Holiday sales performance and competitive performance in 2009 will mark the 'tipping point' for a retail recovery, as 80% of companies are challenged by higher levels of cost of goods sold and lower consumer confidence, according to a survey of 200 retail enterprises by Aberdeen Group.
The last six months leading up to the recent holiday season suggests a shift in value chain priorities and IT investments, when compared to the beginning of 2008, the company warns.
Aberdeen's research data shows that during the last two quarters of 2008, technology and process spending was geared toward accelerated product campaigns, door busters, and promotions - in terms of price discounts and frequency, customer loyalty programmes, precision merchandizing, and lean inventory management.
"The objective over the past six months within key retail sub-segments (such as department stores, fashion, apparel, specialty, and consumer electronics) has centred on customer-pull strategies and lean inventory techniques," explained Sahir Anand, senior analyst and chief author of the report. "The obvious reason for this strategic shift is to pull through the current tough environment with minimal business risks such as store closings, working capital squeeze, depleted customer satisfaction due to staff cuts, and low margin attainment."
At the same time, retail technology complexities are set to further intensify during a period of economic recession because already-scarce IT resources will need to be distributed between front-end and back-end operations, customer-centric and cost-centric management, and revenue-related and non-revenue related priorities.
According to the report, retailers are already accelerating the IT allocation roadmap changes that are likely to shape the next 3 to 12 months in terms of technology use, development, and adoption.
The three major technology priorities for 2009 include:
- Prioritisation of IT spending toward mission-critical, customer-facing and retail optimisation applications that directly impact the bottom-line;
- Greater application integration to improve retail value chain and process efficiencies, to explore greater visibility and acceptance for lean retail IT techniques (such as on-demand software as a service);
- Hosted application delivery models.
The report, entitled 'State of the Retail Market: Technology and Business Strategies to Counter Recession', has been made available for free download from Aberdeen Group's web site - click here (free registration required).
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