Retailers Buying Into IT - InformationWeek

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Retailers Buying Into IT

This year's top expenditures, AMR Research says: supply-chain improvements and better store systems and planning applications. Next year will bring more in the way of self-service and other areas.

Retailers are dipping into their tills and bumping up spending on IT. Analysts expect three areas to see the most benefit: self-service processes, mobile technology, and promotional and merchandising tools, according to a report Wednesday by AMR Research Inc.

IT spending by retailers rose to 2.9 percent in 2005 as a percentage of company revenue from 2.5 percent in 2004, and overall technology budgets are expected to increase by 3 percent in 2006, according to AMR.

Eighty percent of retailers report that the Sarbanes-Oxley Act (SOX) and it attendant compliance issues are the driving force behind the increases in IT spending.

For retail this year, the focus has been on technology that affects top-line performance and the consumer experience. That means better store systems, and better planning applications, and supply chain capabilities. There are three major investment areas for retailers next year.

"Expect to see increased penetration of self-service kiosks and self-checkout devices," said Scott Langdoc, vice president of retail systems, AMR Research Inc. on Thursday. "You also can expect more mobile technology available to store associates to create a more pervasively interactive relationship between the store associate and the consumer."

Retailers also will focus more on promotion and merchandising strategies, Langdoc said. About 29 percent of retailers plan to upgrade their current store software. Specific investments are likely to include applications that improve processes such as inventory and replenishment, point of sale (POS) systems, distributed order management, workforce and task management, and customer loyalty programs.

Vendors are aligning their product lines to improve functions in software, hardware, and services to match the demands of retailers. The applications market for the retail industry this year is expected to rise 10 percent from 2004 to $6.6 billion, with application license revenue accounting for $2.2 billion. The investments are going into consumer-centric technology to help drive top-line revenue and margin improvements.

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