Digital transformation is transforming the way retailers function and if one doesn’t invest in IT then one won’t be able to compete, consequently losing market share.
We are currently living in a highly digital world. High tech tools for retail are used to improve efficiency and reduce costs to improve the business’ profitability.
The Retail Dive reports that this progression has also been accelerated by the COVID 19 pandemic which forced businesses to find online alternatives to physical locations.
In this article, we shall explore the following concerning IT spending in the retail industry:
- Why retailers are investing in IT.
- How much money they are spending.
- What they are spending it on.
What is the average IT spending in the retail industry?
Global IT spending in the retail industry was estimated to have reached $218.5 billion in 2021 according to Gartner and is projected to grow 3.1% to $225.4 billion by 2022.
Retailers are investing in digitalization to meet customer expectations.
As opposed to other industries, retail has been reluctant to remodel over the past years but is now one of the leading sectors with expenditure in regards to IT. There is a growing need for businesses to get closer to consumers and drive results through accurate predictions.
Reasons for increased IT spending
- To stay current during digital transformation.
A business that fails to embrace IT will lose market share to data-driven companies. Failure to generate profits and reduce costs will force them out of business.
- Increased demand for e-commerce.
Online shopping creates the need for smooth, customer-friendly tech that responds quickly. More customers are buying into the convenience of shopping using the internet.
- The need for increased visibility.
Increased visibility allows better service, fewer lost sales and efficiency through the promotion of easier customer-product engagement and discovery.
- Innovations in data analytics give a competitive edge.
There is a mass movement in market demand that is progressing towards tech-based business and e-commerce. Innovations in data analytics are creating clear winners and losers. Those that are using advanced analytics are outperforming the competition by 68%
What IT are retailers investing into?
What is the average IT spending in the retail industry going into?
This software uses several factors specific to the retailer to accurately forecast demand and proactively provides suggestions on optimal actions to take. It helps retailers set suitable prices on the platform at the best time for the right products across the product life span.
Why invest in advanced analytics?
- To unify business across all channels and create visibility throughout product life cycle.
- Optimize demand forecasts so that retailers can plan properly.
- Make better purchasing decisions, minimize overstock.
- Identify demand from a specific SKU.
Order fulfilment options and implementation
This automates inventory management by providing inventory information that is available in real-time across the entire business.
Why invest in fulfilment technology?
- Order fulfilment options have expanded, and so have customer expectations
- BOPIS, ship to home, store to store, pick up at warehouse are some popular options that have created business and customer convenience.
- Retail associates need to know how much product is available, where it is and what the optimal shipping location is. This data is tracked and provided.
Optimized pricing and promotions
Pricing solutions enable retailers to maximise GMROI by setting optimal initial prices, and promotions and markdowns. In the Intelligence Node, according to Oberlo, there will be 2.1 billion online shoppers and one can miss an opportunity if pricing is done wrong.
Why invest in pricing software?
- Integrating planning with pricing enables a retailer to create an optimal product journey.
- Retail AI uses limitations, goals, and sales history to minimize cost and maximize profit.
IT spending to enhance customer experience goes into in-store and online shopping aids that use customer data to create a customer-centric shopping experience e.g. intuitive shopping platform, shelf tags, touchless shopping and shopping assistant tools.
Why invest in consumer experience technology?
- The competitive edge that meets customer expectations of ease and convenience.
- Over 80% of consumers are interested in various tech that simplifies their shopping.
- Directed upselling recommendations have a higher chance of success.
- Fewer returns.
Retailers are spending their IT budgets on AI-powered analytics because it optimizes business processes, resulting in less wasted time, fewer costs and increased GMROI.
Thus creating a market share divide between those spending on analytics IT and those not.
Gerald Ainomugisha is a freelance Content Solutions Provider (CSP) offering both content and copy writing services for businesses of all kinds, especially in the niches of management, marketing and technology.