Retail's next normal
Now that shoppers are moving beyond COVID-induced behaviors, retailers are returning to more predictable patterns. For example, 74% say they will increase or maintain their IT budget in 2023 compared to the lofty 84% last year — a figure that was boosted by pent-up demand unleashed after the pandemic ended.
However, it is worth noting that while the percentage of retailers who plan to increase or maintain current IT budget levels has dropped year-over-year, the size of the IT budget (as a share of overall budget), has increased to 14% in 2023 from last year’s 12%.
When asked for one word to describe the current state of the retail industry, retailers overwhelmingly chose the concept of “evolving” and such related terms as “changing, dynamic, advancing, and fluid.” The takeaway from this insight is that in an uncertain environment, retailers need to build resilient systems and business models that can quickly adapt to changes.
14%
Average share of budget allocated to IT
Year-Over-Year Change in Share of
IT Budget
The top tech-driven strategies for the next 18 months are fragmented compared to previous years. For example, none of the strategies chosen have more than a 30% share of respondents. The top three, which are separated by just three percentage points, are: improving network and IT security at 28% (which also topped this chart last year), new payment tech/capabilities (27%), and advanced analytic tools and capabilities (25%).
In sharp contrast, the list for this year’s major challenges that organizations will allocate resources to tackling has a clear winner. More than half of retailers (56%) chose employee engagement and wages as the strategy where they intend to commit significant resources over the next three years. More than 20 points back on this list in second place is upgrading store bandwidth and infrastructure (31%) and retiring legacy systems (31%) — the former being an important challenge to solve to ensure that current and future store technologies can operate without outages and lag time.
opportunities
influx
Cusp
Subpar
excellent
Supersonic
Artificial
Faceless
fast
Autonomous
Modern
Volatile
Diverse
exploding
intelligence
alabama
static
fair
Expensive
Overhyped
Confusing
Kobalt
Challenging
sales-focused
updated
Surviving
robust
experience
Evolution
old
transition
Lacking
Change
Stagnant
Legacy
mode
school
outdated
Antiquated
Pretty
progressing
in-flux
Evolving
Dynamic
Changing
Advancing
Improving
Growing
Fragmented
In flux
Fluid
Stable
Ok
27%
14%
10%
14%
3%
2%
5%-9.9% increase
.1%-4.9% increase
.1%-4.9% decrease
5%-9.9% decrease
>10% decrease
>10% increase
no change
30%
STATE OF RETAIL TECHNOLOGY IN ONE WORD
Top Tech-Driven Strategies Over the Next 18 Months
Top Challenges Over Next 3 Years
Employee engagement and wages
Retiring legacy systems
Upgrading store bandwidth and infrastructure
Change management (resistance to change)
Application integration (ongoing, new, maintaining)
Amazon, Walmart and Alibaba (online giants)
Customer data security
Rising costs of fast/cheap online fulfillment
Compliance with government regulations
Race to the bottom on pricing (deflationary pressures)
56%
31%
31%
25%
23%
20%
19%
18%
17%
16%
Improving network and IT security
New payment tech/capabilities
Advanced analytic tools and capabilities
Recruiting/retaining frontline employees
Advancing mobile commerce for consumers
Pricing optimization
Accelerating fast, flexible shipping & fulfillment capabilities
Developing personalized marketing capabilities
Advancing mobile store/enterprise capabilities
Providing marketing with advanced IT tools
28%
27%
25%
24%
22%
20%
19%
17%
16%
14%
Interestingly, while a focus on Frontline and HQ employees is seen as a priority strategy for only 24% and 11% of respondents respectively, workforce related concerns top the list of challenges that retailers anticipate needing to commit resources to with over half (56%) selecting among their Top 3.
Upgrading Store bandwidth and infrastructure and Retiring legacy systems follow as challenges for nearly one-third.
Courting the Digital Shopper
The dominant strategy in retail today is omnichannel and, as a result, investment in digital technology is a major gateway for serving customers wherever and whenever they shop. Digital channels are also a major growth area that no retailer can ignore. In 2023, the average share of retail sales coming from digital channels is 20%, continuing an upward trend that accelerated sharply during the national health crisis.
Digital technology is also pivotal to facilitating personalized and targeted marketing, which study data shows is a major goal for retailers today. Among current investments or implementations that are currently in progress, the top technologies are in e-mail, text marketing/messaging (23%), e-commerce platforms (22%), and CRM/personalization (19%).
For upgrades planned within the next 12 months, retailers shift to product/catalog management (20%) and distributed content management/repository (20%). Looking ahead to those who will upgrade either in 12 months or 24 months (combining both data points), the top area of investment will be in product recommendations (33%) followed by CRM/personalization (27%).
Average share of retail sales from digital channels
20%
Top 3 Investments
for Digital Technology
Top Digital Tech for Current Investment
1.
E-mail, mobile, text marketing/messaging
CRM/personalization
E-commerce platforms
2.
3.
Top Digital Tech Investment Within 12 Months
Product/catalog management
Product recommendations
Distributed content management/repository
1.
2.
3.
Top Digital Tech Investment Within 24 Months
Product recommendations
E-mail, mobile, text marketing/messaging
CRM/personalization
1.
2.
3.
Digital Full Data Set
+
Dynamic pricing
Chatbots
CRM/Personalization
Remarketing
Distributed content management/repository
Product recommendations
Product/catalog management
E-commerce platform
Customer reviews/ratings
E-mail, mobile, text marketing/messaging
11%
15%
19%
10%
10%
13%
16%
22%
17%
23%
14%
14%
14%
15%
16%
25%
25%
39%
41%
42%
Currently Upgrading
Up-to-Date
Technology
In Place
18%
9%
18%
17%
20%
19%
20%
15%
14%
15%
Will Upgrade Within
12 Months
3%
6%
9%
1%
6%
14%
6%
7%
8%
9%
Will Upgrade Within
24 Months
53%
57%
40%
57%
48%
30%
33%
18%
20%
11%
No Plans
Digital Capabilities Full Data Set
The year’s No. 1 challenge, the tight labor market, is a source of major concern for retailers because it magnifies problems associated with high turnover, rising
wages, and filling open positions.
All three of these are significant
problems for retailers seeking to
optimize operations and provide quality
shopping experiences to customers.
Supply Chain: Getting Products to Stores
One of the lasting effects of the supply chain disruptions that occurred over the last few years is a determination by retailers to ensure they have robust systems in place to better serve their shoppers. One area where retailers are prioritizing investments is in getting products to the stores.
Retailers had been focusing on fulfillment to customers over the past few years; however, this year’s data points reveal a clear shift toward technologies that support store replenishment. The top four technologies that will get the most investment in the next two years are: logistics (24%), distributed order management (23%), transportation management (23%), and warehouse management (22%).
SUPPLY CHAIN Full Data Set
+
Top Supply Chain Tech for Current Investment
Real-time inventory visibility
Returns management
Fulfillment
1.
2.
3.
Top Supply Chain Investment Within 12 Months
Returns management
Transportation management
Logistics
1.
2.
3.
Top Supply Chain Tech Investment Within 24 Months
Sourcing
Warehouse management
Real-time inventory visibility
1.
2.
3.
Top 3 Investments
for Supply Chain Tech
Radio frequency identification
Drop-ship management
Transportation management
Distributed order management
Warehouse management
Logistics
Returns management
Real-time inventory visibility
Sourcing
Fulfillment
9%
14%
13%
14%
10%
11%
15%
20%
14%
16%
8%
22%
23%
24%
30%
33%
33%
33%
35%
41%
Currently Upgrading
Up-to-Date
Technology
In Place
11%
10%
16%
15%
13%
16%
16%
10%
9%
11%
Will Upgrade Within
12 Months
5%
8%
7%
8%
9%
8%
1%
9%
10%
3%
Will Upgrade Within
24 Months
67%
47%
42%
40%
39%
32%
35%
27%
32%
28%
No Plans
SUPPLY CHAIN Full Data Set
Supercharging the Store
During the pandemic, curbside pickup and click-and-collect boomed so stores could provide shoppers with essential goods they urgently needed. However,
as the crisis eased, retailers began focusing on technologies that offer deeper insight into shopper preferences and behaviors so they can create personalized in-store experiences.
For example, in-store video analytics (26%) tops the list for implementing in-store technologies over the next 24 months and ties with clienteling/guided selling (also 26%), which is a technology that helps store associates provide informed advice to shoppers at the point of decision.
Two other high priorities for implementing in-store technologies over the next
24 months are location-based sensing for marketing/communication (25%) and shopper tracking capability (25%), both of which help with more targeted and personalized messaging in-store.
Retailers that are up to date with curbside pickup technology or are currently upgrading
50%
Retailers that are currently upgrading or will upgrade digital devices (signage, kiosks, magic mirrors) over the next 24 months
40%
Streamlining Checkout
Creating new opportunities for shoppers in the checkout lane is the most frequently planned upgrade in the ecosystem of technologies related to the POS system. For example, there is clear momentum in the next two years for retailers seeking to leverage checkout and payment on the customer’s device. Study data shows 29% of retailers plan to invest in this technology within the next 24 months while another 5% are currently upgrading the tech.
However, most investments are centered on core POS technologies, such as software, terminals, peripherals, and mobile. Cutting-edge POS technologies, such as grab-and-go (cashierless checkout) and SaaS POS, are still not high priorities for most retailers.
Retailers that plan to implement checkout and payment on customer’s device within the next 24 months
29%
Respondents that have no plans to implement grab-and-go (cashierless checkout)
67%
POINT-OF-SALE Full Data Set
+
Grab and go (cashierless checkout)
Checkout and payment on customer's device
Self-checkout terminals
Split tickets (in-store and digital purchasing)
SaaS POS
Mobile POS
NFC payments
POS peripherals
POS terminals (traditional, fixed)
POS software
EMV payment
10%
5%
7%
9%
3%
13%
9%
9%
9%
10%
9%
10%
15%
16%
16%
18%
26%
31%
53%
57%
57%
58%
Currently Upgrading
Up-to-Date
Technology
In Place
7%
13%
8%
7%
14%
9%
5%
9%
7%
10%
7%
Will Upgrade Within
12 Months
6%
16%
8%
8%
9%
9%
6%
7%
8%
8%
3%
Will Upgrade Within
24 Months
67%
52%
61%
60%
56%
43%
50%
22%
19%
15%
23%
No Plans
POINT-OF-SALE Full Data Set
IN-STORE TECHNOLOGY
Full Data Set
+
Augmented reality
Item-level RFID
Computer vision
Autonomous inventory robots
In-store video analytics
Electronic shelf labels
Location-based sensing for mktg/comm
Clienteling/Guided selling
Digital devices (signage, kiosks, magic mirrors)
Shopper tracking capability
Real-time store monitoring/KPIs
In-store shipping
WiFi for customers
In-store pickup/return of web goods
Mobile devices for associates/manager
Curbside pickup
6%
9%
8%
8%
9%
6%
15%
11%
18%
13%
13%
8%
5%
13%
16%
9%
1%
6%
8%
8%
8%
9%
9%
10%
14%
22%
22%
28%
39%
39%
39%
41%
Currently Upgrading
Up-to-Date
Technology
In Place
6%
5%
14%
8%
15%
7%
11%
15%
11%
14%
18%
6%
7%
6%
9%
10%
Will Upgrade Within
12 Months
8%
10%
8%
5%
11%
16%
14%
11%
11%
11%
9%
11%
7%
10%
9%
8%
Will Upgrade Within
24 Months
80%
70%
63%
72%
57%
63%
51%
52%
45%
41%
39%
47%
43%
33%
27%
32%
No Plans
IN-store technology Full Data Set
Essential Merchandise Management Tech
Merchandise management technology is a smart mashup of essential skills that are unique in retailing. Merchandise management tech stitches together critical forecasting and execution plans that cover everything from headquarters operations to distributed store operations to consumer-facing operations.
Leading the pack in this area over the next 24 months is category management (29%), a crucial capability that maximizes sales and profits in highly targeted product areas. This is followed by new product or private label development (27%) and allocation (27%). The next technology on the list is price management/execution (25%), which is a key capability in the current period of high inflation.
MERCHANDISE MANAGEMENT
Full Data Set
+
Retailers that plan to implement category management within the next 24 months
29%
Respondents that have no plans to implement core enterprise resource planning
53%
Core enterprise resources planning
Macro space planning (floor space and store design)
Trade promotion management
Merchandise financial planning
Macro space planning (planograms)
Product lifecycle management
Allocation
Merchandise assortment planning
Item master data management
New product or private label development
Price management/execution
Campaign SKU/product management
Replenishment
Category management
17%
11%
13%
20%
14%
16%
9%
15%
13%
15%
16%
17%
20%
13%
15%
17%
22%
22%
24%
24%
27%
27%
28%
28%
33%
34%
34%
35%
Currently Upgrading
Up-to-Date
Technology
In Place
11%
13%
13%
13%
13%
16%
14%
13%
13%
17%
14%
15%
10%
18%
Will Upgrade Within
12 Months
3%
10%
2%
6%
7%
6%
13%
11%
8%
10%
11%
7%
7%
11%
Will Upgrade Within
24 Months
53%
49%
51%
40%
43%
39%
38%
34%
39%
30%
26%
27%
28%
23%
No Plans
Merchandise Management Full Data Set
Comprehensive Need for Analytics
Building a strong analytics foundation enables retailers to optimize a host of core applications that can drive growth and reduce costs. It can also deliver a multiplier effect to the effectiveness of applications, which is probably the reason why investment numbers in analytics are among the highest in the study.
As noted in the merchandise management section of the study, smart pricing capabilities are critical in times of high inflation, which helps explain why pricing intelligence (real-time data) is the top analytics investment area over the next two years (33%). Another 13% are currently investing in the tech. The next two analytics investment preferences are market basket analysis (32%) and predictive analytics (32%).
ANALYTICS Full Data Set
+
Retailers that plan to invest in pricing intelligence using real-time data in the next two years
33%
Despite artificial intelligence (AI) becoming a major buzzword in the tech industry, a big majority of retailers have no plans to invest in AI (63%) or machine learning (61%)
63%
Artificial intelligence
Machine learning
Prescriptive analytics
Diagnostic analytics
Customer behavioral segmentation
Markdown optimization
Predictive analytics
Pricing intelligence (real-time data)
In-store shopper tracking
Campaign analysis/forecasting
Market basket analysis
Space optimization
Price optimization (modeling)
Location analytics
Workforce analytics/tracking
Frequent shopper or loyalty tracking
Inventory optimization
Social media analytics
7%
9%
14%
9%
13%
15%
15%
13%
10%
16%
15%
15%
23%
14%
9%
16%
22%
22%
5%
5%
6%
8%
11%
11%
11%
14%
15%
16%
18%
18%
18%
20%
24%
24%
25%
30%
Currently Upgrading
Up-to-Date
Technology
In Place
15%
13%
18%
18%
14%
16%
18%
20%
11%
23%
18%
14%
18%
16%
16%
17%
20%
16%
Will Upgrade Within
12 Months
11%
13%
10%
6%
9%
5%
14%
13%
13%
8%
14%
13%
7%
8%
11%
13%
9%
11%
Will Upgrade Within
24 Months
63%
61%
52%
59%
53%
53%
42%
41%
51%
38%
35%
41%
34%
42%
40%
31%
24%
22%
No Plans
Analytics Full Data Set
Workforce Management
Employee engagement has always been important in retail; however, in today’s tight labor market, it has risen to the top of the retail priority list. To help reduce the impact of the tight labor market, retailers are turning to technologies that automate planning, operational tasks, and HR activities.
Heading the list of workforce investments over the next two years is employee engagement management/monitoring (25%). This is closely followed by recruitment and onboarding (24%). Both technologies are aimed at helping to reduce the impact of high turnover.
WORKFORCE MANAGEMENT
Full Data Set
+
Top Tech-Driven Strategies Over the Next 24 Months
Employee engagement management/monitoring
Recruitment and onboarding
Education and training
Labor scheduling
25%
24%
22%
22%
Real-time store/employee monitoring
Employee engagement management/monitoring
Task management
Mobile workforce and/or HR applications
Recruitment and onboarding
Education and training
Labor scheduling
Human resources and benefits
Time and attendance
13%
17%
17%
11%
15%
22%
11%
15%
9%
26%
28%
30%
32%
33%
34%
40%
49%
61%
Currently Upgrading
Up-to-Date
Technology
In Place
10%
16%
11%
10%
15%
11%
14%
11%
13%
Will Upgrade Within
12 Months
6%
9%
7%
8%
9%
11%
8%
7%
5%
Will Upgrade Within
24 Months
45%
30%
35%
39%
28%
22%
27%
18%
13%
No Plans
WORKFORCE MANAGEMENT Full Data Set
Looking Three Years Out
Looking into the future to a three-year horizon line is a challenging task for retailers; however, it is required for those who want to create multi-year tech investment plans designed to achieve important corporate goals.
When asked to identify technologies expected to drive retail growth over the next three years, nearly a quarter (23%) chose AI/machine learning (ML) as a key technology. Yet 63% of retailers said they have no plans to invest in AI or ML (61%), which raises the question, will retailers who neglect these technologies fall behind? Specific areas where AI/ML is expected to enhance revenue opportunities include unified commerce, predictive intelligence, and identifying customer preferences.
In second place on the three-years-out list is personalization/precision marketing (19%), where retailers expect growth to come from individualized target marketing of items to consumers and personalized recommendations.
When asked to identify technologies that will impact the customer experience over the three-year timeline, retailers chose mobile/apps (17%). Customer experience gains are expected to come from a shift to one-device shopping journeys on mobile phones (as opposed to multi-device journeys) and new mobile advancements that will improve experiences for both shoppers and retailers alike.
Not surprisingly, AI/ML (14%) comes in second place as a technology that will impact customer experience over the next three years. Improvements derived from AI/ML tech are expected to come from customer behavior analysis and personalization.
Top Retail Growth Tech Over Next 3 Years
Artificial Intelligence/Machine Learning
Optimizing E-Commerce
Personalization/Precision Marketing
1.
2.
3.
Top Customer Experience Tech Over Next 3 Years
Advanced Payment Solutions
Artificial Intelligence/
Machine Learning
1.
2.
3.
Mobile/Apps
who took the survey
Survey data was collected during January and February of 2023. Surveys were distributed digitally to RIS’ retail readers through Ensemble IQ Insights and Innovation.
Twenty percent of respondents hail from the c-suite, with another 16% self-identifying as VPs. The largest group of retailers are concentrated in the grocery/drug/convenience group (43%), with specialty retailers (21%) comprising the second biggest respondent pool.
Billion-dollar retailers make up 26% of the respondent pool while those with revenue greater than $100 million comprise 17%. Revenue increased year-over-year for most respondents (73%).
<$100 million
57%
$500 million to $1 billion
6%
>10 billion
10%
$5 billion to $10 billion
7%
$1 billion to $5 billion
9%
ANNUAL REVENUE
$100 million to $500 million
11%
.1%-4.9% increase
25%
no change
3%
decreased
24%
10%+ increase
16%
Revenue Change,
Last 12 Months
5% - 9.9% increase
32%
Department Store / Mass Merchandise / Discounter (General merchandise)
11%
Apparel / Footwear / Accessories
Food / Drug / Convenience (Fast-moving consumer goods)
43%
Other
5%
E-commerce
(online retailer that primarily sells online)
10%
PRIMARY RETAIL SEGMENT
Specialty (Electronics, Furniture, Hardware, Home, Office Supplies, Sporting Goods, Music/Video, Arts/Crafts, etc.)
21%
EVP / SVP / VP
16%
C-Level Non-IT
11%
Senior Manager / Manager
38%
Other
10%
CIO/CTO
9%
JOB TITLE
Senior Director / Director
16%
10%
Vertex Inc., is a leading global provider of indirect tax software and solutions. The company’s mission is to deliver the most trusted tax technology enabling global businesses to transact, comply, and grow with confidence. Vertex provides solutions that can be tailored to specific industries for major lines of indirect tax, including sales and consumer use, value added, and payroll. Headquartered in North America, and with offices in South America and Europe, Vertex employs over 1,300 professionals and serves companies across the globe.
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