CTS survey reveals emerging trends in retail technology over next decade: cloud computing, multichannel IT and changes to payment terms

CTS survey reveals emerging trends in retail technology over next decade: cloud computing, multichannel IT and changes to payment terms

According to a recent survey by UK retail software specialists, CTS Retail, over 60% of retailers who were asked their views on technology were unsatisfied, in particular about fee structures, costs and flexibility.

Many complained about the way they are effectively locked into contracts and often pay unnecessarily for generic software tools they either don’t need or don’t use. Another gripe was the time and investment required to continually update and upgrade to different versions.

There appears to be growing interest in cloud computing‚ on-demand, software as a service (SaaS), or managed services. Around 30% of respondents said they were thinking of moving to retail software packages via the cloud‚ in the next two to three years, making it possible to pay only for what they needed (based either on the number of users, or the level of sales). Over half thought that SaaS would be one of the biggest growth areas in retail IT during the next decade. However, a surprising number admitted to not really understanding fully the notion of cloud computing.

High-level input

For the survey, CTS Retail spoke primarily to company executives, IT directors and finance directors at retailers ranging in size from small independents to large multiples. Company executives and finance directors seemed more concerned with costs and fee structures, while IT directors voiced more support for managed services and spending less time on lengthy implementations and upgrades. The rising cost of maintenance from IT vendors was another common complaint from heads of IT.

Greater integration of technology across all channels was also ranked as very important, as customers increasingly shop online, or via mobile phones. Almost eighty percent of respondents acknowledged that a lot more work was needed for a truly integrated multi-channel IT approach. Many felt that out-of-the-box‚ retail software systems were still too orientated towards traditional bricks and mortar retailing. The sentiment was that while multichannel software tools were out there, most software vendors were not quite there yet in answering the needs of tomorrow’s consumer.

“The objective of the survey was generally to gauge opinion on what retailers think about existing retail software offerings, as well as try to ascertain what would be the big and emerging IT trends over the next decade,” said Scott Storey, managing director of CTS Retail. “In the world of retail technology, with the exception of multichannel sales, very little has changed in the last decade and through times of economic recession the retailer is even more aware of the constraints of their retail technology.”

Focus on customer

Dealing with the recession remains clearly a big concern during the next year or two, and while cutting costs remains a high priority for most retailers (ranked second), software to help improve customer satisfaction was the number one driver for continuing to invest in IT over the next decade. However, many smaller retailers, or particularly those struggling because of the recession, felt that IT investment would be hampered by the large upfront costs required.

The survey supported both AMR’s and Gartner’s recent research claims that a lack of capital expenditure was the biggest hindrance to improving IT efficiency, and that retailers are increasingly shifting projects from capital funding to operational expenses. In terms of how IT spend is split in retail, the biggest slice of the investment cake goes into store operations software, with point-of-sale being the most significant.

Integration is becoming less of an issue, although many retailers said they opted for software because of compatibility with the business and widespread IT solutions like Microsoft Excel or Office. However, a bone of contention was the frequent need to adapt existing systems or change hardware every time new tools were required. Retailers were also wary about switching to new emerging technologies for fear that they soon might become outmoded or redundant, for instance, mobile payment devices. Nonetheless, mobility was considered a hot prospect for the next few years.

On the strength of the survey’s findings, CTS Retail has launched a new pay-per-transaction IT solution for retailers, called Cervello, with no need for capital expenditure and free maintenance and upgrades.

Cost management key concern

“The very seasonal nature of retail makes the spreading of IT costs, based on the volumes of sales, an attractive one,” said Storey. “Every retailer we spoke to wants to keep IT spending down to a minimum and in proportion to their current trading environment.”

“During these difficult economic times, many retailers voiced support about being able to free-up cash and turn capital IT expenditure into less burdensome, day-to-day operating expense,” he added. “As we come out of a tough recession and retailers continue to strive for greater efficiencies, more businesses will move to a different charging mechanism, with most opting for pay-per-use, on-demand software, regardless of market sector.”

While retailers want flexibility and price control, many have argued that cloud computing and managed services are not the definitive answer. CTS Retail believes a hybrid of the two is the way forward, taking into consideration all the different delivery mechanisms, with a combination of on-premise and SaaS software. Based on the results of the survey, CTS Retail predicts that in the next five to 10 years, all software will be delivered on a demand basis.