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Retail: Technology Improves Business Processes To Help Close The Deal

Retailers find faster networks are a good way to boost productivity

Retail is all about the sale. And to make the sale pay off, merchants are looking to technology to improve business processes, more than in other sectors. About 83% of InformationWeek 500 general retailers plan to improve business process efficiency in 2006; across all industries, about 60% have that goal.

Fifty-six percent of all retailers say their most effective move in the past 12 months to improve productivity was to boost network bandwidth performance. Retail networks handle a huge amount of products and sales data. At many companies, data continually flows to centralized data stores from geographically far-flung locations in near real time.

Retailers aren't big spenders when it comes to IT. They work with very thin product margins, and IT often gets short shrift. Just 1.6% of the industry's annual revenue goes to IT, compared with an average of 3.2% among the entire InformationWeek 500 this year. But retailers are ready to open their wallets: 81% expect IT spending in 2006 to exceed 2005.

Retailers on average spend half of their annual IT budget on maintenance, somewhat less than other sectors. So it follows that they're planning to spend more of their IT budget on new projects than other industries will. Relatively few merchants (10%, compared with a cross-sector average of 30%) sought intellectual property protection for any IT-driven business process in the past 12 months. That suggests retailers are more interested in innovation as a way to drive down costs than as a way to create business value.

Tiffany, at No. 52, was the top-ranked retailer this year.

Budget Breakdown

Tech Innovation

Inside Retail
1.6% of Industry's Annual Revenue Devoted to IT
50% of IT Budget Devoted to New Projects
81% of Companies Expecting 2006 IT Spending to Exceed 2005

Business Change
38% Creating New Products/Services for Customers in 2006
63% with Global Supply Chain
50% Deploying Business Intelligence Tools to Raise Productivity

Return to the 2006 InformationWeek 500 homepage

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