Through a special arrangement, what follows is an excerpt of a current article from Grocery Headquarters magazine, presented here for discussion.
According to FMI's Food Retailing Technology Benchmarks 2008 report, 56.8 percent of food retailers allocated the same amount of money for technology investments this year as in 2007, and 34.1 percent budgeted an increase. Only 9.1 percent planned to decrease IT spending. Overall, however, retailers are being more selective around IT investments.
"We're seeing pretty strong spending, but there is a clear recognition that in an environment where consumers are spending less, plus all the pressures of energy costs, health care and interchange fees, supermarkets have to be selective as to where they focus their capital investments," said Pat Walsh, vice president of industry and trade development for the Food Marketing Institute (FMI). "We're finding that retailers are willing to spend on IT-related investments if those investments can drive costs out of the supply chain."
Randy Evins, industry principal, food and drug for SAP America, sees more point solutions requests for specific warehouse management and workforce management solutions.
"We're not seeing a lot of holistic overhauls of the entire technology infrastructure, but retailers are still making strategic investments," said Mr. Evins.
One area experiencing a surge in investment is fresh item management technology to properly forecast and manage their deli, bakery, produce, and other perishable departments. "This one is an absolute must and the ROI from the projects we have seen has been tremendous when implemented properly," according to Greg Buzek, president of IHL Group. "This can drop millions of dollars to the bottom line through better forecasting, pricing, and lifecycle management."
Task management is another area where retailers are installing or upgrading technology, Mr. Buzek said. "This is a technology that initially puts everyone on the same page as the store and the home office," he said. Since promotions and in-store displays are timely, there is a focus on better communication between the stores and headquarters, he said.
Mr. Evins agreed that store visibility is an issue that is garnering greater attention in terms of IT investment. "They are absolutely dying to have store visibility and they recognize that they can't do it with legacy systems."
Technology to better help understand shopper buying habits is another key area of investment. While retailers have been collecting frequent shopper data for many years, that information has not been heavily utilized, according to industry observers.
Said Madhu Janardan, associate vice president, retail unit for Infosys Technologies, "Consumers are going to the store much less often, and retailers are trying to find ways to improve the basket size and there are a whole host of IT initiatives ramping up to help this effort."
Discussion Question: Are you noticing a reticence in retail spending on IT investments given the tougher economic conditions? Where should retailers be focusing their IT investments?