Retailers face brisk headwinds in 2023. With market competition increasing, retailers must invest in initiatives to boost revenue and differentiate their business offerings. At the same time, consumer expectations are rapidly shifting, with shoppers seeking a more experiential, flexible and seamless shopping experience than ever before. Given these factors in the context of an uncertain macroeconomic environment, retailers must invest in solutions to drive growth and weather near- and long-term challenges.
In a new report that Coresight Research recently released with VMware, Retail Challenges Boost Edge Technology Investment, we leverage proprietary survey findings to explore the perceived impacts of various business components on U.S. retailers’ revenues and assess retailers’ current and planned investment levels in in-store technology to address these. We reveal how these significant investment plans require accompanying investment in proper supportive cloud and edge technology infrastructure.
Analyzing the findings, we found that more than two-thirds of U.S. retailers plan to increase their investment in technology over the next three years, with nearly three in 10 planning to increase spending by at least 10 percent (see figure below). This near-term focus on technology implementation indicates that retailers believe they can use technology solutions to address a range of current business challenges impacting net revenue.
US Retailers’ Plans for Technology Investment over the Next Three Years Compared to Now (% of Respondents). Base: 200 U.S.-based IT decision makers, surveyed in November 2022 Source: Coresight Research
Retail Challenges Drive New Technology Investments
The report identifies five major aspects of business that impact retailers’ revenues: associate empowerment, business insights, customer engagement, operational efficiency, and security and safety (see figure below). On average, retailers rank security and safety as having the biggest impact on net revenue compared to other categories, with nearly half (47 percent) of all respondents placing this category in Rank 1 or Rank 2 (the biggest impacts).
5 Business Categories: Potential Impact on Net Revenue (% of Respondents). Respondents were asked to rank the five categories based on their potential impact on net revenue, from 1 (biggest impact) to 5 (lowest impact). Base: 200 U.S.-based IT decision makers, surveyed in November 2022. Source: Coresight Research
However, operational efficiency was ranked in the top spot by the highest proportion of retailers (24 percent) — and the average weighted rankings of each category are very close. Coupled with the strong intentions to increase technology investments, the close rankings reveal that retailers are likely experiencing elements impacting net revenue across business categories.
At least 86 percent of surveyed retailers indicated that they either currently use or plan to use various emerging technologies across business categories (see figure below). Furthermore, over one-third of all retailers plan to increase their level of investment over the next three years in each type of technology we asked about.
Technologies That Retailers Are Currently Using or Planning to Use (% of Respondents). Base: 200 U.S.-based IT decision makers, surveyed in November 2022. Source: Coresight Research
Implications for Retailers: Competitive Advantages in Offline and Online Integration
The survey results, as discussed above, show that retailers have a healthy outlook on IT spending and that they report both using several leading-edge technologies currently, with concrete plans to use them in the future.
Retailers should consider taking a holistic approach to technology adoption by seeking ways to implement new solutions and integrate them into existing systems to improve business operations across the board. Retailers need to continue to migrate different operational areas to the cloud while also deploying computing power nearer to physical stores to improve performance, which requires a platform to manage what computing needs to be performed locally vs. in the cloud.
The Vitamin Shoppe, a U.S.-based retailer of nutritional supplements, views its physical stores as a key element of the digital transformation of its approximately 700 U.S. retail stores.
“The need to provide high-quality service to our customers makes reliability and performance crucial,” says Andrew Laudato, chief operating officer at The Vitamin Shoppe. “Store associates use mobile devices to perform customer lookup, manage inventory, execute transactions, and fulfill BOPIS (buy online, pick up in-store) and ship-from-store orders, which have demanding connectivity requirements.”
In the current uncertain economic environment, retailers and brands have to determine spending priorities, from technology to other investment areas that can also benefit business operations (e.g., sustainability and market diversification) and then justify them to their investors.
Deborah Weinswig is the CEO and founder of Coresight Research, a company that delivers data-driven insights focusing on retail and technology.
View Original Article
