Will retailers rein back their tech spending?

The short answer, thanks in greater part to RSR Research in the US, is no.


The reasons given are simple : retail has changed and the consumer has changed so the tech that many retailers currently have will simply not serve them any longer. In short, unless they continue to adopt technologies that enable multi-channel integration, data analytics, rapid fulfilment, single view of stock and personalisation, they won’t be able to run their businesses at all.

So far so good, but what they will do is ease back on investment in technologies that have no clear ROI, or will take too long to pay back, or do not address the fundamental objective – how can I execute better in every channel without increasing my costs and raise productivity from the people, processes and systems I have currently.

For instance, RSR says, “Retail decision makers need to prioritize non-selling processes in the store that can benefit from greater automation.” And in that sober statement we can see the right way ahead – many in-store processes are inefficient in terms of return on labour and outcome. Large format retailers can find multi-million dollar returns by using data to determine stock quantities, location and status, and then convert these insights into tasks that deliver immediate returns.

Two stand out examples

  1. Picking for on line orders. The current pick rate per hour is somewhere between 35 and 45. Using accurate data, shelf-edge labels equipped with flash technology, and smart trolleys gets that figure up to well over 100. 200 has already been seen in some supermarkets.
  2. Higher sell through on near sell by date products. Supermarkets don’t want to waste so much food and more and more customers are keen to buy, so data plus task management gets that stock moving at prices well above standard markdowns.

In short, better execution. You might argue that this should always have been the guiding objective in all tech spend, but we now all know better. The explosion in innovation threw up all sorts of seductive but crazy tech that was perfect for winning a labs competition but simply didn’t deliver value once piloted or even rolled out. Remember when CEOs got excited by beacons because they wanted to be seen to be innovative?

And yet, RSR has beacons and others on their list that I might regard as less important, so it is not easy to call the right shots, and it varies so much depending on what kind of retailer you are.

What is still true is that a lot of the legacy vendors talked the talk on innovation but underneath all the hype, they simply carried on selling legacy tech that has held many retailers back from progressing and completing their digital transformation; we certainly need to ask why it has taken some retailers so long to transform and why so many are still at it.

So, to answer the original question, retailers will not rein back their IT spending because they are running a new type of business, but the bets are mainly on tech that helps them execute better and delivers a clearer and more immediate ROI.

Spend more, spend smarter

This in no way excludes tech that might be seen as nice to have. Take EndorseMe for instance. This app automates the process of choosing, working with and measuring the ROI of influencers. And given that some brands work with 200 or more influencers, the largely manual processes used currently consume vast headcount that could be better deployed elsewhere. Nice to have, so essential to have but probably not on many retailer or brands’ tech roadmap.

The watchword phrase when it comes to tech is spend more, spend smarter

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