers were unable to improve on the insights they could access. The result was often lackluster value propositions – and business outcomes. 

This changed when a handful of savvy tech entrepreneurs realized the benefits of being compatible with other products and services. Open-source APIs made it much easier to launch new offerings that targeted fresh pain points in an evolving digital landscape.

Given the sheer number of integrations now available, it’s become possible for service providers to market themselves on the basis of very specific or niche integrations. 

The returns management platform ReturnLogic literally uses the words ‘Shopify returns done right’ on the front page of its website, while social media APIs have laid the foundations for every third-party management tool you’ve heard of. 

The domination of plug-and-play integrations means that consumers and businesses are navigating a mesh of APIs every day, often without realizing it. 

Every time you open an app on your phone or purchase something online, you’re likely interacting with half a dozen APIs that can are coming together to enhance the customer experience – or create an entirely new offering altogether.

What are the advantages of APIs?

Developing new products/services quickly

When there’s a plethora of open APIs on the market, this makes it far easier for developers to create integrations with less intensive coding efforts. This means that service providers can move fast to take advantage of emerging gaps in the market.

In such a competitive SaaS market, this has obvious benefits. As the API economy grows, more integrations become possible over time and present fresh marketing and sales opportunities. This could be everything from customers being able to add a Buy Now, Pay Later integration to their ecommerce checkout, or take advantage of a new crowdfunding tool. 

In short, APIs allow platforms to become fine wines – they only get better over time.

Enhanced customer experiences

For the customers of customers (so to speak) APIs give businesses a much stronger value proposition. By partnering with other providers via open APIs, you can boost the versatility of your offering while giving customers one of one most enticing qualities of all; convenience. 

By offering seamless pathways to other services that customers need now or in the future, you can successfully market fruitful, long-term partnerships that address multiple pain points. 

It’s for this exact reason that ecommerce platforms like Shopify and BigCommerce have positioned themselves as ‘hubs’ of value-added integrations. They use APIs to create vast marketplaces that offer everything from SEO optimization tools to workflow automation, making them a natural choice for up-and-coming D2C brands. 

What are the disadvantages of APIs?

Data breaches

When an API is entirely open-source, it means that everyone has access – and people’s intentions might not be entirely honorable. Some of the biggest data leaks in recent years have been caused by weaknesses in APIs.

The apparent hack last month of the up-and-coming social media platform Clubhouse caused widespread confusion when the company denied that any hack had taken place. This was despite 1.3 million Clubhouse user records including usernames, follower counts, and social media handles being posted on a hacker’s forum. 

Clubhouse later admitted that this information was likely gathered using their own APIs, raising questions over how companies can guarantee data protection when there are so many pathways into critical systems. 

With the API economy now made up of a dense, interwoven bundle of connections between systems, it’s virtually impossible to pull at one thread without unraveling another. If data isn’t secured sufficiently, this gives would-be hackers access to a broad range of information that can be exploited for nefarious purposes. 

Some APIs have more power than others

One of the key problems with APIs is that they can result in businesses building a proverbial house of cards; painstakingly assembled, but able to come crashing down with little warning. 

Because the API economy is unregulated, there’s nothing to stop an API’s owner from making substantial changes – or even choosing to privatize an API altogether. 

For platforms that are dependent on certain APIs to create their services, the results can be disastrous. 

Instagram: A case study for the power of aggregators

Instagram is a prime example of what happens when a company is dominant enough to begin calling the shots over how its APIs are used, who are often known as ‘aggregators’.

It was once a pet peeve of many marketers and influencers that Instagram didn’t allow users to schedule content via the app. Restrictions to its API also prevented third-party social media management tools from creating built-in integrations. 

This led some platforms to introduce creative workarounds so they could market themselves as offering Instagram scheduling s – at least in part. Hootsuite, for example, introduced Instagram scheduling back in 2015 by allowing users to create and schedule content within Hootsuite, which then sent reminders to log into Instagram and post manually at the allocated time.

It was a serious gamechanger in 2018 when Instagram allowed selected third-party tools access to their API. This is why it came as a big blow when Instagram scheduling capabilities were added to Facebook’s Creator Studio – less than a year later.

There’s a clear lesson here: Creating a service offering on the back of APIs that aren’t your own is a big risk – especially when it involves aggregators who only need to worry about pleasing themselves and their users. 

Logistics and the API economy

In the past few years, APIs have been a major source of disruption in the logistics sector. Businesses and 3PLs alike have traditionally been reliant on EDIs (Electronic Data Interchanges) as the industry standard for exchanging information between different parts of the supply chain. 

But as real-time updates and ease of scaling become the keys to success in a volatile post-covid landscape, companies have been faced with the need to upgrade their systems to eliminate inefficiencies and delays in communication. According to the State of API Integration study, 62% of respondents said that they are transitioning into more of a platform approach to better integrate with partners and find more revenue opportunities.

APIs vs. EDIs

EDIs have been used in logistics for over half a century and continue to offer a reliable and low-cost method for transmitting large batches of information. However, they do have some notable limitations as supply chains strive to become nimbler and more responsive to consumer expectations.

The main weakness of EDIs is that implementation can be time-intensive and costly, requiring staff who are trained in EDI protocol. Furthermore, EDIs are fairly limited in the information they can transfer, often requiring intense customization to meet a business’s needs.

By comparison, the built-in nature of an API integration means that data can be exchanged between partners instantly, allowing for critical information on orders or freight to be updated automatically. APIs can also be tweaked or optimized with relative ease by developers to match the needs of clients, which makes for much more productive partnerships.

3 game-changing uses for APIs in the ecommerce logistics 

1. Shipping and freight selection 

Choosing between carriers is easily one of the most friction-filled parts of the fulfillment process. APIs enable 3PLs to connect directly with major carriers in real-time to identify which shipping method is optimal for their customer’s needs, without needing to jump on the phone or website.

Whiplash’s automated SmartRate selection tool is built from integrations with all major parcel carriers, using customers’ order history to formulate the most efficient shipping option that meets both cost and speed requirements for domestic and international delivery. 

2. Order Management Systems (OMS)

Real-time insights on orders and inventory are essential when today’s consumers expect regular status updates from brands. Endless ‘where is my order?’ questions are very taxing on customer support teams and take valuable time away from handling more complex service requests. This is even more consuming when brands are selling via multiple channels, which forces teams to navigate numerous interfaces to find up-to-date information.

By integrating directly with popular ecommerce platforms and marketplaces, 3PLs can offer businesses a much more streamlined and accessible OMS that puts important order information all in the same place. This means increased productivity and greater ease of navigation.

Offering seamless integrations with Shopify, Bigcommerce, and Magento, the Whiplash platform allows brands to view, edit, and filter all outstanding orders at one glance through one intuitive interface. No advanced training required!

3. Returns management

As return rates continue to rise across channels, reverse logistics has become an increasingly vital workflow. Without an effective system for getting items back on the shelf quickly, businesses will grapple with issues ranging from delays in refunds to costly quantities of deadstock.

Every brand has a different way that it wants to manage its returns, from an exchanges-first approach to offering a fully branded returns portal that maintains a consistent end-to-end customer experience, meaning that it’s impossible for 3PLs to meet customer needs on the back of EDIs alone. 

API-led integrations with top-end returns management tools enable 3PLs to meet the diverse needs of their customers, without having the expense of building their own systems from scratch. Whiplash offers seamless integrations with three of the biggest returns management tools: Returnly, Happy Returns, and Loop.

The API economy has arrived, it’s certainly not going away any time soon. While a reliance on APIs does come with risks and drawbacks, they present some major opportunities to enhance the customer experience and gain a competitive advantage. For retailers, it’s a welcome occasion to pursue value-added partnerships with 3PL providers who can provide seamless pathways to additional service offering, whether they’re needed now or in the future.

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