It's all about the customer, every retailer will tell you. For many companies, though, IT hasn't been considered critical for serving the customer. That's changing among industry leaders, as they selectively embrace technology for understanding shoppers and fighting fraud.

Burlington Coat Factory Warehouse Corp. is fighting fraud using electronic check transactions at its 362 stores in 42 states. The system went live last fall, letting clerks scan a check at the cash register and give it back to the customer. Verifying payments electronically through a clearinghouse has reduced check fraud at its stores by more than 50%, and it speeds cash flow to the store. "It's getting more difficult to perpetrate fraud through debit and credit cards, so thieves are turning to checks," says Brad Friedman, VP of IT.

INSIDE GENERAL RETAIL Average portion of 2005 revenue spent on IT 1.0% Companies spending more on IT this year than last 44% Buying directly from foreign suppliers 89% Centralizing control of IT operations in past 12 months 33% Bringing outsourced functions in-house in past 12 months 33%

Saks Inc. is looking to a new infrastructure--a common point-of-service platform in all its stores--to let it better manage the relationship with customers. Saks designed its system to interface with its gift registry, centralized home-furniture store, and furnishings fulfillment systems, so salespeople have access to more information to help customers. For example, if a customer returns a shirt without a receipt, the salesperson can call up the original sale at the cash register to verify it.

By spring, Saks will tie the system into a customer-relationship-management system on which it's working. That will let it add functions next year, including a more-sophisticated tool for displaying purchase histories and data fields for special dates. If customers provide the data, clerks can offer birthday reminders or target specialty items or sales to customers based on past purchases.

In the grocery world, most attention is on radio-frequency identification, an effort still in testing that's aimed at tracking inventory more efficiently. Yet plenty of proven technologies are being put to use to improve efficiency. Grocer Pathmark Stores Inc. has semiautomated the arduous process of taking inventory at the end of every month's accounting cycle. It has cut inventory time in half, using handheld scanners from Symbol Technologies Inc. to upload data wirelessly to an inventory application, eliminating the need to key in data. RFID eventually will replace this type of system, but for now it isn't mature enough, says Bob Schoening, senior VP and CIO at Pathmark.

Voice over IP has fallen into the promising-but-immature category at Boscov's Department Stores LLC for the past three years, plagued by echoes and software incompatibilities, says senior VP and CIO Harry Roberts. But after successful tests last year, the company plans to install VoIP over the next two to three years at all 41 stores. Roberts estimates the project will cost "hundreds of thousands of dollars," but it will cut communication costs between stores and call centers. Plus, it will allow new services, such as letting employees with the software on their laptops use their office phone extension at home. Other initiatives include using wireless devices in distribution centers to ease taking inventory.

Retailers will continue working with relatively slim IT budgets, but that doesn't mean they aren't ready to selectively embrace the right projects. Consider this year's Oracle-SAP bidding war for merchandising software company Retek. Oracle won--making a big bet that there's a lot of software-buying ahead for this industry.

	I.T. BUDGET BREAKDOWN Hardware purchases IT services or outsourcing Research and development 19% 16% 4% Salaries and benefits Applications Everything else 15% 24% 22% Data: InformationWeek Research

Illustration By Paul Watson

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	GENERAL RETAIL Boscov's Department Stores LLC Burlington Coat Factory Warehouse Corp. May Dept. Store Co. Pathmark Stores Inc. QVC Inc. Retail Ventures Inc. Saks Inc. Sears Roebuck & Co. Walgreen Co. * denotes a top 100 company