Retailers have shed their reputation for being technology laggards and are funneling IT dollars to nearly all areas of their businesses, according to one Gartner Inc. analyst.
“The rate of technology adoption in the retail industry is accelerating,” said Jeff Roster, principal analyst at Gartner. Retailers are transforming their operational systems, from supply chain and back-office applications to merchandising and in-store communications technologies, Roster said. “It’s all hot,” he said.
Roster presented the results of Gartner’s annual Retail Technology Study, conducted in association with RIS News, at the Retail Systems conference held this week in Chicago. The study pools responses from 122 retailers.
As a whole, survey respondents are fairly optimistic about 2004 IT budgets. The majority — 55 per cent — plan to increase their budgets over 2003 levels; 33 per cent expect budgets to remain flat; and 13 per cent plan to decrease their budgets.
Financial and human resource management are the top two applications slated for upgrade or new adoption within the next two years by survey respondents, Roster said.
Sarbanes-Oxley compliance is one factor fueling financial systems investments, he said. The Sarbanes-Oxley Act is financial reporting legislation passed in the wake of corporate accounting scandals at companies such as Enron Corp. and WorldCom Inc.
The IT department at Wilsons The Leather Experts Inc. became involved in Sarbanes-Oxley compliance efforts at the end of 2003, said Jeff Orton, CIO of the Minneapolis retailer. “It’s impacting my life,” Orton said. His company’s approach is to use the legislation’s requirements — such as certifying financial reporting processes and the structure of internal audit controls — as a means to improve the way IT operates. Wilsons Leather already has reviewed about 60 of its major business processes, updating security and change controls along the way, Orton said.
Chico FAS Inc.’s has focused some of its technology resources on improving human resource management. The Fort Myers, Fla., apparel chain recently gave store personnel real-time Web access to the company’s centrally-managed deployment of Lawson Software Inc.’s human resources suite. This allows managers in remote store locations to input interview information online, conduct immediate background checks, and hire candidates on the spot, Chico’s CIO Ajit Patel said.
“We can centrally manage the software, and at the same time distribute functionality to the stores so they can hire associates and put them into the system in real time,” Patel said.
Both Chico’s and Wilsons Leather advocate limiting customization of applications.
“I’m not a software house,” Patel said. He opts for packaged software over in-house development whenever possible. The cost to maintain custom software and integrate it with other systems is too enormous, he said. “If you can find a solution that works, put it in vanilla,” Patel recommended.
Orton agreed. “Strive for vanilla,” he said. Lifecycle maintenance costs for customized software are just too high, he said.
Neither Chico’s nor Wilsons Leather has immediate plans to invest in radio frequency identification (RFID) technology. But many other retailers do, according to Gartner’s Roster.
The Retail Technology Study reveals nine per cent of respondents have invested in RFID technology over the last three years; five per cent have started projects; two per cent plan to invest this year; and 26 per cent plan to invest in the technology within two years.
The application of RFID technology in the supply chain is relatively immature — only a few big-name retailers have publicly talked about their RFID pilots, Roster said — but that hasn’t halted its growth. RFID technology is causing a huge stir, Roster said. “I never thought any technology could surpass CRM from a buzz perspective. RFID has,” he said.
Roster identified several other IT priorities for retailers, including:
— Faster, more reliable networks: 40 per cent of respondents upgraded their network technology within the last three years; 14 per cent are in the process; nine per cent plan to upgrade this year; and 18 per cent plan to upgrade within two years.
— High bandwidth to stores: 37 per cent of respondents upped the bandwidth to their stores within the last three years; 18 per cent are in the process; five per cent plan to upgrade this year; and 16 per cent plan to upgrade within two years.
— Application integration: 33 per cent of respondents tackled application integration projects within the last three years; 23 per cent are in the process; 16 per cent plan to invest this year; and 13 per cent plan to invest within two years.
— Business analytics: 19 per cent of respondents rolled out analytic tools within the last three years; 24 per cent are in the process; eight per cent plan to invest this year; and 24 per cent plan to invest within two years.
— Wireless point-of-sale terminals: 12 per cent of respondents installed wireless POS terminals within the last three years; nine per cent are in the process; 10 per cent plan to invest this year; and 21 per cent plan to invest within two years.