Retailers to ramp up IT spending

Retailers to ramp up IT spending

Retailers, both the pure-play online variety and the multi-channel, clicks-and-mortar incarnation, are going to be spending lots of IT dollars this year, but just how that money is earmarked is not entirely clear.

According to the findings of two separate studies, 2000 will see an increase in the amount retailers spend on their technology budgets. After surveying 159 chief executive officers and chief information officers, Retailing in E-time, published by Computer Sciences Corp and Retail Info Systems News, calculated that, overall, IT operating budgets are expected to increase by 8.4 per cent in 2000, and technology capital budgets should rise an average of 16.8 per cent.

In comparison, The State of Retail Technology 2000, by RetailTech Magazine and PricewaterhouseCoopers LLP, also predicts an increase in IT spending, but uses different numbers. "Traditional estimates of retail IT spending hover around 1 per cent of sales, but that number only reflects the financial budget of the IT organisation," the study says. "Our latest survey results show that retail IT investment is 1.7 per cent of revenue."

Part of the reason why the percentage is higher than expected is because "all the resources for Y2K are now available for new projects," said Drew Riegler, a PWC partner.

"We see some signs of increased spending this year. Retailers are at the tail end of a new technology curve. For example, many point-of-sale (POS) systems are a decade old. We think retailers need to get more aggressive about adopting new technology earlier," Riegler said.

Replacing old POS technology tops the list of improvements the 350-plus CEOs interviewed by PWC want to make to their in-store systems (48 per cent). Following that, they are looking, among other things, for systems that will decrease store labour expenses (40 per cent), increasing the reliability/bandwidth of their data communications infrastructure (37 per cent), providing better product/service information to shoppers (34 per cent), providing sales associates with selling tools (29 per cent) and speeding up the customer checkout process (28 per cent).

Beyond those goals, the same study finds that "retailers continue to show interest in kiosks and are experimenting with more uses for these in-store devices." Sixty per cent of retailers have either implemented a kiosk system, are running a pilot roll-out or plan to do so within the next two years, according to the study.

Those numbers are almost directly opposite to the results of the CSC/RIS study, where kiosks were listed as one of the systems not planned for adoption. Topping that list of technologies not planned for adoption is virtual reality (VR), with 71.7 per cent of respondents saying they wouldn't be implementing it any time soon. VR is followed by artificial intelligence (68.6 per cent), simulation tools (57.9 per cent), voice recognition (56.6 per cent), kiosks (54.7 per cent), infrared technology (52.8 per cent), pen-based computing (51.6 per cent), electronic customer traffic counter (51.6 per cent), application integration/message broker middleware (50.3 per cent) and smart cards (49.5 per cent).

Another significant difference between the two studies is their evaluation of the future of Linux in retail environments. In the Retailing in E-time survey, 81.1 per cent of the respondents said they do not run any significant applications on open-sourced software and 25.2 per cent said open source software will never be a viable alternative for most companies. A lack of support was cited as the main deterrent. The State of Retail Technology 2000, however, says that "some retailers are seeing Linux as a solution with a high degree of reliability, low initial investment cost and the capability to support thin-client environments. As a result many vendors are evaluating the opportunity to adapt their offerings to this emerging platform."

The two studies concur, however, about the importance of integrating networks and business processes. Both point out the benefits of blending and streamlining online and traditional business models, and of stretching out the limits of the business-to-business (B2B) and business-to-consumer (B2C) models.

Besides the obvious business benefits that result from tighter IT integration - a more efficient supply chain, reduced costs and a common customer experience carried from the store to the Web site - Jo McKinney, a partner with CSC, said technology investments help retailers solve other problems such as staff turnover.

He recommends giving retail floor employees at least some e-mail and Internet access and improving the selling tools.

"Turnover is a fairly big issue. We need to make people want to work at our companies. One of the many ways to do this is through IS systems. If professional salespeople know they have a client selling support and information about their customers, those salespeople will come to work for you, and that makes a difference to your stores," McKinney said.

"Anything you can do to keep your employees glued to your company will be a great aid to your human resources friends. And why would anybody leave you if you give them Internet access and allow them to utilise it for their personal purposes?" he asked.

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