In order to keep pace in a fast-moving, hypercompetitive industry, retailers are continually evaluating, testing, buying and implementing new technology systems and solutions. But with so much solutions and tech providers in the market, having a process in place for vetting and purchasing technology is critical for retailers to maintain efficiency and optimize return on investment.
With that in mind, Total Retail wanted to learn more about retailers’ technology buying processes. For example, what are the factors influencing technology purchase decisions? How long, on average, does the vendor selection process take? And where within the organization is tech budget being diverted to? The answers to these questions — and many more — are included in Total Retail’s latest research report, 2023 Retail Technology Report: An Analysis of Trends, Buying Behaviors, and Future Opportunities. This annual report features data compiled from a survey of Total Retail’s audience.
Where Tech Budgets Are Being Funneled
The pandemic further accelerated the growth of e-commerce, and that boom, while having since slowed from its peak, is impacting retailers’ technology spending. More resources are being funneled to digital/e-commerce teams than any other department within retail organizations. Optimizing the experiences of online shoppers is paramount to winning their loyalty, and technology such as OMS, IMS, CRM and AI is being leveraged in this pursuit.
The department slated to see the second biggest percentage increase in technology spending is marketing. Given rising online customer acquisition costs, it’s not surprising that retailers would want to support their marketing departments with increased funds to not only attract new buyers, but retain existing ones as well. Creating personalized marketing messages that consumers engage with and respond to most frequently requires data tools. Spending on those tools, especially AI, is becoming necessary for retailers to build long-term customer relationships.
Human resources is at the bottom of the list, indicating that at least for the time being retailers are prioritizing customer-facing departments vs. internal departments. However, that shouldn’t diminish the importance that talent plays in a successful retail organization. A well-balanced commitment to excellence in people, process and technology is a blueprint for success.
Cost is Driving Purchase Decisions
Retailers are analyzing two key factors when making technology purchase decisions: cost and integration with existing systems. Regarding the former, retailers are seeking out value as they operate in many cases with less capital to spend. They’re targeting technology solutions that have proven to yield positive ROI, whether through increased revenues, decreased costs, or some combination of the two.
For the latter, it makes sense that retailers would be prioritizing how well a new tech solution would integrate with existing systems, as that’s the No. 1 challenge identified by respondents when purchasing new technology. Integrated systems that provide frictionless experiences for users, both customers and employees, are more effective at driving desired results.
Seamless integration between tech systems is also required to execute the omnichannel experiences customers have to come to expect. For example, inventory and order management systems working together to enable cross-channel fulfillment. Or CRM and marketing automation platforms, with customer data powering personalized messaging delivered via automated email, SMS, and social media campaigns.
Does Slow and Steady Win the Race?
Retailers, on average, are taking longer to make final vendor decisions for moderate to major technology purchases. Twenty-eight percent of respondents in our 2023 survey said they’re taking six months to a year to make such decisions vs. 14 percent that said the same in our 2022 survey. With the multitude of service providers in the marketplace and retailers wanting to ensure they’re getting the best ROI, vetting processes are being extended.
The sweet spot is three months to six months for the majority of respondents (30 percent) to make moderate to major technology purchase decisions. While down from the 35 percent that said the same in the 2022 survey, the time frame was once again the No. 1 choice for respondents. While being thorough in the vetting process to ensure that they’re choosing the right partner and solution for their business is prudent, retailers must be cognizant of the speed at which the industry landscape is evolving. Those that wait too long risk being passed by.
For more in-depth survey data as well as analysis of what it means for the retail industry at large, download the 2023 Retail Technology Report: An Analysis of Trends, Buying Behaviors, and Future Opportunities report.
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