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Retailtechstudy Ris 0409

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    Retailtechstudy Ris 0409 Retailtechstudy Ris 0409 Document Transcript

    • A SUPPLEMENT TO RIS NEWS APRIL 2009 19TH ANNUAL RETAIL Innovate TECHNOLOGY STUDY Execute Adapt Strategies and technologies for surgically adjusting to today’s challenges and widening the gap when the economy rebounds. 3 Who Responded FINDINGS 5 Year of Reassessment & Reallocation PRODUCED BY: 8 Gauging Economy’s Impact 10 Strategy & Transformation 12 Point of Service 16 Merchandising & Supply Chain Presented By: 20 Integration Across Channels Presented By
    • 2 0 0 9 R E TA I L T E C H N O L O G Y S T U D Y | W H O R E S P O N D E D RETAIL TECHNOLOGY TRENDS Supplement to RIS News Who Responded April 2009 The respondent pool for the 2009 Retail Technology Study consists of more Group Editor-in-Chief than 80 senior-level retail executives who have significant responsibility for IT deci- Joe Skorupa sion making in their organizations. Of the total, 28% are C-level executives and 22% Assistant Editor are vice presidential level for the IT department. This means that the largest portion Christina Zarrello of our respondent pool is comprised of executives who are the senior-most deci- sion makers in their organizations when it comes to IT matters. Creative Director In addition to job titles, all retail segments are well covered and help us reflect a Colette Magliaro broad spectrum of insight across the industry. We see 21% are in specialty, 20% in specialty soft goods, 16% in grocery, and 9% in specialty hard goods. Art Director While it is important to achieve a good mix of respondents in each of the annu- Lauren Cloos al revenue categories, the truth is the study is best served when there is a slight bias Chief Analyst toward large retailers, because these are the engines that drive the wheels of IT in Jeff Roster, Gartner the retail industry. We achieve this goal with 40% of respondents saying that have more than $1 billion dollars in annual revenue. The rest of the respondent pool is PUBLISHER roughly divided in categories between $50 million and $1 billion. David Weinand This year we added a new demographic – number of stores in the chain. The bulk of our respondents, Title have at least 100 stores. The average number for all 58%, Retail Segment SALES Job respondents is between 244 and 377 stores. Associate Publisher Catherine J. Marder Job Title Retail Segment Sales Manager 2% 11% Drug Ashley Oswald 15% 6% Convenience Other Non-IT 11% Other CEO/CFO/COO 4% 16% 2% Other IT Discounters Grocery/ 8% Supermarket 5% 17% Marketing/Sales/ Department Store/ Departmental Management CIO/CTO Mass Merchandise 21% 5% 9% Merchandising/Supply Specialty Specialty 20% 22% Chain/Store Operations Hard Goods Specialty VP/SVP/ Soft Goods 22% EVP of IT 4% Director/ Furniture/ Founded by Douglas C. Edgell Manager of IT Home Furnishings 1951-1998 Annual Retail Sales Number of Stores in Chain PUBLISHED BY EDGELL COMMUNICATIONS 14% 14% 12% Under $50 million Less than Over 1000 10 stores stores $50 million to 19% $250 million Chairman . . . . . . . . . . . . . . . . .Gabriele A. Edgell $250 million to 16% 11% $500 million President . . . . . . . . . . . . . . . . . .Gerald C. Ryerson 17% 501-1000 500 million 14% stores 10-50 to $1 billion Vice President . . . . . . . . . . . . . .John Chiego 5% stores $1 billion to 30% 301-500 $10 billion Chief Operating Officer . . . . .Daniel J. Ligorner stores 11% 10% Above $10 billion 28% 51-100 101-300 stores stores 0 5 10 15 20 25 30 4 Middlebury Blvd., Randolph, NJ 07869 Tel: 973-607-1300; Fax: 973-607-1395 Email: edgell@edgellmail.com ABOUT GARTNER Gartner Research is a leading provider of research and analysis about the global www.risnews.com www.gartner.com information technology industry. It worked with RIS to bring out this study, s which was conducted during the first two months of 2009. In conjunction with the RIS editorial team, Gartner created the survey and posted it online. Gartner performed the analysis of the data and was then interviewed by RIS on the mean- ing of the data. Gartner was not paid for its involvement and RIS did not involve any of the advertisers in the report during the preparation or analysis phases. s RIS NEWS | RETAIL TECHNOLOGY STUDY | 3 APRIL 2009
    • 2 0 0 9 R E TA I L T E C H N O L O G Y S T U D Y | E X E C U T I V E S U M M A RY BY JEFF ROSTER, GARTNER RESEARCH VP IMS, RETAIL Year of Reassessment, Reallocation and Cost Containment CUSTOMER-CENTRICITY, PCI COMPLIANCE AND MULTI-CHANNEL COMMERCE INITIATIVES RISE TO THE TOP OF IT BUDGETS IN A TOUGH YEAR. The year 2009 will long be remembered as a time of great challenge this requires technology enablement for retailing as a whole and the retail CIO in particular. No one wants to successfully carry out. to focus on doom and gloom on a steady basis, but as of this writ- ing there are few positive economic signs to point to on the horizon. • PCI compliance is a major focus in The stock market continues to produce daily declines, the revalua- all tiers and subsectors in retailing, tion of housing has yet to stabilize, and the consumer continues to and it requires ongoing investments remain stingy on all but the most necessary of purchases and only in consulting, hardware and software. buying items on deep discount. • Predominance of first-generation So what’s in store for 2009? Will However, here’s why I don’t see e-commerce platforms still exists retailers slash their IT budgets in a des- overall IT budgets decreasing dramati- across all tiers and subsectors, which perate bid to improve their income cally in 2009: requires significant upgrading or statements? Slash, no, but they will defi- • Customer-Centricity is STILL the replacement. nitely reassess, redirect, reallocate and dominant strategy today in retailing. MAJOR STUDY THEMES remove costs as much as possible. In all but the smallest retail formats Among the findings in this year’s study, highlighted here and analyzed in greater Key Business and IT Stategies for Next 18 Months detail in the following pages, are: • Customer Satisfaction and Experience has occupied the top slot 68% Customer Satisfaction/Experience on our list of key strategies for the last few years. It’s a very positive sign that Cost Management - Reduce Costs 62% in Every Aspect of Enterprise even in these economic times these high-level strategies remain on the 55% Workforce Efficiency/Productivity front burner. 42% Store/Network IT Systems Security • Cost reductions are sweeping across 35% Cost Management - Using Technology to Reduce Costs organizations, and since many of these initiatives are technology enabled it 35% Store-level Investments to Improve Customer Experience actually leaves IT in a better position than most other departments. 32% Store-Level Inventory Visibility/Efficiency 31% • Multi-channel initiatives will get sig- Reducing Shrink/Improving Loss Prevention nificant attention over the next three Reducing Out-of-Stocks 31% years, which represents an ongoing transformation that shows no signs of 29% Supply Chain Visibility/Efficiency slowing down even in a challenging economy. 25% Growth Through Store and/or Online Expansion • Overall, we will see a softening in 0 10 20 30 40 50 60 70 80 IT spend, but it won’t occur uni- RIS NEWS | RETAIL TECHNOLOGY STUDY | 5 APRIL 2009
    • 2 0 0 9 R E TA I L T E C H N O L O G Y S T U D Y | E X E C U T I V E S U M M A RY Top 10 IT Initiatives Obstacles That Stand in the Way of Improving Efficiency Started in 2009 21% 69% Capital constraints Real-time reporting of key data Creating enterprise-level performance 44% “Spaghetti” application architecture 21% dashboards for headquarters executives 38% Insufficient skills or people resources 17% Kiosks Legacy hardware and software isn’t 34% 16% POS software being replaced at corporate 31% Legacy technology at the store level 15% Voice/digital bandwidth Rising cost maintenance from IT vendors 31% 15% POS hardware 27% Lack of analytical tools and technologies 15% Portable inventory terminals/scanners 22% Inadequate data management systems 14% Loss prevention Lack of a packaged retail-specific ERP solution 17% Creating targeted performance dashboards 14% for regional and store managers 0 10 20 30 40 50 60 70 80 14% Centralizing customer data/intelligence SO WHERE DO formly throughout the industry. son for the move is that Insufficient WE GO FROM HERE? Aggressive adopters and grocers, for Skills/People Resources incurred such a example, still plan on increasing their dramatic drop. Spaghetti Application This year will be a time of phenomenal overall IT spend Architecture actually holds relatively challenges to the retail community. steady interest year over year. We will see more retailers fall this year, NO SHORTAGE OF OBSTACLES like Circuit City and so many others. TOP 10 IT INITIATIVES The economic uncertainty gripping the And as they pass from the scene their STARTED IN 2009 industry has scrambled our annual list of competitors will grow stronger. obstacles that stand in the way of I’ve spent the last six months worrying We will see many retailers close improving efficiency, which we have what answer I would give to the ques- unprofitable stores. Some will claim been tracking for several years now. No tion: What are retailers working on in this is another sign on the pending surprise that concern about Capital 2009? “Nothing” was the most common retail apocalypse. While others, me Constraints sits atop the list this year, answer I received from my blog and twit- included, believe this is a healthy moving up from the number two slot in ter efforts. While I understand it’s development. It’s the pruning of the last year’s ranking. become fashionable to deliver negative orchard in preparation for the next Insufficient Skills/People Resources news in this environment, fortunately crop. Some of these stores should have falls from first to third place on the obsta- the real answer to the question is much been closed years ago. Better late than cles list as turnover and retention fade to more positive. never. the background in recessionary times. The new initiatives can be summed We will most likely see housing val- With the economy in the shape it is in, up in two words: customers and data. A uations remain fluid and 401Ks still most of us are just happy to have a job and fair number of retailers are still wrestling depressed. But those of us in the we aren’t about to complain about not with long-term POS and kiosk projects, industry need to buckle down and per- having enough staffing resources to cope which focus on improving customer severe. And we will. with current workloads. service and satisfaction. And a larger Finally, we need to begin prepara- Spaghetti Application Architecture block of retailers is wrestling with con- tions for a coming upturn. Despite all moves up the list from third to second cerns surrounding data: How to find it, the doom and gloom a rebound will place this year, but not because it made a speed it up, and make it available to happen. And smart retailers will be dramatic leap in interest level. The rea- wider audiences within the organization. ready when it does. s 6 | RETAIL TECHNOLOGY STUDY | RIS NEWS APRIL 2009
    • 2 0 0 9 R E TA I L T E C H N O L O G Y S T U D Y | I T B U D G E T JOE SKORUPA Gauging Economy’s Impact RETAILERS REACT TO MARKET GYRATIONS IN PLANNING 2009 IT BUDGETS Is it possible 36% of retailers had revenue decreases in 2008? It is 2009 or stayed the same as last year. when you recall that the fourth quarter of 2008, which usually per- This is a solid majority for a political forms as the goose that lays retailling’s golden egg, took a historic election, but it is far from par compared nosedive in October, November and December. to previous years. Typically, we find retailers report year-over-year IT budget Still, 38% of respondents were up in Is this a reason for optimism in decreases in the single digits. This year revenue year over year and the rest 2009? As far as profits go, the answer is the figure is a whopping 36%, which recorded flat sales. Will this happen “yes.” Revenue? Not so much. It will closely corresponds to those who again in 2009? Not likely. The reason is take a few years to reverse the econom- reported depressed revenue in 2008. last year’s nosedive was faster and steep- ic contraction occurring today through Digging deeper into budget alloca- D er than anything ever seen before, and it store closings and a sharp consumer tion for 2009 we find the largest chunk occurred just as retailers headed into reluctance to spend, but smart retailers going to internal staffing. Good, skilled the holiday season. Even retailers with have now caught up with the trend and staffers are worthwhile investments in real-time systems could not adjust that are now fully prepared to adjust to cur- any economic environment and worth quickly. No one could. rent demand levels while at the same the resources to retain them. The whipsawing of shoppers by a time focusing on productivity and effi- There are no surprises in other areas credit meltdown, massive Wall Street ciency to protect margins. of IT budget allocation, including hard- Percentage of Budget for Capital Detailed Allocation of IT Budget Investment and Operating Expenses 17% Infrastructure 30% Store 13% 34% Operations Corporate Capital Administration 66% 16% Operating 11% Merchandise Marketing & Management Customer Support 13% Supply Chain Management IMPACT ON IT SPENDING bailouts, and frightening headlines ware, software, communications, train- ripped right out of the Great Depression The fourth quarter also is a time when ing and change management. The one had a chilling effect on consumer confi- CIOs plan the following year’s technol- area that shows an up tick is third-party dence. But here’s an interesting insight: ogy budgets, so the economic gyrations services, which is a good option for Replace these once-in-a-lifetime circum- last fall likely had a major impact on IT CIOs to explore as they seek alternative stances with normal recessionary forces, plans. One logical area to feel the ways to squeeze more out of ever tight- which are typically slower moving than squeeze is capital investment. ening budgets. what we are now experiencing, and the Compared to last years’ study cap-ex STORE OPERATIONS revenue figures probably would have spending is down 10%, a sharp but looked similar to previous years with the expected decline. Breaking down the IT budget further total number of retailers reporting Overall, we find that 63% of retailers we see that store operations accounts decreases in the mid-teens. either increased their IT budgets for for 30% of the overall IT budget. The 8 | RETAIL TECHNOLOGY STUDY | RIS NEWS APRIL 2009
    • other categories, including infrastruc- ture and merchandise management, Margin of Revenue Change in Last 12 Months come in a distant second and round out budget allocation at fairly equal levels. 8% Running a widely distributed net- Decrease more than 10% work of stores is a costly undertaking 15% Decrease between 5-10% and subject to chain-math, which means that every dollar spent on a store is mul- 13% Decrease between 1-5% tiplied by the number of stores in the chain. Since our respondents average 28% Same as last year between 244 and 377 stores it is easy to 16% see how spending on store operations Increase between 1-5% can add up quickly. Chain math works to 13% a retailer’s advantage in good economic Increase between 5-10% times when sales gains add up quickly 9% Increase more than 10% when multiplied per store. During a recent presentation by a 0 5 10 15 20 25 30 noted Wall Street analyst it was pointed out that only 150 of the Fortune 500 com- Comparing 2009 IT Budget to 2008 panies avoided posting a loss in 2008. Just as important, he pointed out, the drop in 14% Decrease more than 10% economic activity was the fastest and steepest the country has ever seen. 9% 5 to 9.9% decrease So, if there is any reason for hope in these dark economic times, it is because 14% 1 to 4.9% decrease retailers have adjusted to the shock and awe of 2008. Store openings have been 41% Same as last year delayed, store closings of underperform- 10% 1 to 4.9% increase ers have been increased, purchasing lev- els have been decreased, inventory has 6% 5 to 9.9% increase been cleared out, layoffs have been announced, and, in general, retailers 6% Increase more than 10% have become right sized for today’s demand levels. 0 10 20 30 40 50 Some retailers have been exposed as vulnerable, primarily due to carrying too much debt and having too little cash on How IT Budget Is Allocated in 2009 hand, and the apparel and luxury verti- cals have been hit particularly hard. 27% Internal Staff But there are strong segments that are performing extremely well, such as 17% Software grocery, mass merchants and discoun- ters. And some individual winners are 15% Hardware posting enviable gains like Amazon, Third party services 12% Aeropostale, The Buckle, Hot Topic and Autozone to name a few. 8% Communications But there is no doubt that when the record of this era is written and reasons 3% Training & change management for making budget decisions are analyzed the underlying theme will be: 0 5 10 15 20 25 30 It was about the economy, stupid. s RIS NEWS | RETAIL TECHNOLOGY STUDY | 9 APRIL 2009
    • 2 0 0 9 R E TA I L T E C H N O L O G Y S T U D Y | I T S T R AT E G Y JOE SKORUPA Strategy and Transformation PCI COMPLIANCE AND PACKAGED APPLICATION SUITES MOVE TO THE FRONT BURNER Technology pros are never satisfied with their current systems, takeaway in a question asked about IT and they shouldn’t be. Their job is to know the best IT options and outsourcing trends in 2009. align them with business processes to help their organizations Here we see that the largest bloc improve results or solve problems. of respondents planning a decrease in IT outsourcing plan to do it in the So, it is interesting to see that 57% of to “Advanced.” area of custom application develop- respondents believe their IT architec- There will always be a role for best-of- ment at 27%. And correspondingly, ture is best described using the word breed applications (and also third-party we see the largest bloc planning an “Basic” as opposed to “Advanced.” and in-house developed apps, especially increase in IT outsourcing plan to do That’s a big number and not where for highly targeted solutions). But we are it in the area of packaged application organizations want to be in a time when starting to see packaged application implementation/integration at 29%. efficiency and customer satisfaction suites pull away as the most frequently Another large bloc of retail CIOs have never been more critical. taken road when CIOs upgrade enter- planning an increase in IT outsourcing To be fair, retail technology has been prise functionalities and services. in 2009 fall into the category of telecom- evolving at a rapid pace in recent years, We find a confirming point to this munications/networking at 26%. This is especially packaged applications. As we continue to track this datapoint in What Concerns/Challenges Will You Devote Significant future studies we expect to see the Resources to in the Next 3 Years “Basic” percentage decline and “Advanced” increase. Many impedi- 74% ments stand in the way, such as capital PCI Compliance constraints and legacy systems, but this is a battle that ultimately must be won. 51% Multi-Channel/Cross-Channel Strategy SOFTWARE PHILOSOPHY Application Integration 48% Partly confirming this point is the delta discovered between integrated solu- Application Rationalization/ 42% tions suites and best-of-breed when Retiring Legacy Systems selecting software deployment philoso- phy. When we first began tracking this 38% Server Virtualization datapoint and learned (to our surprise) that integrated solutions beat out best- Real-Time Visibilty Throughout the Organization 37% of-breed by roughly 10 points, we have been expecting the delta to grow. But it Mobility Communication Solution held steady until this year when it 29% widened to 16 points. Increasing Use of On-Demand or We know that CIOs don’t want to be 20% Software as a Service Applications over-committed to a monolithic plat- form, especially as software mainte- Adopting a Unified Enterprise Platform through 20% nance fees continue to rise. But as retail- Use of a Broad-Based Application Suite specific software apps mature, a grow- ing number of retailers are beginning to 17% SOA Web Applications leverage the benefits of one-throat to choke, or should we say one partner to 0 10 20 30 40 50 60 70 80 rely on, as they transform from “Basic” 10 | RETAIL TECHNOLOGY STUDY | RIS NEWS APRIL 2009
    • an area of technology that is well served Where Does Your Organization’s IT Architecture by IT service providers and CIOs have and Applications Fit into a Maturity Model clearly come to the conclusion they have the right solutions to their needs. As a 9% result, just 6% plan to decrease their Basic IT Infrastructure 9% and Systems with Critical budget in this area in 2009. Advanced IT Limitations Infrastructure and We are starting to see Systems with Deep Integration packaged application 48% 33% suites pull away as the Mostly Advanced Mostly Basic IT IT Infrastructure and Infrastructure and Systems But Lack of Systems But Some most frequently taken Comprehensive Advanced Upgrades Integration road when CIOs upgrade enterprise functionalities and services. Software Deployment Philosophy 52% We seek integrated solution suites PCI COMPLIANCE Looking three years out is an exercise in 39% We use in-house IT resources to develop software clairvoyance, something no one has yet perfected. But our respondents can easily We seek best-of-breed software 36% see that PCI Compliance isn’t going away any time soon. 28% We use 3rd party services to help develop software Last year, when most retailers were thought to be fully compliant due to 14% We seek on-demand or software-as-service models deadlines set by the credit card industry, PCI Compliance was fourth on our con- 0 10 20 30 40 50 60 cerns/challenges list. This year it is num- ber one by a wide margin, selected by 74%. The cumulative effect of data IT Outsourcing Budget Trends for 2009 breaches, attacks by sophisticated organ- ized gangs and costly damages are 9% 20% 31% 12% 6% Packaged application implementation/integration enough to justify this level of concern. What is equally interesting is that 5% 21% 43% 6% Telecommunications/networking Multi-Channel/Cross-Channel Strategy jumps up from fifth to second, with 5% 8% 45% 3% 13% Application maintenance 51%. With e-commerce being one of the few bright spots last year and con- 3%10% 46% 11% 3% Break fix sumers now expecting retailers to have deep cross-channel functionality it’s 10% 8% 27% 14% 13% Custom application development not surprising that CIOs are stepping up to the plate with long-term cross- 5% 13% 41% 10% 3% channel plans. Business processes for example HR, financials What a difference a year makes. Virtually every concern/challenge has 0 10 20 30 40 50 60 70 80 jumped several spots up or down the list. Greatly Increase Slightly Increase Maintain Existing Level In today’s economy, sticking with old Slightly Decrease Greatly Decrease strategies is simply not an option. s RIS NEWS | RETAIL TECHNOLOGY STUDY | 11 APRIL 2009
    • 2 0 0 9 R E TA I L T E C H N O L O G Y S T U D Y | I T B U D G E T JOE SKORUPA Point of Service SYSTEMS FOR THE ULTIMATE SHOPPER EXPERIENCE — INSTANT GRATIFICATION Despite all the advantages of shopping online there is a huge continues through the end of the year it advantage only be found in stores: instant gratification. You walk is likely a significant portion of these into a store, you see what you want, you touch it, you buy it, you projects will get postponed. take it home immediately. IN-STORE TECHNOLOGIES To a shopper nothing beats this expe- respondents say they are planning POS Self-service systems continue on a steady rience. But for retailers it comes with a hardware and software upgrades, which growth track as retailers recognize that hefty price. As our study found in the IT is a slightly higher level than last year. younger generation shoppers are very budget section, store operations takes Despite this somewhat rosey out- comfortable using the technology. the lion’s share of the IT budget. In fact, look, we have discovered in past studies As these usage rates rise retailers will it doubles the spending levels on such that CIOs tend to err on the optimistic finally be able to deploy self-service major systems as infrastructure, mer- side when planning IT projects two devices and achieve measurable benefits chandise management and supply chain years out, especially big-ticket projects from labor savings, labor redeployment management. like POS which take several years to and cost-reduction. complete. If the economic recession As a result, we find that kiosk deploy- POS HARDWARE/SOFTWARE At the heart of store operations is the Status of In-Store Technologies critical role played by the POS system. This can range from a simple terminal 47% 12% 8% 10% In I store servers for performing transactions to a full-fea- 9% tured PC computer equipped with Portable inventory terminals/scanners 46% 8% 15% 11% inventory visibility, ship from another store, ship from online, contactless pay- 32% 7% 15% 10% Voice/digital bandwidth ment, CRM/loyalty, employee portal, 3% 3% 19% Electronic shelf labels and the ability to accept cell phone 3% 2% coupons and charges. Digital signage displays 14% 12% 3% It is these additional functions that 5% define an up-to-date POS system, and it Kiosks 14% 17% 5% is the ability to accommodate expanded functions and analytical needs that 0 10 20 30 40 50 60 70 80 determines when the POS needs to be Have up-to-date technology in place Have started but not finished major technology upgrade replaced. Will start major technology upgrade this year Will start major technology upgrade within 2 years POS system upgrades are expensive because they need to be installed in Status of POS Systems 9% every single store, which produces the dreaded chain-math effect. In a year 41% 11% 15% 18% POS hardware when IT budgets are squeezed we would expect to see a slowdown in 39% 8% 16% 18% POS software planned POS deployments, but this is 8% not the case. 3% 10% Self-checkout terminals 2% True, we find that POS hardware and 5% software rollouts already underway in 8% 18% Wireless fully functional POS terminals 2009 are low compared to last year at 0 20 40 60 80 100 just 11% and 8% respectively. But look- Have up-to-date technology in place Have started but not finished major technology upgrade ing ahead to the end of 2009 and into Will start major technology upgrade this year Will start major technology upgrade within 2 years 2010 we see that 33% and 34% of 12 | RETAIL TECHNOLOGY STUDY | RIS NEWS APRIL 2009
    • 2 0 0 9 R E TA I L T E C H N O L O G Y S T U D Y | I T B U D G E T recognition, but that day is still several Status of Payment Systems years ahead of us. 5% 63% 12% Gift/stored-value cards 5% WORKFORCE MANAGEMENT 8% 60% 10%10% Debit card processing The problems of retention and turnover, 52% 7%7%7% which are traditional painpoints in retail- EFT credit card ing, have been supplanted in the current 2% 38% 8% Check MICR processing 7% economic crisis by the necessity to get 31% 12% 8% 15% Signature capture right sized to meet lower demand. 3% Retailers forced to reduce head counts 14% 17% Check imaging (e-checks) 5% must balance multiple and often compet- 12% 5% 5% Contactless payment ing needs: meet lower labor budgets, 2% keep as many good employees as possi- 7% Biometrics payments 2% ble, increase productivity, and maintain 0 20 40 60 80 100 high customer satisfaction. They do this by using advanced work- Have up-to-date technology in place Have started but not finished major technology upgrade force management systems, which have Will start major technology upgrade this year Will start major technology upgrade within 2 years matured in recent years by expanding Status of Workforce Management capabilities into a sophisticated work- force suite. As a result, over the last few 63% years we have tracked a strong replace- 40% 12% 21% Time & Attendance 2% ment rate of older workforce applica- 37% 9% 21% tions, especially in the areas of time and Labor Scheduling 2% attendance and labor scheduling. 16% 7% 7% 19% Even in this time of lean IT budgets Task Management these categories are still holding steady Human Resources because the benefits from upgrading 30% 18% 13% 13% Self-service human resources/benefits these systems are proven and return on investment can typically be achieved in 25% 16% 7% 11% less than a year. The same is true for the Education and training human resources technologies we track, 17% 23% 12% 9% 11% Hiring Management especially self-service human resources/ benefits, which has a 26% growth rate 0 10 20 30 40 50 60 70 80 over the next two years. But one area that shows a significant Have up-to-date technology in place Have started but not finished major technology upgrade Will start major technology upgrade this year Will start major technology upgrade within 2 years increase in activity, year over year, and stands out as a true bright spot in this year’s ment at 22% over the next two years sonalized customer experience, has been study is task management. Although still a shows strong growth plans and only gets famous for resisting any technology that relatively young technology, no more than beaten among in-store technologies by sits between its well trained staff and its a handful of years old, it has a 26% growth such necessities as voice/digital band- beloved shoppers.) rate over the next two years. width (25%) and portable inventory ter- For a number of years we categorized The growing interest in task manage- minals (26%). biometric payments as an emerging tech- ment is due to two converging factors. Not all retail verticals today embrace nology, but its growth track has stalled First, the technology itself has demon- self-service technology, but as someone just as surely as has RFID in the supply strated it can deliver measurable results pointed out recently, if Wegman’s is chain. It didn’t help that a major biomet- in store-level efficiency and productivity. finally piloting self-service POS then we ric vendor suddenly went bankrupt last And second, with store openings on hold have crossed a major threshold and wide- year, but the larger issue is lack of shop- due to the slowing economy, the prime spread acceptance can’t be too far away. per acceptance. In the future we may feel benefits that task management technolo- (Wegman’s, a high-touch, up-scale region- more comfortable relying on fingerprint, gy is known for (efficiency and productiv- al grocer with a strong emphasis on a per- iris, palm or facial scans for identity ity) have never been more important. s 14 | RETAIL TECHNOLOGY STUDY | RIS NEWS APRIL 2009
    • 2009 RETAIL TECHNOLOGY STUDY | VALUE CHAIN J O E S K O R U PA Merchandising and Supply Chain EMPOWERING THE DATA-DRIVEN ENTERPRISE BY FEEDING BI TO POWER PLAYERS Last year’s study found that tapping into business intelligence (BI) to Across the broad grouping of merchan- make smarter, better and more accurate decisions was an overar- dising technologies we see low numbers ching theme that emerged from the data. This year’s study confirms (single digits) for work scheduled to this finding by posting some of the strongest numbers for planned begin by the end of the year. Last year adoption in the next two years for BI and analytical capabilities, these levels were in the mid-teens. especially in the area of CRM, A bright spot in this grouping is in the area of inventory management, which shows 27% of respondents will The popularity of this tech grouping, BI dashboards for executives. begin a project by the end of this year or even in a year when IT budgets are Our findings align with this in 2010. The reason we see this level of spare, is partly due to the fact that proj- approach as a huge amount of real-time near-term activity in inventory manage- ects of this type are not just plumbing reporting is already underway or will ment is that retailers are making an (infrastructure) or data warehousing, begin in 2009 while the bulk of the dash- effort to squeeze more inventory out of both of which often are invisible to end board projects are planned for two their pipelines while at the same time users. BI is mission critical to the suc- years out. trying to avoid jacking up the rates for cess of key power players within the out of the stocks. The only way you can MERCHANDISING CAPABILITIES organization and to the overall organi- achieve this balancing act is by upgrad- zation itself. In the area of merchandising we can see ing inventory management systems. Every top executive is a numbers per- clear signs that lean budgets are putting Two years out, several technologies son at heart, and knows the business the squeeze on new project planning. in this grouping show strong levels of value of good data. As a result, BI res- onates in good budget years and bad. Every top executive is a numbers person at heart, Creating enterprise-level dashboards, and knows the business value of good data. As a for example, has the lowest up-to-date result, BI resonates in good budget years and bad. installed base in this grouping (16%), but it has the highest deployment inter- est over the next two years (47%). And what’s good for the home office Status of CRM Capabilities is good for the store manager. Starting with a low installed base of up-to-date 34% 22% 14% 19% Centralizing customer data/intelligence technology (16%), CIOs indicate a high Creating targeted performance dashboards 16% 17% 21% 26% level of deployment activity for per- for headquarters executives formance dashboards for regional and Tracking customer acquisition, 28% 16% 12% 22% store managers (42%) through 2010. retention, and extension Key to the effectiveness of these Creating targeted performance dashboards 16% 16% 14% 28% for regional and store managers dashboards is a back-end system that Segmenting customers by needs, 26% 19% 10% 17% provides real-time reporting of key data, behaviors or economic value a technology where 42% of respon- 18% 21% 21% 12% Real-time reporting of key data dents say they have already begun work or will begin by year’s end. This work 39% 11% 14% 5% Loss prevention consists of breaking down data silos, solving issues with data quality, achiev- 0 10 20 30 40 50 60 70 80 90 ing consistency of classifications, and Have up-to-date technology in place Have started but not finished major technology upgrade other data-reconciliation issues. And it Will start major technology upgrade this year Will start major technology upgrade within 2 years must be done prior to creating accurate 16 | RETAIL TECHNOLOGY STUDY | RIS NEWS APRIL 2009
    • 2009 RETAIL TECHNOLOGY STUDY | VALUE CHAIN have likely implemented in recent years. Status of Merchandising Management Capabilities In a time of budget constraint it makes sense to postpone upgrading these sys- 50% 14% 13% 14% tems. Doing this serves to extract more Inventory management value from the original investment and 45% 20% 7% 13% Replenishment avoids causing an unnecessary disrup- 5% 51% 15% 9% Purchasing tion during a time of stress. 5% 36% 16% 13% Allocation SUPPLY CHAIN MANAGEMENT 4% 41% 9% 13% Merchandise planning Looking at the grouping of supply chain 4% management technologies, we see a sim- 27% 14% 14% Assortment planning ilar picture to what we find in merchan- 5% 16% 5% 33% Price optimization dising capabilities for deployments slat- 4% 7% 17% 28% ed to begin by the end of 2009. In other Markdown optimization 2% words, it is about as low as you can go. 13% 11% 28% Promotion optimization Warehouse management systems 6% 23% 6% 13% (WMS) and sourcing, for example, pull Product lifecycle management 2% off the rare feat of racking up zero per- 24% 11% 11% Space planning cent that plan to start by the end of the year, something that is best explained as 0 20 40 60 80 100 a statistical anomaly relative to the study Have up-to-date technology in place Have started but not finished major technology upgrade sample as opposed to an accurate reflec- Will start major technology upgrade this year Will start major technology upgrade within 2 years tion of the marketplace. Still, the deploy- ment numbers are low by any measure. Status of Supply Chain Management But WMS, like several core merchan- dising technologies noted above, is a Warehouse 49% 19% 12% mature technology that has seen heavy management systems investment by retailers for many years. 5% 29% 20% 18% Inventory planning At some point you would expect to see 2% the up-to-date technology in place grow Transportation 30% 11% 18% to a large figure (49% in this case) and management systems future deployment numbers start tailing 21% 14% 5% 20% Demand planning off. This is indeed what appears to be happening this year. 16% 21% 9% Sourcing When looking two years out we see strong levels of interest in demand plan- 9% 11% 11% 9% Vendor managed inventory ning (25%), inventory planning (23%), transportation management (20%) and 0 10 20 30 40 50 60 70 80 vendor managed inventory (20%). Have up-to-date technology in place Have started but not finished major technology upgrade In a year when merchandising and Will start major technology upgrade this year Will start major technology upgrade within 2 years supply chain projects tail off due to lean IT budgets, we see levels of inter- interest, including price optimization high optimism by CIOs who are creating est in BI projects remains as strong as (33%), promotion optimization (28%) a wish list now but may change their ever. During the last recession, when and markdown optimization (28%). plans as they get closer to pulling the many IT budgets were cut to the bone Because of this strong level of plan- budget trigger. (or into the bone), many experts won- ning it would appear that the title for the One final point: many technologies dered if CEOs actually understood the 2010 or 2011 retail tech trends study will in this grouping (such as purchasing, importance and value of the data-driv- have to be the Year of Optimization. merchandise planning, allocation and en enterprise. Today, we see clear evi- However, as mentioned in a previous assortment planning) can be considered dence that lessons have been learned chapter, this is probably another case of fairly mature applications that retailers from past mistakes. s 18 | RETAIL TECHNOLOGY STUDY | RIS NEWS APRIL 2009
    • 2009 RETAIL TECHNOLOGY STUDY | CROSS-CHANNEL J O E S K O R U PA Integration across Channels MUCH WORK STILL NEEDS TO BE DONE TO SYNCHRONIZE SALES CHANNELS The battle to engage the hearts and minds of retailers in deep cross- upgrade. Of this group, 53% say they channel integration has been decisively won after a long and steady are either upgrading now or will begin campaign throughout this century. The tipping point was reached a upgrading in 2010. This represents a few years ago when dollar volume from online sales jumped sharply massive amount of IT activity to keep ahead of sales delivered by a single store in a chain. Once this CIOs busy for the next couple of years. occurred, retailers felt compelled to devote resources to a large and As these retailers map our their growing part of their business. future e-commerce platform strategies they will be seeking such important sys- tem upgrades as the following: person- The first phase of cross-channel inte- crunches begin stressing the system as alized experiences for shoppers, greater gration was focused on customer-facing Web sites continue to grow. control for merchandisers, A/B promo- functions and brand consistency, a With only 21% of respondents say- tion testing, consumer feedback, natu- phase some retailers are still wrestling ing they are currently using second gen- ral language search capabilities, easier with. This is especially true for retailers eration e-commerce platforms that have management of e-mail campaigns, bet- whose primary revenue source is from Web 2.0 capabilities it means the vast ter site analytics, and improved ability brick-and-mortar stores. This segment, majority (79%) still need a major to service and support customers. not surprisingly, accounted for 91% of respondents in our study. What Is Your Primary Business Model/Revenue Source It is interesting to note that an increasing number of pure-play e-com- 2% 2% 5% merce sites (5% of our respondent pool) are in the process of opening or planning to open brick-and-mortar stores. The irony is that they will then require cross- Brick-and-mortar stores channel integration plans just like brick- E-commerce and-mortar chains, but they will approach Catalog/Direct mail it from the opposite angle and accom- Contact center 91% plish it easier without the legacy systems most retailers have to contend with. 2ND PHASE OF INTEGRATION The next phase of cross-channel integra- tion, the one most retailers find them- Percentage of Annual Sales from Channels selves working on now, is characterized by upgrading critical e-commerce plat- Brick -and- forms. Most e-commerce platforms 76% Mortar Stores enable posting of product catalogs, offering ways for search and navigation, 11% E-Commerce shopping carts, ability to run special promotions and, most importantly, the Catalog/ 3% Direct mail ability to enable secure transactions. But these are just the basics, and 1% Contact Center problems have arisen with first-genera- 0 10 20 30 40 50 60 70 80 tion platforms when retailers try to add Web 2.0 capabilities and peak traffic 20 | RETAIL TECHNOLOGY STUDY | RIS NEWS APRIL 2009
    • 2009 RETAIL TECHNOLOGY STUDY | CROSS-CHANNEL ing, logistics, reverse logistics, fulfill- Status of E-Commerce Platforms ment and warehouse management, to name a few of the most critical. Re-engineering these systems so they Using first-generation system, 26% are seamlessly integrated across all sales no plans to upgrade channels represents a difficult challenge 19% Using first-generation system, to retailers, one that is complicated by a but currently upgrading fragmented and complex IT and opera- Using first-generation system, but plan tions infrastructure. 13% to upgrade within 12 months Because of this complexity, retailers have been sluggish in achieving tight cross- Using first-generation system, but plan 21% to upgrade within 24 months channel integration, and a great deal of work still needs to be done. According to Using second-generation system 21% our data, 57% of respondents are using with Web 2.0 capabilities legacy systems not designed for agile 0 5 10 15 20 25 30 cross-channel operations and have no plans to upgrade. When these retailers begin losing customers and sales to their competitors they will probably change Ability to Seamlessly Enable Cross-Channel Initiatives their tune about investing in cross-chan- nel integration. Just 17% say they have currently 57% Still using legacy integrated systems that were not designed for agile cross-channel operations and no plans to upgrade begun upgrading their cross-channel integration capabilities, and another 17% 17% say they are currently up to date Using legacy systems, but have currently begun upgrading and have already achieved many cross- 6% channel upgrades. Using legacy systems, but plan to upgrade within 12 months As we move through 2009 and head into the year’s holiday season planning, 4% Using legacy systems, but plan to upgrade within 24 months one emerging and differentiating tech- nology on the horizon is the linkage of 17% Many cross-channel upgrades currently in place cross-channel systems to achieve pur- chase anywhere, fulfill anywhere func- 0 10 20 30 40 50 60 tionality. Want to buy online and pick- up in a store? No problem. Want to buy in one store and pick up in another The tipping point was reached when dollar volume store? No problem. Want to buy in a from online sales jumped sharply ahead of sales store and have it delivered at home? No delivered by a single store in a chain. problem. Want to buy on your cell phone and have it delivered anywhere? No problem. THIRD PHASE OF INTEGRATION With so much revenue coming in But it is a huge problem for retailers As previously noted, the dollar volume from non-store channels, the next chal- to make this happen without a great from e-commerce sales caught the atten- lenge retailers face is a third phase in the deal of work done tightening integra- tion of C-level executives a few years ago process of cross-channel integration tion between cross-channel orders and when it surpassed sales by a single store. that focuses on tightly coupling front- back-end systems and operations. As Today, according to our respondents, end systems with back-end systems and with upgrading e-commerce platforms, the e-commerce figure is about 11% of operations. This includes integration there is much work that needs to be total sales, with another 4% coming with technologies that are generally done in this area, and it is something from catalog, direct mail and contact considered fairly mature in the typical that will keep CIOs busy for several years center sales. retailer tech stack, such as merchandis- to come. s 22 | RETAIL TECHNOLOGY STUDY | RIS NEWS APRIL 2009
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