04/02/2019

Retail at Crossroads: Investment, Re-Investment and Reinvention

Joe Skorupa

Reinventing retail is not an option. It is an obligation to the consumer, key corporate stakeholders, and the retail organization itself. It is built on a commitment to continuous improvement, leaping ahead of competitors, and moving at the speed of the consumer.

It is a tech-fueled strategy, one that requires investment, re-investment and reinvention.

“Consumers prove again and again how quickly they can shift to something new. They are doing something different every six months, so building an organization that can change that fast is the challenge for retailers today.”

Mark Rabkin, VP Business Platforms for Facebook

Retail Accelerates

In the 29^th Annual Retail Technology Study, RIS News benchmarks 81 core retail technologies that are essential for success.

We benchmark the hottest technologies retailers are implementing in 2019 and 2021 and encourage every retailer to match it against their own tech stack. See how your company aligns with the hottest areas in technology where dollars are flowing today. Is your company on target, falling behind or moving ahead of your peers?

Study data shows that for calendar year 2018, only 34% of retailers had an annual revenue increase greater than 5%, a figure that matches the overall increase of about 5% for the entire U.S. retail sector in 2018. Growth of 5% is good news, but not every retailer achieved it. In fact, 66% fell short of increasing revenue at the market growth rate. Many recorded minimal gains or suffered big losses.

One of the major reasons the leading retailers sharply outperformed two thirds of their competitors is their commitment to moving quickly, making continuous investments, and focusing on leaping ahead instead of playing catch up.

In fact, today’s over-achievers actually began making their strategic investments five years ago when many other retailers were debating the merits of omnichannel. Instead of debating, these retailers were implementing. They took risks and invested in projects that had no proven path to success until they were tested and launched.

Thanks to investments begun several years ago the over-achievers are reaping big rewards today and slow-moving retailers are struggling with sub-par financial performance.

Where Retail Dollars Are Flowing in Tech

“Today, you must be able to invest in the present business and tomorrow. You must be willing to reinvest and be willing to invest in yourselves. We will never be able to be successful unless we disrupt ourselves."

Brian Cornell, CEO, Target

Here are the biggest takeaways from the study and key recommendations for investment:

The average year-over-year increase in retail technology budgets is 5.6% for retailers who plan an increase.
A large share of these technology dollars are aimed at projects that support advanced analytic tools and capabilities, advancing mobile commerce, and pricing optimization.
Heading the list for Top Technology-Driven Obstacles to Overcome in the Next 18 Months are retiring legacy systems and application integration, both of which are essential for streamlining the tech stack and moving ahead on a digital transformation journey.
The two big areas of current investment in in-store technologies are mobile devices for associates/managers and shopper tracking capabilities. Investments for implementing mobile devices for associates and managers are currently being done by 40% of retailers. Dollars flowing into shopper tracking capabilities is currently being done by 39%, which represents a big leap from previous years.
In the area of POS and checkout the two big areas of current investment are mobile POS, which is currently being done by 41% of retailers, and checkout and payment on a customer’s own device, which is currently being done at some level by 40% of retailers.
It is worth noting that while SaaS POS is a rarity in national and large retail enterprises (just 8% say they have completed a recent implementation) 29% say they are planning an implementation by the end of 2021. If this figure holds true it will represent a huge surge for SaaS POS, something many retailers said would never happen.
Inventory optimization analytics, which manages the biggest capital investment made by retailers, is currently being invested in by 45% of retailers and will be invested in by 31% by 2021.
Price optimization is currently being invested in by 44% of retailers and will be invested in by another 35% by 2021.
The top two analytic investments by 2021 are prescriptive analytics (38% of retailers will be investing in it in two years) and location analytics (35% in two years.
Last year no application in the merchandise management category achieved a 40% or higher current investment total. This year there are four: price management/execution (46%), product lifecycle management (43%), allocation (41%), and core ERP (40%).
In the supply chain area, real-time inventory visibility is a current investment priority for 38% of retailers, warehouse management for 39%, and order management for 35%.
The top applications for current investment in the workforce management category are education and training (43%) and mobile workforce/HR applications (38%). Education and training, a technology area that did not even approach priority status in previous years, has currently risen to the top of list due to the tight labor market.
CRM/personalization tools are one of the hottest investment areas for retailers in 2019 (38%) in the area of digital commerce. Last year, dynamic pricing was one of the lowest investment areas in the digital commerce category. For 2019, it is one of the highest (38%).

The above summary is a brief look at some of the more than 320 datapoints presented in the 2019 RIS Retail Technology Study. Click here to download a complete set of charts, analysis and recommendations.