The Future of Retail: IT Spend and Store Growth Up in 2011
The last two years were tough ones for retailers, and many fell by the wayside. Most disappeared because economic forces were too harsh to allow them to continue with current business practices and too punishing to allow them time to change. Vulnerable retailers like this were probably heading toward eventual extinction, and the economy simply hurried things along. Of retailers that survived (if not thrived), there are many who were shaken and stirred by economic events, especially the slow recovery that brought further weaknesses to light.
Clearly the slow-motion recovery is having a major impact on the retail business and how retailers invest in technology. A recent Store Systems study from RIS News (CGT’s sister publication) (www.risnews.com) and IHL Group finds that retailers are aligned with the fragile state of the economy and have remained fairly consistent with technology investment plans compared to the previous two years. However, things get interesting when the discussion turns to mobility, where retailers are being driven to embrace a game-changing technology by empowered customers and fast-moving competitors.
Top Concerns for 2011
By a 50 percent margin, retailers are more concerned about Unemployment/Underemployment than any other factor. The only retail segment that did not put Unemployment/Underemployment at the top of the list was Convenience/Gas, which put Fuel Prices on top. As might be expected, the smallest retailers (less than 10 stores) were more concerned about this issue than the largest retailers (88 percent vs. 67 percent).
Credit/Discount Rates ranked second as a major concern for both Specialty Soft Goods and Hard Goods retailers, while Healthcare ranked second for Food/Grocery retailers. The Healthcare issue is an interesting data point because Food/Grocery retailers see it as being twice as concerning as Specialty Hard Goods retailers, who in turn see it as twice as important as Specialty Soft Goods retailers.
Aside from these worries, however, there are some exciting takeaways to be drawn from the data:
· Retailers expect to expand for the first time in two years with 69 percent of respondents planning to open new stores in 2011 and 42 percent planning to increase IT headcount.
· This expansion also parallels IT investment with average IT spending growth of 4.3 percent over 2010 levels.
· POS Shipments are showing healthy signs of growth again as we begin the next round of replacements.
· And mobile technology is looming large in retailer plans. Study data shows we are hitting the tipping point for mobile device deployment for associates and consumers. This “Gutenberg Moment” as some have called it will have a dramatic impact on customer engagement and security issues.
After two tough years, retailers are optimistic about prospects in 2011. All the signs point to light at the end of the tunnel, but if the recent past has taught us anything, let’s buckle up just in case.
This report is just a summary of the most important highlights from a complete set of data and analysis. Click here to download the complete study.
About the Respondents
Nearly 80 respondents participated this year from a variety of retail segments. There were 36 retailers with more than $1 billion dollars in revenue including Sears, Walgreens, Winn-Dixie, Sports Authority, The Pantry, Bed Bath & Beyond, Whole Foods, Wawa, Books A Million, Ritz Camera, REI, Raley’s and others. Of these, 15 had revenue in excess of $5 billion. Sixteen percent of our sample were in the range between $500 million to- $1 billion, and another 36 percent were retailers with less than $500 million in revenue. The three predominant segments of retailers were Specialty Hard Goods (33 percent), Specialty Soft Goods (32 percent) and Food/Grocery (19 percent) which together accounted for 83 percent of survey responses. Approximately 76 percent of respondents have IT-related job responsibilities, with the most common title being CIO/CTO/VP of MIS. In second place were IT Director/Managers. Another 16 percent are C-level or VP-level executives.