gartner 2012 retail technology study april 2012

8/10/2019 Gartner 2012 Retail Technology Study April 2012

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RETAILRETAILT E C H N O L O G Y S T U D Y

F I N D I N G S

7 EXECUT IVE SUMMARY

10 I T B U D G E T S

14 I T STRATEGY

22 STORE SYSTEMS

26 SUPPLY CHAIN

27 WORKFORCE

28 CROSS CHANNEL

32 MERCHANDIS ING

35 WHO RESPONDED

P R E S E N T E D B Y

A S U P P L E M E N T T O R I S N E W S A P R I L 2 0 1 2

T I T L E S P O N S O R S

EMBRACINGEMBRACING

2 2 N D A N N U A L2 2 N D A N N U A L

Social and mobile

technologies convergewith the growing influenceof marketing and analytics in retail

Social and mobile

technologies convergewith the growing influenceof marketing and analytics in retail


2/19

4 A P R I L 2 0 1 2 R I S R E T A I L T E C H S T U D Y 2 0 1 2

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ABOUT GARTNER

Gartner Research is a leading provider of research and analysis about the global information technology in-dustry. It worked with RIS to bring out this study, which was conducted during the rst two months of 2012 . 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 meaning of the data. Gartner was not paid for its in-

volvement and RIS did not involve any of the advertisers in the report during the preparation or analysis phases.

Embracing ChangeA convergence of powerful forces is driving retailers to build

on-ramps to the road leading to the transformation of their businesses

Welcome Signs of MomentumRising revenues and IT budgets reflect an expectation

of sustainable confidence

Learning to FlyA measured approach to experimentation runs beneath the surface

of tech adoption trends in retail

The Technology-Enabled StoreMobility moves into stores along with item-level RFID and NFC payment

Retailing in MotionRatcheting up the pressure on supply chains to improve agility

and visibility in an omni-channel world

Workforce Balancing ActLearning how to simultaneously serve customer needs and do more with less

The Multi-Channel ImperativeDeveloping channel capabilities that run the gamut from physical stores to

digital storefronts and everything in between

The Merchandising Arms RaceThe proliferation of merchandising and BI tools is fueled by aggressivemarketers taking action to build the next big missile

Who RespondedPolling C-level and IT-focused decision makers from companies with clout

RETAILRETAILT E C H N O L O G Y S T U D Y CONTENTS


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SOCIAL AND MOBILE TECHNOLOGIES are

converging in retail combined with the grow-

ing inuence of analytics and the rising power

of the marketing department. No doubt about

it, there is a great deal going on today in the

retail industry.

One of the things generating a lot of dis-

cussion these days is about shifting the refer-

ence for Generation Y (18 to 34 year olds) to

Generation C, where C stands for connected.

That seems like an appropriate call for a broad

generalization.

But when you look at the customers that

retailers are dealing with it is clear that be-

ing connected is not limited to any particular

age. A huge portion of the general public is

shifting how it interacts in our highly connectedenvironment.

We now tell the world through social net-

works what we think about everything from

the mundane to the ethereal. We share things

on the Web that not only have the potential to

reach everyone in our networks wherever they

are located, but we sometimes connect to unex-

pected global phenomena. One good example

of this is the Kony 2012 video that at the time

of this writing in a three-week period has been

viewed 78,295,117 times on YouTube alone.

Retailers understand they need to take an

active role in how much of the world now com-

municates and interacts. The data examined in

this study documents these efforts and offers

insight into how retailers are taking paths to

transform their businesses.

MAJOR ACTION ITEMSGartner made news at its annual Symposium

conference last year when we declared by

2017 the CMO will spend more on IT than the

CIO. That prediction was based on a review of

all industries and was not specic to retail.

I dont believe that high level will be quite

achieved in retail because of the large num-

ber of stores that need specialized technology

to support them, a trait that is fairly unique to

retailing. But directionally, the rising inuenceof the marketing department on IT spending is

correct and heralds a new era for retail IT pro-

fessionals and marketers alike.

This trend goes a long way toward explain-

ing why, in less than two years, the action item

Leveraging Social Media has risen to the top

of the priority list for retailers. Most likely this

is the result of the expanding role of the retail

CMO, whose responsibilities encompass social

media and who is therefore in need of tools andbudget to better do his or her job. Optimizing

Big Data, another relative newcomer to the ac-

R I S R E T A I L T E C H S T U D Y 2 0 1 2 A P R I L 2 0 1 2 7

A convergence of powerful forces is driving retailers to build on-ramps

to the road leading to the transformation of their businesses By Jeff Roster

Embracing Change

E X E C U T I V E S U M M A R Y

41%Leveraging social media

34%Cost containment

33%Expanding multi-channel (synchronization) initiatives

39%Developing mobile enterprise and/or store strategy

30%Network and IT systems security

28%Campaign management and promotions effectiveness

26%Adopting a unified enterprise platform

22%Improving coupon and/or special offer effectiveness

22%Developing a mobile commerce strategy

20%New payment technologies (EMV and contactless)

18%Adding capabilities to optimize big data

16%Virtualization (storage, desktop, store-level, etc.)

16%Providing marketing department with advanced tools14%Cloud services and SaaS

13%Increasing private label programs

13%Global market expansion

5%Green retail initiatives

0% 10% 20% 30% 40% 50%

M A J O R A C T I O N I T E M S O V E R T H E N E X T 1 8 M O N T H S


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tion item list, will likely be on a similar acceler-

ated t rajectory.

Perhaps the most signicant shift on the ac-

tion item list is the placement of Cost Contain-

ment, which for several years has been in thenumber one position. This year it has fallen to

third place.

I want to be very clear about what this shift

in priorities signies, because there is no retail-

er that would publically say cost containment

is not a major strategy. The slippage has oc-

curred, if you want to call it that, because of the

rise of other options. In my opinion, it heralds

a time of real innovation in the areas of social

and mobile retailing. And retails embrace of

these forces is a very healthy sign.

TOP TECHNOLOGIES FOR 2011

In a multi-channel retail experience information

must move to any touchpoint a consumer might

use and interact with. Retailers understand

that while work-arounds are possible, many of

their current systems act as roadblocks to the

seamless ow of information across channels

and touchpoints.

As a result, almost half of retailers surveyed

plan to retire legacy systems and invest in appli-

cation integration. Many retailers on this pathplan on having WiFi become available in their

stores to enable them to become true hubs in

our hyper-connected world.

Looking at this years set of data it is clear

that retailers are making a concerted effort to

build innovation into their organizations. Thisis not an easy task and requires risk taking.

At times, mistakes may occur at the consumer

level and if they do, the best advice is to be

transparent with customers using the instant

communication tools now available. Admit mis-

takes honestly and quickly, and shoppers, whoactually pioneered the revolution in communica-

tions in the rst place, will reward you.

8 A P R I L 2 0 1 2 R I S R E T A I L T E C H S T U D Y 2 0 1 2

E X E C U T I V E S U M M A R Y

48%Mobile POS with payment

37%Loyalty program access

36%Mobile POS with suspend (line busting)

35%NFC Payments

34%Support for EMV cards for payment

34%Mobile wallet/e-wallet

34%Predictive analysis

34%Geolocation

34%Shopper tracking capability

33%Campaign management

0% 10% 20% 30% 40% 50%

47%Application integration

45%Developing apps to enable newly empowered consumers

45%Application rationalization/retiring legacy systems

41%Upgrading store-level bandwidth and infrastructure

41%Fighting intrusions and Web attacks

40%PCI compliance

39%Optimizing stores as a major channel

38%Consumer smart devices in the enterprise

18%Mobile security

11%Fighting against inflation

5%Managing big data3%Environmental sustainability/social responsibility

0% 10% 20% 30% 40% 50%

TOP TECHNOLOG IES FOR 2012

TOP CHALLENGES OVER NEXT 3 YEARSMANY CURR ENT IT

SYSTEMS ACT AS

ROADBLOCKS TO THE

SEAMLESS FLOW OFINFORMATION ACROSS

CHANNELS AND

TOUCHPOINTS.


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10%

5%

35%

40%

30%

25%

20%

15%

10%

5%

0%

THERE ARE GROWING INDICATIONS that

the economy is at last moving in the direction

of self-sustaining momentum. A strong, if not

stellar, 2011 has been followed in the rst

quarter of 2012 by higher stock prices, encour-

aging labor market gures and rising consumer

condence.

The retail industrys solid performance in

2011, including a record-setting holiday sea-

son, is an indicator of a brighter outlook ahead

in 2012. The pace of growth is not as strong

as other post-recession recoveries, which is

frustrating to many retailers, and some worry

about a threat to consumer spending from ris-

ing gasoline prices. But overall, the retail cli-

mate in 2012 is shaping up to be one of the

most optimistic retailers have encountered in

many years.Analysis of retail revenue performance dur-

ing the past 12 months puts some hard num-

bers behind this mostly positive mood. More

than two-thirds (68%) of respondents reported

revenue increases: 34% grew in the 1% to 3%

range, with the same percentage reporting

growth of 3% or greater.

These gures are up from last year, when

63.6% of respondents reported revenue

growth (27.1% in the 1%-3% range and 36.5%

in the 3% or greater range).

Whenever a larger segment of companies

are achieving year-over-year revenue upsides it

is undoubtedly good news. Even better news is

found in the trend among those reporting reve-

nue decreases, which is getting smaller. While

2011 gures showed 16.8% of respondents

reporting revenue decreases of 3% or more,

that number was cut in half this year to 8% ofrespondents. Those reporting no change in-

creased slightly this year, from 8.4% in 2011 to

11% in 2012.

1 0 A P R I L 2 0 1 2 R I S R E T A I L T E C H S T U D Y 2 0 1 2

I T B U D G E T S

Rising revenues and IT budgets reflect an expectation of sustainable confidenceBy Adam Blair

Welcome Signs of Momentum

REVENUE CHANGE OVER LAST 12 MONTHS

I T B U D G E T S A S P E R C E N T A G E O F T O T A L R E V E N U E

8%

13%

11%

34% 34%

Decreased>3%

Decreased1% to 3%

No Change Increased1% to 3%

Increased>3%

35%

30%

25%

20%

15%

10%

5%

0%

More thantwo-thirdsreport revenueincreases

Tripled from

last year

Doubled

from last

year


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REVENUE AND IT BUDGETS

Higher revenues also represent good news for

the size of IT budgets, which tend to be tied to

corporate revenue gures. Because there are

so many large retail companies in the studys

respondent pool, a rise of even a few percent-age points can represent a signicant boost to

the overall industrys technology spending.

Analyzing retail IT spending in this years

study reveals another set of positive indicators

for the industry. Only 10% of respondents are

at the lowest end of the scale, with IT budgets

that are less than 1% of total revenues. Last

year this group was 14.1% of the total.

The area that has shown growth is at the

higher end of the IT spending scale. The per-

centage of companies with IT budgets that are

3%-5% of total revenues more than doubled,

rising from 4.7% last year to 10% this year.

Those with budgets totalling 5% or more of rev-

enues nearly tripled, climbing from 6.3% last

year to 15% in 2012.

FEWER BUDGETS SHRINKING

While we can clearly see an upward shiftin how IT budgets are calculated as a percent-

age of revenue, the actual ow of dollars to

the IT department is on a rising but slightly

slower track.

Looking at year-over- year changes in IT

budgets, we see that three in 10 respondents

report no change in their IT budgets, and

the largest group of respondents (36%) indi-

cate that budget increases will be in the 1% to

5% range.

The good news is that the group with

decreasing budgets has shrunk. In last years

study, one in four respondents reported that

their IT budgets were down on a year-over-

year basis (11% declining 1% to 5% plus 2.7%

declining 5% to 10%, and 11% dropping by

10% or more).

This year, the percentage of decliners has

shrunk to 16% of total respondents (6% de-creasing by 1% to 5% plus 4% declining 5% to

10% and 6% dropping by 10% or more).


I T B U D G E T S

CHANGE IN YEAR OVER YEAR I T BUDGET

A L L O C A T I O N O F I T B U D G E T

P R I M A R Y B U S I N E S S M O D E L

6% 6%

4% 4%

30%

36%

13%

Decreased

>10%Decreased

5% To 10%

Decreased

1% To 5%

No Change Increased

1% To 5%

Increased

5% To 10%

Increased

>10%

35%

40%

30%

25%

20%

15%

10%

5%

0%

Pure-play

e-commerceCatalog/direct

5.6%

4.2%

90.1%

Brick-and-mortar

34%Internal staff

19%Software18%Hardware

15%Third-party services

9%Communications

5%Training and change management

0% 5% 10% 15% 20% 25% 30% 35%

Majority of

retailers have

rising IT

budgets

Stores still

drive retailing


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BIG BETS ARE BEING placed by leading-edge

retailers in the areas of mobile applications,

social retailing, big-data analytics and power-

ful new tools to support the marketing depart-

ment. But maybe your organization isnt ready

to make these moves. Maybe your C-suite

draws a hard line against deploying emerging

technologies until they are proven.

Which raises the question: Are retailers who

are making investments in emerging areas of

technology gambling with scarce IT resources

on projects that have a slim chance of achiev-

ing ROI? Or are they pursuing a different agen-

da entirely?

Consider this: Maybe the rst mobile app

launched by a leading adopter fails to achieve

ROI, but the second one hits the ball out of thepark because it incorporates learnings from the

rst. Then all subsequent mobile apps build on

a track record of success. Maybe this learning

process is actually the goal of the project, and

perfecting it is a way to develop a skill set that

Non-adopter,

dont adopt new tech

unless necessary

Leading,

at the cutting edge

6%

7%

28% 59%

Late adopter,

wait until proven,

then consider

adoption

Quick adopter,

quickly follows

leaders

A measured approach to experimentation runs beneath the surface

of tech adoption trends in retail By Joe Skorupa

Learning to Fly


I T S T R A T E G Y

APPROACH TO TECHNOLOGY ADOPT ION

MATUR ITY OF I T ARCH ITECTURE AND APPL ICAT IONS

14.3%

Basic IT infrastructure

and systems

45.7%

Mostly basic with some

advanced upgrades

22.9%

Mostly advanced,

but lack comprehensive

integration

17.1%

Advanced IT infrastructure

with deep integration

50%

40%

30%

20%

10%

0%

ADOPTING A WAIT-AND-

SEE ATTITUDE MAYENSURE SHORT-TERM

STABILITY, BUT IT

CARRIES LONG-TERM

RISK IN A WORLD

WHERE THE TORTOISE

IS NO LONGER ABLETO CATCH THE HARE.


8/19


is becoming crucial in modern retailing agility

and experimentation.

Retailing in the world of digitally empowered

consumers will favor calculated risk takers.

Adopting a wait-and-see attitude may ensure

short-term stability, but it carries long-term risk,

because in modern retailing the tortoise is no

longer capable of catching the hare.

APPROACH TO TECHNOLOGY

Despite powerful marketplace forces that

encourage and reward IT experimentation,

evidence in the study indicates that retailers

havent changed much in their fundamental

approach to technology deployment for several

years. Comparing this years data to those over

the past ve years, we see that leading-edge

adopters always number in the single digits and

late adopters always form a big majority.

Does this mean a huge block of retailers is

out of touch with todays powerful marketplace

realities? Not necessarily.

Fortunately, both m-commerce and social

retailing have low barriers of entry, so pilot tests

often have minimal nancial impact on the rest

of the organization. Also, many pilots can be

pushed to the periphery of the enterprise to al-low the rest of the organization to operate in-

dependently. Then, when the pilot is producing

promising results, it can be moved toward the

center of the organization and prepared for a

larger rollout. In this way some who describe

themselves as late adopters can do experimen-

tation while also maintaining a conservative ap-

proach to technology adoption.

Another nding that has remained fairlyconsistent over several years is retailer place-

ment on a model that measures IT architecture

and applications maturity. The two extremes in

this model (Basic IT Infrastructure and Systems

with Serious Limitations on one end and Ad-

vanced IT Infrastructure with Deep Integration

on the other) always wind up with the smallest

numbers of retailers. And the two middle steps

(Mostly Basic with Some Advanced Upgradesand Mostly Advanced But Lacking Comprehen-

sive Integration) always end up with the largest

numbers of respondents.


I T S T R A T E G Y

ARCHITECTURE APPROACH TO SOFTWARE

IT ACTIVITIES USING THIRD-PARTY SERVICES

57%Seek best-of-breed software

55%Seek integrated solutions suites

39%Seek on-demand or software-as-service models

55%Use in-house IT resources to develop software

38%Use third-party services to help

28%Seek cloud computing systems

0% 10% 20% 30% 40% 50% 60%

59%IT consulting

33%E-commerce initiatives

32%Custom application development

55%Website development/maintenance/hosting

31%Packaged application implementation/integration

28%Telecommunications or networking

28%Application maintenance

24%Social media initiatives

20%Training

26%Data center operations

0% 10% 20% 30% 40% 50% 60%

FORTUNATELY, BOTH

M-COMMERCE AND

SOCIAL RETAILINGHAVE LOW BARRIERS

OF ENTRY, SO PILOTS

HAVE MINIMAL

FINANCIAL IMPACT.


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I T S T R A T E G Y

One change of note this year is that the

group identied as having Mostly Basic with

Some Advanced Upgrades took a big leap up

in a year-over-year comparison, from 30% to

45.7%. This is a lower rung on the maturity lad-

der than Mostly Advanced But Lacking Compre-

hensive Integration, which has correspondingly

dropped year over year.

Why the backward progress? It could be the

result of legacy components that continue to

age in the tech stack, but a more likely reason

is that as retailers prepare to add new capabili-

ties that were never envisioned ve to 10 yearsago, such as supporting mobile enterprise ap-

plications or big-data analytics, they are coming

to the realization that current architecture and

applications will not easily support them. As a

result, a tech stack that once looked relatively

advanced now looks seriously limited.

Finally, the examination of retailers ap-

proach to software deployment is another cat-

egory that has not shown much movement inrecent years. But it is worth noting that in 2007,

after several years of steady growth the cate-

gory of respondents seeking integrated solu-

tions suites came out on top of the list, beating

best-of-breed software 56% to 45%. This was

at the peak of a multi-year run of software ven-

dor mergers and acquisitions, which seemed to

portend a new era of deeply integrated end-to-

end software suites.

Integrated solutions suites stayed on top of

the list through 2009, but gradually lost ground

and now, since 2010, the best-of-breed ap-

proach has once again assumed its position as

the software architecture approach of choice

among retailers, although by a slimmer margin

this year than in the past three years.

Several factors account for this shift, but

the one that probably carries the most weight

is that when retailers seek a solution to solvea problem they want something that doesnt

carry along extra baggage. They dont want an

elephant gun to hunt a mouse or handcuffs

that lock them into a single vendors product

map. The best-of-breed approach offers retail-

ers maximum options.

THIRD-PARTY SERVICES

As with several other datapoints in this chap-

ter, we nd that retailers have been fairly con-

sistent in their strategic approach to using

third-party services providers, with IT consult-

ing topping the list and website development/

maintenance/hosting coming in second place.

The rest of the options have also been fairly

consistent year over year.And the same consistent picture emerges

when we look at the list of top IT services pro-

viders. IBM is on top followed by Microsoft and

all the rest of the usual suspects.

However, it is worth noting that there are

signs that retailers are turning to IT services

providers for more projects than ever before, as

a way to keep in check or reduce the overall IT

budget by shifting these costs into the category

of operating expenses (OpEx). Every retailer

has an ideal level of IT expenditures and also

a bigger list of demands than the capacity to

carry them out.

So, the ability to shift spending out of the IT

budget into another category is a way to free

up resources for other purposes. This kind ofbudget manipulation can be extremely valuable

to a company and also be a boon to IT services

providers.

42%IBM

23.2%Oracle

23.2%JDA

30.4%Microsoft

20.3%Cisco

17.4%SAP

13%Dell

11.6%Verizon

11.6%HP

10.1%Accenture

0% 10% 20% 30% 40% 50%

TOP 10 IT SERVICES PROVIDERS RETAILERS SEEK FOR STRATEGIC INSIGHTS

RETAILERS DONT WANT AN ELEPHANT GUN TO HUNT

A MOUSE OR HANDCUFFS THAT LOCK THEM INTO ASINGLE V ENDORS PRODUCT MAP. A BEST-OF-BREED

APPROACH OFFERS THE MOST OPTIONS.


10/19


Mobility moves into stores along with item-level RFID and NFC paymentBy Joe Skorupa

The Technology-Enabled Store

POS TECHNOLOGY holds a special place in

the hearts and minds of retailers as the cata-

lyst for creating the modern technology-en-

abled store. Interestingly, POS will celebrate

its 40th anniversary next year, and as such

it deserves special recognition. Do you think

IBM, which was behind the launch of the rst

POS system in Pathmark and Dillards in 1973,will throw a party?

Probably not. This is partly due to the fact

that POS is not the pre-eminent, stand-alone

technology it once was. Today, the POS sys-

tem is connected to more than 30 other appli -

cations in the retail tech stack. Also, modern

stores have added a long list of hardware and

software technologies that some experts es-

timate cost about $75,000 per location. Nodoubt about it, retailing technology has come a

long way since POS circa 1973.

Still, POS is clearly rst among equals when

it comes to store technologies, in large part be-

cause it directly supports revenue generation.

And, although it is nearly 40 years old, it is in

the midst of a major transformation that is as

signicant as any covered in this study, thanks

to the boom in mobility.

For this reason, despite decades of matu-

rity, POS is a challenge to keep current due to

the increasing demands placed on it, and al-

though the number of retailers who say their

POS terminals are up to date is relatively high

(44%) compared to other technologies in the

study, the 2012 number is still a big drop from

the 53.8% gure recorded last year.

This could indicate that the strong level of

traditional POS upgrades cited in the study for

the last few years is starting to slow down. This

could be attributable to the cyclical upgrade

pattern often seen in the POS category, or it

could be due to something else.

That something else might be seen when we

glance at the other POS technologies tracked in

this chapter and note that they have had mini-

mal changes in status year over year (including

POS software). This means there are no major

future investment trends of note among these

technologies with two exceptions, and both are

in the area of mobility.

THE RISE OF POS MOBILITY

Do retailers really want to have mobile POS ca-

pability in stores? After all, wireless handheld

POS units are nothing new. And if retailers do

deploy mobile POS, will it be equipped with

transaction capability so that store associates

can do checkouts in, say, aisle three?That is the question facing retailers who are

creating their mobile POS strategies. The chal-


S T O R E S Y S T E M S

STATUS OF POS TECHNOLOGY

0% 20% 40% 60% 80% 100%

44% 18% 8% 13%POS terminals

40% 16% 1 1% 1 0 %POS peripherals

35% 20% 1 4% 16%POS software

9% 8% 13% 24%Mobile POS with suspend (line busting)

8 % 6 % 20% 28%Mobile POS with payment

Self-checkout terminals 13% 1%6%5%

Thin-client hardware/software 18% 1%9% 13%

Up-to-date tech in place Started but not finished major tech upgrade

Will start major tech upgrade in next 12-24 monthsWill start major tech upgrade in next 12 months

DESPITE DECADES OF MATURITY, POS IS A CHALLENGE

TO KEEP CURRENT DUE TO THE INCREASINGDEMANDS PL ACED ON IT.


11/19


lenges include providing customer receipts,

wrapping and/or bagging items, and ensuring

that the products shoppers walk out with have

actually been paid for. These are big issues of

concern to many retailers.

To get a handle on emerging mobile POS

trends, we split the category into two parts

Mobile POS with Payment and Mobile POS with

Suspend (for line-busting applications that can

take an order and save it in the POS system to

be recalled later when the shopper pays at a

designated checkout station).

Prior to seeing study results, anecdotal evi-

dence seemed to indicate that current store

environments and management teams werent

ready to deploy mobile POS with transactionalcapability, but study data shows there is no

discernible difference in investment intentions

for transactional and non-transactional mobile

POS. Both show promising levels of interest for

an emerging technology, especially for future

investment in the next 24 months.

Two nal areas in our store systems report

worth calling out for special attention are item-

level RFID and near-eld communication (NFC)

payment.

Item-level RFID is still at a low level of adop-

tion, but it has actually doubled in up-to-date

technology year over year, which is signicant.

Some multi-billion-dollar chains have taken

the plunge with item-level RFID in the last 12

months and activity of this magnitude will have

a cascading effect on other retailers.

NFC payment is also worth noting not for a

high level of current interest, which is still fairly

low, but for the activity that retailers are plan-

ning to execute in the near future. More than a

third of retailers say they will begin an NFC roll-

out within the next two years 11% by the end

of this year plus 24% in the next 12-24 months.

This is the highest level of future growth of

any technology tracked in the store systems

category.

MOBILE PAYMENT

While we track several payment functions in

this section and in the Cross-Channel chapter,

payment in stores is quickly emerging as a like-

ly area of deeper coverage for next years study

due to the proliferation of options that offer a

new level of convenience for shoppers.

The most interesting of these is the develop-

ment of the mobile wallet, which is similar to

an online wallet that shoppers use to pay for e-

commerce purchases. On mobile phones they

are powered by native software applications or

downloadable apps.

The Google Wallet came out last year and

employs NFC technology to make transactions

using the MasterCard PayPass network. It

stores payment card data and also coupons, of-

fers and loyalty/rewards card information. Later

in the year, PayPal piloted its mobile payment

solution in stores, which offers the benet to

shoppers that an in-store payment can be done

without the customer using a mobile device. In-

stead, they simply type in their mobile phone

number and PIN at a payment terminal.

Traditional credit card technologies are also

adapting to the omni-channel marketplace

by using the EMV global standard, otherwise

known as chip and pin, or microprocessor-

chip embedded cards, which offer increased

security features through dynamic authentica-

tion technology.

All of these emerging payment options willrequire adding new capabilities to the POS sys-

tem, further cementing its role as the essential

technology in the store.


S T O R E S Y S T E M S

STATUS OF STORE TECHNOLOGY

0% 20% 40% 60% 80% 100%

Electronic shelf labels 4% 2% 1% 6%

NFC Payments 24%11% 4% 6%

Digital signage displays 11% 12% 10%6%

Shopper tracking capability 16%12% 20% 13%

Kiosks 16% 12% 5%13%

Store-level task management 17% 5%11% 17%

In-store pickup or returns of web goods 22% 18% 12% 6%

Store-level loss prevention 27% 15% 11%12%

Item-level RFID 1% 4% 3% 5%



THE PROLIFERATION OF EMERGING PAYMENT OPTIONS

WILL REQUIRE ADDIN G NEW CAPABILITIES TOPOS HARDWARE AND SOFTWARE.


12/19


Ratcheting up the pressure on supply chains to improve agility

and visibility in an omni-channel world By Joe Skorupa

Retailing in Motion

DRIVING OUT COSTS and making process im-

provements are never-ending goals in the sup-

ply chain, but that doesnt mean they are the

top-ranked missions inuencing technology

investment plans. In fact, as the supply chain

comes under increasing pressure from omni-

channel shopping, many retailers now realizethat supply chain systems once considered

robust are actually inadequate to handle the

multi-channel challenge.

This point can be seen in two areas that

had previously been considered strong suits

for retailers warehouse management and

real-time inventory visibility. Warehouse man-

agement has steadily dropped since it hit a

high point in 2009 in the number of retailers

who say they have up-to-date technology in

place (50%). Last year the number was 42%

and this year it is 39%.

Similarly, real-time inventory visibility had

been hovering around 30% for retailers who

say they have up-to-date technology in place,

but this year the gure is 25%. These two ex -

amples are the most notable, but all technolo-

gies we tracked in the supply chain have lost

percentage points for those who say they have

up-to-date tech in place.

The reason this is happening is that retail-

ers are serving greater volumes of shoppers

through increasing numbers of channels, but

they are doing this by using supply chains that

were built to serve stores. In this world, the bar

is set by online pure-play retailers who offer to

ship anywhere, overnight or two-day delivery,

if not free of charge then at a minimal cost to

the shopper.

In this world, retailers need a high degree

of visibility into all levels of their supply chains

and many are nding they are falling short in

on-time delivery, purchase order matching, in-

stock positions in stores, ll rates and hitting

lead-time targets

The good news is that multi-channel ful-

llment, a key function in the omni-channel

retailing world, has the highest level of cur-

rent upgrade activity (24%), followed closely

by sourcing management (22%), which helps

retailers gain control over extended supply

chains that stretch across the globe.

S U P P L Y C H A I N


STATUS OF SUPPLY CHAIN TECHNOLOGY

39% 14% 8%9%

7% 8%32% 11%

11%26% 11% 8%

25% 15% 12%12%

25% 15% 12% 10%

21% 22% 4%11%

18% 24% 7% 10%

5%4% 3% 7%

0% 20% 40% 60% 80% 100%

Warehouse management

Returns management

Transportation managementReal time inventory visibility (SCIV)

Distributed order management

Sourcing

Multi-channel fulfillment

RFID case/pallet

Up-to-date tech in place Started but not finished major tech upgradeWill start major tech upgrade in next 12-24 months

Will start major tech upgrade in next 12 months

AS THE SUPPLY CHAIN COMES UNDER INCREASING

PRESSURE FROM OMNI-CHANN EL SHOPPING, RETAILERS

NOW REALIZE THAT SUPPLY CHAIN SYSTEMS ONCE

CONSIDERED ROBUST ARE NOW INADEQUATE.


13/19


Learning how to simultaneously serve customer needs and do more with lessBy Joe Skorupa

R I S R E T A I L T E C H S T U D Y 2 0 1 2 A P R I L 2 0 1 2 2 7

W O R K F O R C E

THE FLASHPOINT BETWEENserving customer

needs and dealing with top-management pres-

sure to do more with less hits a sensitive nerve

in the area of workforce management.

Fortunately, many retailers have deployed

workforce management (WFM) solutions to

automate these processes, such as budgeting,

forecasting, scheduling, time keeping and task

management. The net result is that some realgains have been made in balancing these com-

peting goals.

However, there is a new frontier on the work-

force horizon and it is in the area of tapping

rich existing enterprise databases to improve

workforce optimization and labor allocation. To

make this happen, retailers will have to make

workforce management analytics a key com-

ponent in the organizations overall analytics

strategy. When this occurs, retailers will have

the ability to make better workforce manage-

ment decisions, adjust on the y, and track the

effects of their decisions to improve the cus-

tomer experience while simultaneously hitting

labor budget targets.

Most retail organizations have long used

analytics to optimize inventory, pricing and fore-

casting on a store-by-store level, but many have

been slow to extend analytics in an effectiveway into their WFM solutions. At best, some re-

tailers use workforce analytics in a centralized

manner to inform decisions at the headquar-

ters or regional level.

However, to provide optimal benets, work-

force analytics should be pushed to individual

stores so managers can use data to guide deci-

sions and measure results. And the dashboards

developed to report KPIs to managers should

be accessible from a tablet, smartphone or

other mobile device.

Mobility in retailing is a clear opportunity to

improve store and DC productivity, but it is also

a challenge, because it will have a big impact

on managing, scheduling and hiring associates.

Impacted areas include training, skills required

per shift, new employee roles, new metrics to

measure employee efciency, and new hiring

and recruiting goals.

The good news is that retailers have been

smart enough to make steady investments in

WFM and human resource solutions over the

last ve years. The end result is that a large

segment of retailers either have up-to-date

technology in place today or are in the process

of upgrading their software now. For every tech-

nology tracked in this chapter this combined

gure is either above 50% or close to it, with

two exceptions task management, which is

still a fairly recent solution, and mobile-enabled

workforce or HR applications, which we only be-

gan tracking last year.

Interestingly, the use of social media for

recruiting and hiring, which was also added

last year, has jumped from emerging status to

broad deployment in record time.

STATUS OF WORKFORCE MANAGEMENT TECHNOLOGY

STATUS OF HUMAN RESOURCES TECHNOLOGY

0% 20% 40% 60% 80% 100%

Time and attendance 52% 14% 16% 8%

Labor scheduling and optimization 32% 16% 19% 10%

Task management 22% 11% 15%13%



Education and training

0 % 1 0% 2 0% 3 0% 4 0% 5 0% 6 0% 7 0% 8 0%

Human resources and benefits 40% 19% 11% 7%

Recruitment and onboarding 2 6% 19% 11% 6%

26% 18% 16% 10%

Social media recruiting and/or hiring 25% 7%18% 11%

Mobile-enabled workforce and/or HR applications 7%14% 15% 14%



Workforce Balancing Act


14/19


Developing capabilities that run the gamut from physical stores

to digital storefronts and everything in between By Joe Skorupa

The Multi-Channel Imperative


THE URGE TO SHOP IS TRIGGERED by an in-

dividuals wants and needs, and thus begins a

journey that ultimately ends in making a pur-

chase. However, in todays multi-channel world,

this journey is far from linear.

A shopper might go to a store, use a smart-

phone to check prices, query family and friendsabout recommendations, go back online to

make a purchase, and then return to the store

to pick up the product.

As a result, retailers are challenged to be-

come cross-channel polymaths, meaning they

need to become skilled experts in multiple

disciplines. These disciplines include deliver-

ing easy-to-use shopping experiences that run

the gamut from physical stores to digital store-

fronts living on a variety of platforms. And, of

course, they need to make sure all channels

have seamless interconnectivity to deliver a

consistent brand and shopping experience.

For the most part, retailers have recognized

that adopting this sort of multi-channel mission

is a critical element in the digital age. Evidence

of retail investment in mobile and social ini-

tiatives, for example, is found throughout the

study, and we will review more in this chapter.But it is worth noting that there is also

evidence that many retailers are not as

polymathic (yes, its a word) as they should be

in the age where Amazon.com has become the

new Walmart.

Recent cross-channel misres include Tar-

gets Missoni collection, Disney Stores limited

edition Princess doll, H&Ms Versace collection

in 2011 and again in 2012, Barneys Lady Gaga

Workshop, and Liz Claibornes multi-channel

promotion handled by Kate Spade. Each of

these had serious problems that indicate some

retailers are not as advanced in their digital re-

tailing as they are in brick and mortar.

E-COMMERCE PLATFORM ACTIVITY

Over the last ve years we have tracked prog-

ress by retailers moving from rst-generation e-

commerce platforms with limited capabilities to

second-generation e-commerce platforms with

broad exibility and scalability.

Now that e-commerce platforms are ubiq-

uitous and have gone through several gen-

erations of development, we have decided

to benchmark their status in a way that more

closely aligns with the methodology we use to

track other technologies.

What we found is that e-commerce plat-

forms, unlike more mature technologies such

as workforce management and supply chain

solutions, are on an accelerated timetable for

C R O S S C H A N N E L

STATUS OF E -COMMERCE PLATFORM

Platform needs updating, but no plans 7.0%

We dont have an e-commerce platform 16.9%

Plan to upgrade within 24 months 12.7%

Plan to upgrade within 12 months 12.7%

Currently upgrading platform now 32.4%

Re-platformed within past 2 years 18.3%

0% 5% 10% 15% 20% 25% 30% 35%

Not planning any activity 19.5%

Fully functioning m-commerce strategy in place 10.3%

Pilots in progress 24.1%

Planning under way 46%

0% 10% 20% 30% 40% 50%

STATUS OF MOBILE COMMERCE STRATEGY


15/19


The current snapshot of the mobile apps

landscape indicates that the dominant func-

tions are store locator, barcode scanning, link

to retailers social networks, and product infor-

mation. All of these apps have roughly a 40%

share of respondents who say they have up-to-

date technology in place.

Another takeaway is that there is a surpris-

ingly low level of current usage for geoloca-

tion, support of 2D barcodes, support for EMV

(chip and pin) payment, and support for NFC/

RFID payment. However, each of these areas

shows strong development activity in the next

24 months.

Despite the fact that there is a huge amount

of investment going on in the areas of e-com-

merce platforms, m-commerce and mobile

apps, evidence indicates that many retailers

may not yet be effectively executing the next

step up on the ladder of omni-channel maturity

synchronizing the brand and shopping experi-

ence across all channels.


C R O S S C H A N N E L

upgrading. We see this by noting that 32.4%

of retailers are upgrading their platforms now

and 12.7% plan to start an upgrade within

12 months. These are high numbers in them-

selves, but when you add to the mix 12.7% who

say they will upgrade within 24 months, the g-

ure jumps to nearly 60% who say they will up -

grade in the next two years.That is a huge level of activity and a major

recognition by retailers of the need to nally

stop conceding the online channel to Ama-

zon.com, whose year-over-year growth gures

should send shivers up the spines of most

multi-channel retailers.

MOBILE COMMERCE BOOMS

Even more impressive than the planned invest-

ment numbers seen in e-commerce platforms

is the activity recorded in the mobile channel.

The best way to understand the signicance

of the ndings in this area is to note that only

19.5% say they are not planning any m-com-

merce activity. This means that more than 80%

of retailers have an m-commerce strategy un-

der way, which is a huge number for a technol-

ogy we have only been tracking for three years.

Granted, only 10.3% say they have a fullyfunctioning m-commerce strategy in place, but

this is nearly double what it was in 2010, and

those who say they have a pilot in progress has

grown steadily over three years to its impressive

24.1% level.

For the rst time this year we began to track

specic customer-facing mobile applications

deployed by retailers and the overarching take-

away is that mobile apps are getting a massive

amount of investment across a wide array of

functionalities.

0% 20% 40% 60% 80% 100%

Store locator

Barcode scanning

Link to retailers social networks

Product information

User/product reviews

Inventory status

Product purchaseCoupon redemption in stores

Up-to-date tech in place Started but not finished major tech upgrade Will start in next 12-24 monthsWill start in next 12 months

Integration with social networks

Customer support

Product comparisons

Loyalty program access

Daily deals/flash sales

Sharing (outfits, wishlists, shopping carts, etc.)Support for 2D barcode

Geolocation

48%

37%

37%

35%

29%

25%

24%

23%

23%

22%

18%

16%

16%

16%

10%

9% 4% 21% 13%

18% 9% 14%

8% 11% 16%

16% 9% 20%

15% 18% 19%

13% 9% 10%

6% 18% 14%

16% 20% 13%

16% 4% 11%

22% 6% 18%

19% 16% 13%

15%

23% 9% 10%

16%5%

19%

9%

13%4%

11%

10% 11%

9% 15%

STATUS OF CUSTOMER-FACING MOBILE APPLICATIONS

MORE THAN 80%

OF RETAILERS HAVE

AN M-COMMERCE

STRATEGY UN DER WAY.


16/19


The proliferation of merchandising and BI tools is fueled by aggressive

marketers taking action to build the next big missile By Joe Skorupa

The Merchandising Arms Race

IF THE GARTNER PREDICTIONis accurate that

by 2017 the marketing department will have a

bigger technology budget than the IT depart-

ment, we should expect to see signs in this

years study that this trend is emerging. Do we?

The rst indicators can be found in the list

of major action items retailers say they will beworking on for the next three years, which ap-

pears in the Executive Summary. Social media

leads the list and further down is providing bet-

ter tools for the marketing department.

Another indicator is found in the top 10

list for technology investment in 2012, which

is also in the Executive Summary chapter.

This list pulls data from all questions asked

in the study and then lists the top 10 technolo-

gies that retailers say they will invest in by the

end of the year. Of the 10, four are related to

marketing: predictive analytics, geolocation,

shopper tracking capability and campaign

management.

Another clear set of indicators of this trend

is found in this chapter, where we examine in-

vestment intentions across a spectrum of tools

used for merchandising and business analyt-

ics. Both of these areas show the highest levelsof category-wide investment when looked at

by projects that are already started but not yet

complete, and also projects set to begin by the

end of the year.

This indicates an arms race is taking place

in the proliferation of merchandising and busi-

ness analytics technology that is being fueled

by marketing departments taking an aggres-

sive approach to building the next big missile.

Marketing departments have always con-

trolled big budgets, but until recently they were

mostly devoted to advertising. But as expen-

sive, mass-market advertising loses ground to

a splintering consumer base, marketers are

seeking new ways to reach customers and new

tools to help them accomplish their jobs.

If the Gartner prediction is accurate, or

close to being accurate, many technologies in

this chapter will be locked into a cycle where

roughly a fth of retailers at any given time will

be in the process of updating marketing tools.

Marketers are always in need of ring the next

big missile and they are turning to technology

to help them get it.

MERCHANDISE TECHNOLOGY

So many things need to come together to ll a

store with appealing products to serve shopper

wants and needs that it takes a host of cross-

functional IT tools to make it happen. This or-

chestration, which touches nearly every aspect

of the retail enterprise, is at the heart of what

merchandisers do, and at the end of the day


M E R C H A N D I S I N G

STATUS OF MERCHANDISE TECHNOLOGY

0% 20% 40% 60% 80% 100%

New product or private label development 24% 12% 7% 7%

Category management 29% 16% 15% 7%

Allocation 25% 23% 9% 9%

Assortment planning 21% 20% 13% 9%

Product lifecycle management 20% 15% 11% 16%

Multi-channel planning and forecasting 18% 22% 15% 10%

Shelf and space planning 18% 14% 15% 5%Price and markdown optimization 17% 16% 13% 16%

Campaign management 17% 15% 19% 15%

Replenishment 35% 24% 13% 7%

Forecasting and planning for stores 32% 24% 18% 7%

Item management 30% 25% 10% 5%




17/19


they are judged by how well the symphony is

performed.

In the merchandising category, we nd the

top technologies retailers say they are currently

in the process of updating are item manage-

ment (25%), replenishment (24%) and forecast-

ing and planning for stores (24%).

This year we split up forecasting and plan-

ning technology into two categories to see if

there was a difference in accomplishing these

tasks when focused on physical stores, the tra-

ditional approach, and for multi-channel syn-

chronization, which is a more holistic approach

to modern retailing.What we found is that when ltering the

rankings by up-to-date technology in place,

multi-channel forecasting and planning ap-

pears farther down the list than store-centric

forecasting and planning. This makes sense

because multi-channel tools are a more recent

development. But when we examine future up-

grade intentions, both tools are on essentially

the same update path.

Interestingly, the tool with the highest

percentage of retailers saying they will

update within 24 months is campaign

management, a pure marketing function,

which seems to be a conrming point to the

Gartner prediction that marketing is on the

rise in retail organizations.

ANALYTICS AND BUSINESS

INTELLIGENCEDespite years of aggregating huge databases

of POS and customer information, it is gener-

ally acknowledged that retailers have been

underutilizing a resource of tremendous value.

But while this is true for retailers overall, it is

not true for leading adopters who are putting

advanced analytics tools in the hands of skilled

executives and achieving measurable results in

driving revenue.

Typically, advanced analytics tools are used

to support the merchandising and marketing

departments, although other departments

benet, too, such as store operations and the

supply chain.Our detailed look at analytics and BI shows

there is a huge amount of upgrade activity go-

ing on right now and another huge amount

planned within a one-year and two-year time

frame. The top three areas that are presently

up to date are: market basket analytics (28%),

customers segmented by demographics and

transaction history (26%), and centralized cus-

tomer data and intelligence (26%).

Areas targeted to get the most investment

by the end of the year, which is a combination

of projects already started and projects set to

begin by the end of 2012, include all of the

above plus frequent shopper/loyalty programanalytics and campaign analysis.

A retail enterprise that gets maximum

value out of its analytics and BI capabilities

is one that has an integrated framework that

employs quantitative methods to derive action-

able insights from data, and then uses those

insights to shape business decisions to im-

prove outcomes.

Retailers havent achieved this end game

yet, but they are in the process of putting all

the pieces in place within the next few years.

M E R C H A N D I S I N G


STATUS OF B I/ANALYTICS TECHNOLOGY AND CAPABIL IT IES

0% 20% 40% 60% 80% 100%

Market basket analysis 28% 19% 13% 6%21%

Customers segmented by demographics, transaction history 26% 23% 14% 13% 12%Centralized customer data and intelligence 26% 22% 10% 14% 13%

Frequent shopper or loyalty program metrics 24% 24% 9% 15% 16%

Conversion metrics using store traffic counting 2 2% 12%10%1 2% 29%

Customer data segmented by channel 21% 15% 12% 9% 28%

Campaign analysis metrics 21% 14% 19% 12% 21%

Consistent customer data recognition across channels 21% 17% 12% 17% 21%

Psychographic metrics using social network data 8% 6%10% 21% 37%

Predictive analytics 1 9% 14% 16% 18% 19%


Will start major tech upgrade in next 12-24 months No plans for major tech upgrade

Will start major tech upgrade in next 12 months

THERE IS A HUGE AMOUNT OF ANALYTICS AND BI

ACTIVITY GOING O N RIGHT NOW AND ANOTHER HUGE

AMOUNT PLANNED WITHIN A TWO-YEAR TIME FRAME.


18/19

RETAILRETAILT E C H N O L O G Y S T U D YM E T H O D O L O G Y

Polling C-level and IT-focused decision makers from companies with clout

Who Responded

THE INFORMATION IN THIS YEARS study is

based on signicant input from people who are

senior-level decision-makers within their own

organizations. The respondents also represent

retail companies that, due to their size, exert

considerable inuence on retails technology

trends.

In order to provide a balanced cross section

of the industry, respondents are from carefullyselected retailers and are invited to participate

based on job title, revenue segment and retail

category.

More than one-third (36%) of all survey re-

spondents are C-level executives, which has be-

come a hallmark of this study. These executives

have both the responsibility and authority to set

their companies IT and business agendas, and

their insight gives the study a unique gravitas.

The bulk of the other job titles are heav-

ily involved in IT. This includes CIOs (28%) and

the largest single group of respondents (39%),

directors of IT. Together these two segments ac-

count for over two-thirds of the survey pool.

POWER PLAYERS

In addition to the high number of respondents

who wield internal clout, theres also strong

representation from retailers that are among

the biggest and most inuential in the industry.

More than one-third (35%) of represented com-

panies have annual revenue in the $1 billion

to $10 billion range, with another 11% in the

upper echelons of Tier I, at $10 billion and up.

These large retailers are important drivers

of IT trends. They have big technology budgets

and therefore represent a large proportion of

the industrys overall spending. In addition, their

size and the number of storefronts they operate

means that their tech decisions exert a major in-uence on customers, competitors, trading part-

ners and technology vendors.

All revenue levels have strong representa-

tion in the total respondent group, ensuring

that this study provides an accurate reection

of the diversity of the retail industry.

The study also reects the industrys diver-

sity in terms of retail verticals. The largest ver-

ticals represented specialty hard goods, at

36%, and apparel/footwear/accessories, with

24% of respondents are themselves broad

and diverse retail verticals, with wide variations

in assortment mix and business model.

JOB T ITLE RETAIL SEGMENT REVENUE CATEGORY

28%

8%

25%

39%Director IT

CIO

Departmental

management

CxO

13%

24%

7%

4%

16%

36%Specialty Hard Goods

Apparel/Footwear/

Accessories

Grocery/Drug/

Convenience

Hardware/

Home Center/

Automotive

Department Store/

Mass Merch.

E-commerce/

Catalog

16%

14%

11%

8%

35%

$1 billion to

$10 billion

$500 millionto $1 billion

$50 millionto $250 million

>$10 billion


19/19

P R E S E N T E D B Y

S U P P O R T I N G S P O N S O R S

T I T L E S P O N S O R S

T H A N K Y O U T O O U R S P O N S O R S

YOUR VISION,OUR SOLUTION

Be the Pioneer, Be the Leader

RETAIL

2 1 S T A N N U A L

RETAIL

2 2 N D A N N U A L

T E C H N O L O G Y S T U D Y

gartner 2012 retail technology study april 2012

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