As the world has become increasingly digital and commerce moves more and more online, decades-old electronic data interchange (EDI) technology has gained a tarnished reputation, especially with brands. increasingly direct to consumers (D2C) seeking to sell products through corporate retailers. .
“It was formed with pre-Internet assumptions, and because it’s a standard, it’s very difficult to change,” said Roger Kirkness, co-founder and CEO of supply chain software company Convictional , to PYMNTS in an interview.
For example, he said, EDI does not have a document type for sharing e-commerce content, which means companies must either hijack the meaning of an existing document or use a separate process, slowing down B2B transactions.
Over $ 5,000 billion in B2B exchanges a year occur using EDI, which means that for the most part businesses are “tied to a standard that in many ways is not. more relevant and yet immutable, ”Kirkness said.
“As the way companies have traded with each other has changed, [EDI] did not keep pace, ”he added.
The use of EDI also often acts as a hindrance for D2C companies wishing to engage in third party sales through corporate retailers such as Staples, Harry Rosen, and Scandiborn. EDI is incompatible with modern vendors’ use of application programming interface (API) -based e-commerce platforms such as Shopify, which means D2C brands typically need to build a new technology stack. parallel for B2B sales.
“It’s like we can invest more money in ads, or we can make that investment six to 12 months,” Kirkness said. “They’re going to put it off for as long as possible. “
What Convictional aims to do, however, is to act as a “Google Translate” between buyers who use EDI and suppliers who use API, Kirkness said, which keeps purchase orders consistent. and precise.
“We are not a market,” he said. “We do not intervene in this commercial relationship. We just provide the rails.
For now, Kirkness has said Convictional relies on Stripe to provide the payment rails, but something the company will likely do “as soon as possible” is invoice factoring on both sides.
“If you’re selling to a big retailer, the bill is absolutely guaranteed to get paid,” he said. “It may be late, but in the end, he will be paid. So you can take some of that money off the table in the form of invoice factoring. And this concept applied to what we do is actually a very clear gap to fill.
A significant change
Kirkness and his co-founder, company president Chris Grouchy, are both former members of the Shopify Plus team who helped launch the Shopify wholesale channel, which Kirkness says has opened my eyes to the problems that D2C companies face with B2B commerce.
“Our belief is that the more you facilitate trade, the more trade will happen,” he said.
Kirkness compared the move away from EDI in retail and B2B to the evolution of the financial services API, allowing institutions to seamlessly connect with businesses and customers. Similar to this transition, EDI will not go away overnight, but it will be a long-term migration, which can be facilitated in part by Convictional.
“We will be connecting through EDI, but we will also be connecting via API, and over time they will move their use to APIs,” Kirkness said. “It gives them a migration route. “
Convictional recently raised $ 6.7 million in Series A funding, led by venture capitalist Lachy Groom, who also led the 2019 startup cycle of Y Combinator. Convictional plans to use the capital to invest primarily in research and development to expand its platform and grow its network of connected suppliers and retailers.
Convictional is not the first company to look for ways to combine EDI and API; Orderful, a tech startup founded in 2017, also focuses on facilitating the exchange of data between buyers and suppliers in the supply chain with the aim of accelerating the time it takes for B2B suppliers to integrate with business systems.
Read more: Supply Chains Explore the API Opportunity
“The technology is not that difficult,” Erik Kiser, founder and CEO of Orderful, told PYMNTS in an interview. “What is really difficult is communicating between two organizations and aligning schedules so that the company and the supplier can actually start exchanging data. “
A decade behind
Some, however, say that EDI’s long history is in fact a competitive advantage. Todd Gould, CEO and founder of Loren Data, told PYMNTS that the fact that the technology has been around for a long time “in and of itself is not necessarily a bad thing.”
See more : In defense of legacy EDI technology
“The power of EDI is that the job has been done,” Gould said. “Removing EDI means you have to relearn everything, understand it, and get a lot of people to cooperate. With EDI, this work is already done.
From Kirkness’s perspective, however, EDI lags too far behind other e-commerce infrastructure and software.
“EDI is much further behind in terms of maturity and modernization effort by probably 10 years,” he said. “I think it’s like, everything that potential people saw 10 or 15 years ago for things like e-commerce and web payment gateways is what I see when I look at this happening with IDE. “