Retailer spending for IT, cloud on the rise

Dive Brief:

About 72% of 158 retailer representatives surveyed by Retail Systems Research anticipate increased spending directly by their IT departments over the next three years, while 77% expect increased IT-related spending on cloud or outsourced services and 76% foresee increased IT-related capital spending, according to a new RSR report.
After years of hesitating about increasing IT spending, many retailers have already begun to increase their IT-related investments as a percentage of their total revenue. For example, 67% of apparel retailers studied have IT spending that represents at least 3% of their revenue, higher than in past years, per RSR.
The percentage of total corporate IT spending allocated to outsourced or cloud-based services is also increasing. For example, about 84% of apparel retailers and 65% of hard goods retailers are directing more than 25% of their IT spending to these services, according to the report.

Dive Insight:

Whether or not to increase IT spending is a conversation that, traditionally, no one in retail has wanted to have. Retailers have battled with the conception that this kind of spending wouldn't have a direct, positive effect on sales, or a fear that investing in the wrong technology could capsize an entire operation.

Although, for the most part, the hand of retailers has been forced. For one thing, as RSR noted in the report, the overall consumerization of IT, with individuals getting access to vast computing power in the palms of their hands through smartphones, has led to a better informed, more powerful consumer. Retailers have had to respond by not only investing in mobile shopping apps and features, but also by investing in mobile gear and apps for their own store employees, or risk leaving them woefully undermatched to deal with their own customers.

Also, ongoing fear of possible store closings and of "the Amazon effect" on the evolving digital shopping experience has sent some retailers scurrying for possible solutions, including increasing technology investment in a number of areas to keep stores relevant, or to better integrate the offline, online and mobile shopping experience.

Another growing area of IT-related investment, as RSR pointed out, is cloud and outsourced services. This is not a new development at all, as the retail sector has been heading in this direction for years, occasionally outsourcing time-sensitive projects to third-party technology specialists and migrating IT processes and apps to the cloud to reduce on-premise hardware investment and free up IT staff for more important tasks.

The need to do this is growing as retailers face challenges, such as the need to continue upgrading their mobile shopping apps with new features. The recent spate of augmented reality app launches, for example, saw some retailers turning to outside developers to help them quickly prepare the new feature for rollout.

Retailers may once have been hesitant to increase their IT spending year over year, but 87% of those surveyed by RSR said they agree that they need to invest in IT to meet the needs of how customers want to shop in today's world. Among other things, that means investment in technologies to help retailers better manage and use data for personalization and cross-channel selling. As the customer and revenue benefits of increasing IT spending become clear, a discussion about increasing IT spending that once was so painful to have has become necessary.