Retailers, Still Spending on IT, Look for Quick Returns

By Dan Orzech

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U.S. retailers are not holding back from spending money on information technology this year, but their spending is tightly focused on projects that will deliver a quick return on their investment.

That's the major conclusion of a new study on retail IT spending, conducted by research firm Moonwatch Media and systems integrator Getronics.

Retailers spending emphasis is on "quick return projects that are going to deliver increasing revenue, or efficiencies at the store level," says Brian Kilcourse, research director of Moonwatch Media's Retail Systems Alert, and the former CIO of California-based retailer Longs Drug Stores.

That largely means point of sale systems, according to the study. Forty three percent of the companies surveyed say that they will spend more on point of sale hardware in 2003 compared to last year, with another 21% projecting level year-to-year expenditures. Spending on point of sale software showed similar figures.

That's a trend seen in the retail industry over the last few years, according to Getronics vice president of retail, Patrick Daniels, as retailers replace cash register that are reaching the end of their lifecycle.

"Much of the point of sale technology in use today has been around since the early 1990s," says Daniels, "and is getting pretty long in the tooth."

More cash registers are also needed for new stores, adds Kilcourse. "We have not seen our customers pull back on their plans to add more stores, or more checkout lanes in existing stores."

Retailers are also spending on back office systems, with 41% planning increases in hardware spending and 36% planning to spend more on software.

Retailers are looking for immediate returns from these investments as well. Back office technology purchases will focus on "process improvements, saving labor costs and better inventory management," according to the study.

Kiosks and radio tagging stay on the back burner
What the retail industry is not spending money on, according to the study, is Radio Frequency Identification (RFID) technology or self-service kiosks.

RFID tags can be attached to pallets or cases of products, and offer the possibility of significant improvements in retailers' ability to track inventory.

Despite plenty of hype around the technology, however, less than one percent of the retailers in the survey listed RFID as a top three spending priority for this year.

That?s apparently because the technology is still new, according to Kilcourse. While there are tests going on at some of the big retailers, "there aren't a lot of verifiable success stories yet," he says. "So most retailers are taking a wait-and-see approach."

Nor are retailers spending on self-service kiosks. Almost three-quarters of the retailers said they do not have kiosks for either customers or employees and 60% said they do not have plans to install them.

The survey which was conducted in April and May, queried 52 IT professionals at U.S. retailers or foreign retailers with substantial U.S. operations. Just over half of the respondents classified themselves as national or global retailers.