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A S U P P L E M E N T T O R I S N E W S
R E T A I L T E C H N O L O G Y S P E N D T R E N D S
STORE SYSTEMS STUDY 201411 T H A N N U A L
S P O N S O R E D B Y :
PRESENTED BY:
StoreS reinvented
®
Growth and Innovation
Optimism in the Driver’s Seat
Dawn of the New Store
A Mobile Device in Every Hand
Relentless Pursuit of Omnichannel
StoreS reinvented
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J A N U A R Y 2 0 1 4 R I S N E W S S T O R E S Y S T E M S S T U D Y 3
R I S S T O R E S Y S T E M S S T U D Y 2 0 1 4 E X E C U T I V E S U M M A R Y
The push of mobile technology into all as-pects of the retail enterprise that we saw last year continues, but this year the focus shifts slightly to include the onrush of omnichan-nel capabilities. This study examines data-points about both mobile and omnichannel technologies, broad-based and detailed IT investment plans, and macro trends in the current economic climate that will have an impact on retailer technology strategies.
The retailers polled in this study seem to be increasingly positive about the economic prospects for 2014 and as a result are cur-rently making plans to increase investments that will support growth. We find that en-terprise IT spending for 2014 is expected to be up 4.9% from 2013, which equates to a growth rate of 22.2% over the past five years. Store level spending is expected to be up 5.1%, which is up 20.4% from 2010. The mid-tier retailers ($250 million to $1 billion in annual sales) are the biggest investors, and the smallest retailers are the laggards.
Here are some compelling takeaways from this year’s Store Systems Study:
• Retailers expect to step up the pace of expansion – 75% of respondents are plan-ning new stores in 2014 and 60% are plan-ning an increase in IT head count.
• Increased expansion plans parallel IT – average IT spending growth is 5.0% above 2013 levels (which were up 4.8% from 2012). Sources of spending include store-level mo-bility (using devices owned by both retailers
and consumers) and omnichannel. Big Data and RFID not so much.
• Nearly one-third (30%) of retailers are planning a new POS investment decision in the next 12 months. This is the largest pur-chase intent for POS hardware in years.
• Food/Drug/Convenience Store retailers are the leading targets for POS hardware investments (39% plan to purchase in the next 12 months), while Specialty Softgoods retailers lead for POS software (40%).
• The largest retailers ($5-plus billion in annual sales) are showing the greatest inter-est in POS investment in the coming year, with 44% looking to purchase POS hardware and 35% POS software. This should portend to a strong year for POS vendors.
• Less than one-quarter (23%) of retailers say that the sunset of Windows XP support is a significant influence on their POS deci-sion going forward. However, from other IHL Research we know that nearly one million POS terminals in North America will need to be upgraded due to the sunset of Windows XP support in spring 2014. We believe that some retailers don’t realize this is coming, and some are planning replacement as part of an overall strategy to move to a single ar-chitecture.
• 63% of retailers looking to make a POS software purchase in the next 12 months say
Growth and InnovationRetailers expect 2014 to be a year of mobility, omnichannel and growth
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CHIEF RESEARCH ANALYSTSLee HolmanGreg Buzek
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BY LEE HOLMAN AND GREG BUzEk
30% of retailers are planning a new POS investment decision in the next 12 months, the largest figure in years
63% of all retailers say their next POS will be a unified transaction engine also used for m-commerce and e-commerce
Consumer Mobile:
Anchoring Your Brand Experience
Q Mobility in stores is not well defined although solutions are more advanced. What are the
keys to successful mobile POS deploy-ments?Three areas that impact mobile deployments the most are the right technology, the right implementation and the right employee en-gagement. There are many choices when it comes to technology and each retailer will have different requirements. For some, a simple hand held device for line busting is sufficient, whereas some retailers may require the larger tablet format for a more immersive and consultative interaction with their customers. Depending on how the mo-bile POS solution is deployed, mobile print-ers may be necessary to print receipts.
Retailers must also address all of the op-erational aspects of mobile POS to ensure success. Mobile POS is much more com-plex than simply extending scanning and payment capabilities to a mobile device. In addition to securing, managing and charg-ing the physical mobile devices, mobile POS requires rethinking everything from merchandise handling, payments, receipt printing, customer flow and loss prevention, just to name a few. Ensuring that associates are trained and, more importantly, that they clearly understand how the mobile POS so-lution supports them in their job, is critical to the success of any mobile POS solution.
Q What is the correct balance be-tween fixed POS and mobile POS for a retailer?
There is no simple formula for how to op-timize technology in retail stores. Require-ments will vary for each retail segment, for each retailer within those segments and of-ten for each store within a single retail chain.
formation. This includes information about product features, pricing and availability. This can be delivered through a native ap-plication or by providing QR codes that can be scanned. Second, consumers want per-sonalization. Mobile devices allow retailers to deliver customized messages and pro-motions to consumers while they are shop-ping. Third, more and more consumers are interested in mobile self-service. Particularly in the grocery and high-volume segments, consumer mobile self-scanning is growing.
For associates, mobile functionality should include anything that makes their job easier. This includes the ability to scan and check inventory and prices, as well as basic queue busting/mobile POS functional-ity to help customers, particularly those with small basket sizes, get through the check-out process faster. By enabling associates with mobile access to product information, they are better able to assist consumers and drive sales. In some retail environments such as supermarkets, associate handheld devices can be used for task management or for documenting spills or accidents.
Finally, mobile technology can liberate store managers from their stationary PCs and allow them to be on the store floor with customers. Managers can use tablets to ac-cess labor management systems, sales data or planogram information. They can receive e-mails, or loss prevention and remote man-agement alerts. Tablet devices become mo-bile command centers that provide manag-ers with persistent real-time access to the data they need to effectively manage their store.
QWhat should retailers do to make the transition to a store mod-el that includes smart-device
wielding associates, return capability for online orders, and ship-anywhere capability?
In addition, mobile technology creates the opportunity for multiple devices within a single transaction, particularly when it comes to scanning and payment. These ac-tivities may occur on an associate handheld mobile POS device, or at one of a number of fixed POS options such as traditional at-tended lanes, self-checkout and scan tunnel machines or self-service kiosks and pay sta-tions. With the growth in consumer mobile self-scanning applications and mobile pay-ment solutions, consumers may use their own smartphone for scanning and payment. Other factors that influence the optimal mix of store technologies may include:
• Impact on cost per transaction• Throughput capacity requirements dur-
ing peak and non-peak shopping seasons• Impact on transaction speed• Acquisition and implementation cost• Customer preference and adoptionFor the foreseeable future, most retail-
ers will continue to require fixed POS in the store, but mobile will play an increasingly critical role in store operations.
Q What key mobile functionalities should retailers add to their stores?
Many retailers immediately viewed mobile as an opportunity to sell more to consum-ers, which is evident in the number of mo-bile apps and mobile websites currently available. Yet mobile is much more than just a sales channel and should be used to enhance the retail experience for consum-ers, associates and store managers. Mobile functionality will depend on the intended user.
Research shows that consumers are in-terested in a number of mobile activities within the store. First, consumers want in-
Mobile is the lynchpin of omni-channel re-tailing. To take full advantage of mobile technology and achieve a true omni-channel retailing experience, merchants must invest in a technology foundation that provides visibility and access to common data and services across all touchpoints. This allows associates to access customer data, pur-chase history and loyalty information from any device creating a personalized and en-gaging experience. It allows retailers to de-liver a consistent brand relationship to cus-tomers regardless of how, where and when the interaction occurs.
Retailers can begin by augmenting exist-ing store processes and infrastructure with mobile technology. Associate mobile POS and consumer mobile self-scanning can help improve the shopping experience for today’s technology-empowered consumers and deliver cost and operational benefits to the retailer. Retailers then need to integrate additional services and enable access to common data and business logic across de-vices and touchpoints to ensure a consistent brand relationship with consumers. Finally, analytics needs to fuel a highly personalized experience that delivers the products, ser-vices, promotions and messages that each consumer wants the way they want.
Q With so many changes underway in retailing caused by consumers embracing mobile technology,
what big trend do you foresee at the top of the retail priority list in 2014?
Cross-channel optimization will be the top priority for retail in 2014. In recent years, omni-channel retailing has grown from a forward-looking vision to a business neces-sity. In 2014, retailers will focus investments on optimizing cross-channel interactions to deliver on that omni-channel vision and cre-ate the brand experience that today’s con-sumers demand.
J A N U A R Y 2 0 1 4 R I S N E W S S T O R E S Y S T E M S S T U D Y 54 R I S N E W S S T O R E S Y S T E M S S T U D Y J A N U A R Y 2 0 1 4
By EMBracing TEchnOlOgy ThaT TOday’S ShOPPErS dEMand
Leo L. Suarez Sr. Vice President, Worldwide Marketing & Strategy
Toshiba Global Commerce Solutions is retail’s first choice for integrated in-store solu-tions. Along with a global team of dedicated business partners, we deliver innovative com-merce solutions that transform checkout, provide seamless consumer interactions and optimize retail operations that are changing the retail land-scape. To learn more, visit www.toshibagcs.com
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it will be a unified transaction engine also used for m-commerce and e-commerce.
• Nearly half of all retailers (47%) cite omnichannel strategies as a key priority for 2014.
• 63% of respondents expect their IT spend on omnichannel activities to increase in 2014. Specialty Hard-goods retailers are the most bullish, with omnichannel spending outpac-ing store spending by more than 30%.
• Overall in-store costs are ex-pected to increase by 2.4% due to implementation of omnichannel.
• The number of retailers using mobile devices for POS is expected to triple in the next year, which is a major finding in the study.
• Nearly 30% of retailers are plan-ning to adopt tablets or non-rugged handhelds in the next 12 months.
• Specialty retailers, already the greatest spenders on mobile, will increase mobile spending so much that store-level IT spending is set to grow 15.9% faster than last year.
• Both Softgoods and Hardgoods
retailers plan to buy tablets (40% and 25% respectively).
• Fifty percent (50%) of Food/Gro-cery retailers plan to purchase tab-lets in the next 12 months.
• The average retailer using mo-bile for POS plans over the next three years to purchase 20.3% fewer traditional POS terminals than be-fore for their stores.
Overall, the picture this paints of store systems investment in 2014 is a bright one. No doubt part of the growth in IT spending will be aimed at increasing head count. Spending here is expected to increase 3.3%, which is consistent with the 3.2% we found last year. Store counts will in-crease an average of 5% this year. •
IHL Group is an independent business-consulting organization headquartered in Franklin, Tennessee. It specializes in busi-ness consulting, professional and technology referral, market analysis and business planning for retailers and information technology companies that focus on the retail industry.
Lee Holman
Lead Retail Analyst
IHL Group
Greg Buzek
President
IHL Group
METHODOlOGYRESUlTS Of THE STUDY ARE bASED ON RESPONSES bY 90 RETAIlERS wHO wERE POllED IN OcTObER 2013. Of THESE, 42% cAME fROM RETAIlERS wITH MORE THAN $1 bIllION IN REvENUE, INclUDING TJX, MEIJER, SEARS, IKEA, SObEYS, RADIO SHAcK, bURlINGTON cOAT fAcTORY, wAlGREENS AND MORE. Of THOSE, 17 HAD REvENUE IN EXcESS Of $5 bIl-lION. NONE Of THE RESPONDENTS wERE fIElD OR STORE lEvEl. All wERE HEADqUARTERS-lEvEl DEcISION MAKERS.
47% cite omnichannel strategies as a key priority for 2014
RESPONDENTS BY RETAIL
RESPONDENTS BY TITLE/POSITION
RESPONDENTS BY ANNUAL REVENUE
29%Food/Drug/C-Stores
8%Dept. Stores/MM
30%Specialty
Soft
20%Specialty
Hard
12%Hospitality
5%Store
Operations
7%Other
17%Exec. Mgmt.VP-Level(non IT)
11%Exec.Mgmt.C-Level(non IT)
34%CIO/CTO/VP of MIS
27%IT Dir. - Mgr.
21%Under $250
Million
7%Over $25 Billion6%$10-25 Billion
22%$1-5 Billion
7%$5-10 Billion
20%$500 Million -
1 Billion
16%$250-500 Million
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Growth is the primary driver for retailers striving to stay relevant in a dynamically shifting market
Optimism in the Driver’s Seat
Store Count
IT Hiring
Increase Stay the Same
19%75%
35%60%
This is the second consecutive year where we are willing to claim that growth is a primary driver of invest-ment strategies in retail as opposed to an effort to attempt to do more with less. Within this macro trend we see store IT investment growing faster than enterprise IT spending. This is even more noteworthy be-cause it is expanding faster than the projected growth in store count and IT hiring.
The rate of spending growth is a significant change from last year and it is being driven by a rise in planned purchases of POS hardware and software. Another significant factor is a big rise in spending on projects that expand in-store mobility.
The rise in technology spending runs counter to the perceived reduc-tion in costs attributable to data stor-age, virtualization, cloud services, outsourcing and the replacement of traditional POS with more inexpen-sive mobile solutions.
However, on the flip side, new government mandates on health care benefits and rising salaries for inter-nal staff are contributing to growing IT budgets.
This is the fourth consecutive year that we see consistent plans for store growth. This is an encouraging sign because it indicates that retail-ers continue to gain confidence in business prospects going forward.
Food/Grocery retailers are the most bullish when it comes to ex-
pectations for 2014 – 78% expect to increase store count and 72% expect an increase in IT hiring. Specialty Softgoods retailers are not too far behind at 92% for stores and 60% for IT hiring.
Last year the largest retailers (an-nual revenue greater than $25 bil-lion) lagged in expansion planning, with 40% expecting store count growth and 20% anticipating IT hir-ing increases. This year 82% expect store count increases and 72% ex-pect IT head count increases.
It has been well documented that
CIOs are forging a greater relation-ship with marketing. We see this continuing and increasing overall IT budgets. In fact, in IHL’s recent “Black Ops IT Spend” study, this has been quantified as over $11.6 billion more IT spend available from retail-ers due to the influence and budget inputs from marketing.
TEcH SPENDING RISESFrom last year’s study, we saw that IT spend for 2013 was expected to rise 4.8% for Enterprise IT and 4% for Store IT. For 2014, retailers are
R I S S T O R E S Y S T E M S S T U D Y 2 0 1 4 T E C H N O L O G Y B U D G E T S
STORE COUNT AND IT HIRING PLANS fOR 2014
CURRENT RELAT I ONSH IP BETWEEN I T AND MARkET ING
1%We have no idea 17%
Rarely strategizetogether
1%Other
54%Closer than before,
could be better
27%Very closetogether
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planning to increase Enterprise IT spend by 4.9% and Store IT by 5.1%. This suggests that sales growth is expected to accelerate again. Also, since the software license model is moving toward the cloud pric-ing model, where payments are not made upfront but are made on an as-you-go basis, the true growth in IT spending may be closer to 10% once the projects are completed.
Another big driver of growth in the number of IT projects is the growing influence of the marketing department on IT spending. Many retailers have given their marketing departments the authority to not only purchase some technologies but also to develop applications they need.
Looking back at 2013, Enterprise IT spending for the largest retailers shows a 4.7% increase over 2012 and this year there is a similar budget increase. Large retailers represent the bulk of overall retail technology spending, which is why we track it so closely. The smallest retailers show subdued IT spending growth and this is due in part to several years of big year-over-year increases. However, we expect this group of retailers to discover some hidden costs as they come to grips with the sunset of Win-dows XP support, which commences in April 2014.
Retailers who plan to increase their store count for 2014 are obvi-ously more inclined to increase their store IT spending and we find this figure up 11% over 2013. However, enterprise IT spending for these re-tailers actually declined 3.4% due to cloud and pay-as-you-go options. Retailers who anticipate a net de-crease in store count for 2014 are expecting to see flat enterprise IT
spending and a 3.8% decrease in store IT spending.
Looking a bit closer at the data, 84% of respondents plan to increase their enterprise IT budgets for next year, an increase of 13%. Of those, the average intended increase is 6.1%.
When it comes to store IT spend-ing, 79% plan an increase for 2014, up from 76% last year. The average increase for these retailers is 6.9%, which is a growth of 15% from last year. The key purchases for these re-tailers are POS hardware (33%), POS software (33%) and tablets (38%).
Seventeen percent (17%) of all re-tailers are anticipating a flat store IT budget in 2014. For these retailers, the key focus in 2014 will be Tablets (36%). These folks expect to reduce operat-ing costs by moving to mobile POS.
When looking at the segment level, we find that fast-moving con-sumer goods retailers (Food/Drug/C-Stores) are more aggressive in both enterprise IT spending and store IT plans. The takeaway is that FDC retail-ers, who sell essentials, continue to maintain an aggressive stance toward store IT investment and now need their enterprise plans to catch up.
For the General Merchandise re-tailers, enterprise spending may sim-ply be considered a continuation of last year’s strategy fueled by a need to support more omnichannel ser-vices and functions. Within the store IT increase of 5.3% we find a large part of it is due to heavy investment by department stores that want to remain relevant in the dynamically shifting retail environment. •
I T BUDGET GROWTH BY RETA I L ER REVENUE
Enterprise ITSpend Average—4.9%
Store Level ITSpend Average—5.1%
3
4
5
6
7
8
3.5%
5.3%
6.3%
5.1% 5.3%
3.7%
Under$250Million
$250-$500Million
$500Million - $1 Billion
$1-$5Billion
Over $5Billion
6.4%
5.4%5.0%
4.6%
IT BUDGETS GROWTH BY RETAIL SEGMENT
Enterprise Store
Overall 4.9% 5.1%
Food/Drug/C-Stores 5.5% 5.8%
General Merchandise 4.7% 5.3%
Restaurant/Hospitality 4.7% 3.0%
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Three years ago, we noted that re-tailers had been fairly consistent when it came to their top store sys-tems priorities. Five priorities (Better Tools for Associates, PCI Compli-ance, Advanced CRM/Loyalty, Inven-tory Visibility and Speed Through Checkout) had occupied all but three of the top five positions over the previous five years. That started to change in 2011, as we began to in-clude Mobile technologies in the se-lection process.
Last year more than 82% of re-spondents cited Mobile (for either associates or customer engage-ment) as a priority, making it the single highest response rate in the previous seven years. Mobile con-tinues to be a heavy point of focus for retailers this year although in true hype-cycle fashion its rising wave seems to have crested. Break-ing it down a bit, this year Mobile for Consumers garnered 46% (down from 58%) while Mobile for Associ-ates claimed a 43% response rate, well down from last year’s 61%. We’ll have more to say about it in the Mobility section.
Currently, Advanced CRM/Loyalty and Inventory Visibility are the only two remaining of the original top five priorities. The two other spots are held by the Mobile priorities. Ad-vanced CRM/Loyalty continues to be a priority because it costs less and is easier to sell more products to an existing customer than it is to ac-
quire new customers. Inventory Vis-ibility takes on added significance as retailers add real-time inventory status for mobile devices and online, for both associates and customers.
Taking the final spot in the top five on the priorities list is Omnichannel Integration. Since 2007 when it was 14th on the list (and called Cross-Channel Integration), it has seen an impressive move up the rankings. Consumers want to use all available channels for purchasing, receiving and returning items. In response, retailers have been taking steps to make it happen.
Retailers (and consumers) con-tinue to see progress in omnichan-nel functions and services, and the retailers that get it right the quick-est will reap the greatest rewards. General Merchandise retailers es-
pecially cite this as a priority and tie with Specialty Hardgoods retailers at 69%. Other segments that gave it high marks are Department Stores/Mass Merchants (57%) and Special-ty Softgoods retailers (50%).
New this year is the priority ranked sixth – Single Transaction Engine for All Channels. Clearly, re-tailers are adding e-commerce and mobility capabilities to the brick-and-mortar store and contact center. Rather than having multiple solu-tions that do essentially the same task of ringing up sales, retailers are increasingly seeking a unified solu-tion that can manage transactions regardless of the channel. Depart-ment Stores strongly supported this approach (83%) with Specialty Hard-goods a distant second at 50%.
PCI Compliance holds onto sev-
The rise of omnichannel integration, mobile POS and singular transaction engines are hallmarks of the new store
Dawn of the New Store
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TOP STORE SYSTEMS PR IOR I T I ES fOR 2014
Advanced CRM/Loyalty
Omnichannel Integration
Mobile Engagement for Consumers
Inventory Visibility
Mobile for Associates
Single TX Engine for All Channels
PCI Compliance
Workforce Management
Store-Level BI
48%
47%
46%
44%
43%
38%
35%
28%
21%
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TOP POS SOfTWARE VENDORS fOR PLANNED PURCHASES IN 2014
Food, Drug, C-Stores % General Merchandisers %
NCR 46% Epicor 32%
Micros Retail 21% Micros Retail 32%
Toshiba Global Commerce Solutions
21% NCR 23%
Fujitsu 17% Microsoft 20%
Oracle 17% Oracle 18%
Epicor 13% Fujitsu 16%
Microsoft 13% Toshiba Global Commerce Solutions
16%
enth place, after a dramatic descent from being the number one priority in 2008 and 2009.
POS MAKES bIG lEAPWith the advancement of Mobile POS, we saw a reasonably steady de-emphasis on traditional POS sys-tems, which historically have been not only the most noticeable tech-nology in the store but also the larg-est component of store IT spending. For this year, 30% of all retailers are planning to make a purchase of ei-ther POS hardware or software (78% of those are planning to buy both). This is a huge jump from last year, which was the leanest year in recent memory, with only 16% and 22% planning a POS hardware or soft-ware purchase respectively.
Tempering this enthusiasm is the fact that only 40% to 50% of those who say they are going to purchase actually do. Still, 2014 is shaping up to be a much better year than 2013. Key retail segments for POS hard-ware sales deployments include Drug Stores (50% plan a purchase in the next 12 months), Food/Grocery (35%) and Department Stores (33%). For POS software, the segments with the highest deployment plans are Specialty Softgoods (40%) and both Drug Stores and Department Stores, which were selected by 33%.
POS Printers (26% of retailers plan to make a purchase in 2014) made a nice recovery from last year when the category only garnered 13% for planned purchases. The other hardware categories related to POS terminals that come next on the planned deployment list for 2014 are 2D Barcode Scanners (26%), EFT/
Debit/Signature Capture devices (25%) and Mobile Screen-capable Scanners (25%). Food/Drug/C-Store retailers will be looking to add POS Printers (26%), Department Stores/Mass Merchants want both forms of scanners (43% each), and Specialty Softgoods and Hardgoods retailers
intend to purchase EFT devices (36% and 31% respectively).
For the remaining technologies tracked in the store systems cat-egory, 44% of those looking for Self Checkout systems are Specialty Softgoods retailers; 31% looking for Digital Signage solutions are in the
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NEXT STORE SYSTEM PURCHASE
POS client-based system
POS Software
POS Scanner (2D Barcodes)
POS Printer
EFT/debit/signature capture
POS Scanner (cell phone screen)
Kiosks
Digital Signage
Self Checkout
Currently Use Within 12 Months 12-24 Months 24-36 Months
28%
26%
29%
35%
26%
16% 25% 13% 9%
25% 15% 8%
26% 9% 7%
26% 10% 9%
30% 13% 11%
30% 10% 11%
16% 19% 15% 5%
9% 16% 12% 10%
9% 11% 9% 5%
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Food/Drug/C-Store grouping; and 27% looking for Kiosks are Specialty Softgoods retailers.
This is the sixth year where we list POS Software vendors that re-tailers are planning to make invest-ments with in the year ahead. The question is worded to find out which vendors retailers show the most in-terest in for their next POS software decision. Each respondent was pro-vided with a list of 15 of the leading POS vendors to select from as well as a write-in form and a selection for internally developed. Due to the nature of the question, respondents were allowed to select more than one response.
This year’s results look somewhat different from last year’s, mainly due to NCR’s November 2012 acquisition of Retalix (along with Cornell-Mayo). Overall, 42% of respondents chose NCR as one of the POS software ven-dors they are considering for their next purchase. Micros Retail was in second place at 27% of respondents, and Epicor was in third at 23%. NCR really scored strong numbers: 67% of Department Stores, 56% of Food/Grocery, 50% of Drug Stores and 40% of Hospitality retailers. Micros Retail did well in Drug Stores (50%), Specialty Softgoods (48%), and a sur-prisingly low 22% in Hospitality. Epi-cor did well in Specialty Softgoods (43%) and also grabbed a 33% share among Department Stores.
Large retailers (annual revenue over $5 billion) showed a prefer-ence for NCR (47%), Oracle (32%), Toshiba (26%) and Epicor (17%). For the smaller retailers (those with less than $500 million in annual revenue), Epicor and NCR tied with 19% each.
THE MObIlE POS EffEcTThis is the third year that we have examined the expected reduction in POS terminal purchases by retailers due to their embrace of Mobile POS. Simply, we asked those retailers who were planning to use Mobile devices for POS over the next three years what the percentage of decline will be in the number of traditional POS terminals they would otherwise have purchased. The first two years were reasonably similar, with overall reduc-tions of between 12% and 13%. This year, there is a significant increase in the reduction in all segments (“in-crease” means a larger reduction).
The Hospitality segment may be the easiest to explain, since in pre-vious years we had a small sample size. Still, the vast majority of Hos-pitality respondents are restaurants, and there is no lack of potential for using tableside Mobile POS.
The bump in the numbers for General Merchandise retailers is best explained by the fact that we are now well into the second gen-eration of mobile devices that can be used in stores. At this point, most of the bugs have shaken out, op-erational plans have been refined, and there are a number of success-ful case studies available for guid-ance. There are also a number of corporate-level apps available that have significant retail functionality. The overall view appears to be that the guinea pigs have gotten past the trial phase and now mobile POS is ready for prime time in mainstream retailing.
The figures that are most inter-esting are the ones from the Food/Drug/C-Store group (10.8% planned reduction in fixed POS terminals). We suspect this reduction is being driven by a few line-busting termi-nals for peak periods and the desire to engage consumer mobile devices to do their own scan and bag as they walk through the store and subject them to spot-check at the exit simi-lar to how Costco and Sam’s do this check today. In so doing, not as many full lanes are required. •
FiGuRe 4
Reduction in planned POS terminal purchases jumped sharply.
EXPECTED REDUCTION IN POS TERMINAL PURCHASES DUE TO MOBILE
Segment 2013 Expected POS Reduction
2014 Expected POS Reduction
Overall – 12.4% -20.3%
Food, Drug, C-Stores – 6.1% -10.8%
General Merchandise – 14.3% -27.1%
Hospitality – 0.1% -11.1%
Five years ago, we introduced mobil-ity as a coverage topic in the study. It started out as a subtopic, then a pri-mary subject, then a game changer, and now it has become part of re-tailing’s DNA. Mobile devices have turned the 340-year history of retail in North America on its head, and it has caused retailers to completely rethink the way associates interact with customers.
When it comes to the types of devices that retailers use in their stores, we need to remember that these are not necessarily either-or decisions. No less than 40% of retail-ers are either currently using or are considering using more than one of three mobile device types in their stores in the next 12 months.
Rugged Handhelds have been a mainstay in retail for a couple of de-cades, and as a result we tend to treat them a bit differently than their more sexy cousins. They show the heaviest current adoption of the three devices (20%). The 21% planned adoption rate in 2014 may be down a bit from last year’s 26%, but it is still a strong number, and it tends to hold fast in terms of turning into an actual pur-chase decision. Department Stores (50% have purchase plans for 2014) and Food/Grocery retailers (24%) are the segments most intent on deploy-ing in 2014.
Non-Rugged Handhelds (NRHH, which includes iPhones, iPod Touch-es, and other smartphones, etc.),
show a current adoption of 10%, with another 21% planning a pur-chase in 2014. For 2014, Department Stores (33%) and Food/Grocery re-tailers (31%) are the most likely to purchase.
Tablets are the devices that seem
to attract the most attention, which makes the 6% current adoption rate seem paltry. Looking ahead to 2014 we see 37% of retailers are planning a Tablet purchase. The leading retail segments are Department Stores (83%), Food/Grocery (50%) and Spe-
in just five years mobility has become an integral part of the retail store’s DNA
A Mobile Device in Every Hand
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FiGuRe 1
GROWTH IN EMPHASIS Of SPECIAL IT PROJECTS, YEAR OVER YEAR
FiGuRe 2
TOP STORE-LEVEL MOBILE DEVICE PLANS fOR 2014
Store Level Mobile
Big Data
Omnichannel
RFID 18%
63%
64%
70%
Tablets
Non-Rugged Handhelds
Rugged Handhelds
6% 37% 29% 5%
10% 21% 17% 5%
20% 21% 9% 5%
Currently Use Within 12 Months 12-24 Months 24-36 Months
FiGuRe 3
CONSUMER GRADE VS. RETAIL HARDENED PREfERNCE fOR 2014
Retail Segment Consumer Grade without
Bumpers
Consumer Grade with Bumpers
Retail Hardened
Overall 30% 37% 33%
Food/Drug/C-Stores 25% 30% 45%
General Merchandise 33% 37% 30%
Restaurant/Hospitality 28% 65% 7%
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cialty Softgoods (40%). For the largest retailers (annual
revenue over $5 billion), 44% plan to purchase Tablets, 24% Non-Rugged Handhelds and 28% Rugged Hand-helds. For the smallest retailers (an-nual revenue under $500 million) the figures are 26% (Tablets), 14% (Non-Rugged Handhelds) and 20% (Rug-ged Handhelds) respectively.
One finding that is interesting has to do with the use of consumer-grade devices without bumpers. Typically, a Department Store will have tiled floors while a Specialty Retailer will have carpet. It would seem to make sense that retailers with tile floors would have a preference for a con-sumer grade device with a sled and bumpers, and the data shows this. Department Stores show only a 3% preference for consumer-grade de-vices without bumpers. The Special-ty Softgoods retailer with the carpet-ed floor shows a 29% preference for the same device.
We asked retailers about the mo-bile platforms they plan to use in their enterprise. Currently, the iPad is the clear leader, with the iPhone in second place and the iPad Mini in fifth place.
Windows 8, which has only been on the scene since October 2012, showed well in fourth place at 31%. The various flavors of Windows make a reasonably good showing here, and we believe this has more to do with the ability of the retailers themselves to be able to develop mobile applications on the Windows platform (without having to subject them to the Apple App Store).
Bring Your Own Technology
(BYOT) had a strong showing in third place at 39%. Our speculation here is that most of the devices in this cat-egory will be iOS-based, which will enhance the overall position of the various Apple devices. Still, the one big drawback to BYOT is the fact that the device is not controlled by the retailer, so steps must be taken to ensure security is maintained.
fOUR-STAGES Of MObIlEThe first stage of mobile deployment to stores is to provide Mobile Devic-es intended for the Manager, which shows a 30% current adoption. This scenario provides the manager with a device to get him out of the back office and onto the floor. By the end of 2014, fully half of retailers will
have this technology deployed. The second stage of mobile adop-
tion puts a device in the hands of a store associate to improve customer engagement. Current adoption is 21%, and that will double within the next year.
The third stage is Mobile POS. Adoption rates for this stage are still in the low double digits. Stage four is where the consumer actually per-forms checkout using his/her own device. Currently 10% of retailers claim such a capability, and we think it will take a couple more years to double that amount, let alone quin-tuple it as the respondents indicate.
Added together — stages one to four — mobility has become a game changer that no retailer can ignore. •
FiGuRe 4
MOBILE PLATfORMS PLANS fOR 2014
FiGuRe 5
MOBILE DEVICE MISSION PLANS
iPad
iPhone
Bring Your Own Technology
Windows 8
iPad Mini
Other Android
Windows Mobile
iPod Touch
57%
45%
39%
31%
29%
19%
12%
10%
Mobile Device for Manager
Mobile Device for Associate (non-POS)
Mobile POS (Transaction Completion)
Consumer Mobile Checkout at Store
30% 21% 25%
21% 18% 20%
13% 26% 26%
10% 19% 20%Currently Use 12-24 Months 24-36 Months
Multi-channel synchronization is the future of retailing, but it adds 2.4% to store costs
Relentless Pursuit of Omnichannel
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As noted in the IT Budgets section of the study, omnichannel strategies have emerged as a key driver for IT spending and growth plans in 2014. On a simple level, omnichannel strategies are a way for a retailer to operate consistently with how con-sumers wish to shop. What makes it a major issue in retailing today is that supporting shopping in this way is not how retail organizations were originally created.
When retailers started their e-commerce journey they did so with separate divisions for online, brick-and-mortar and contact center sales. The pursuit of omnichannel readi-ness is simply the result of modify-ing systems to support a seamless cross-channel customer experience with a tightly coupled tech stack. The goal is to create a shopping experience that lets the consumer make purchases anywhere, anytime, anyway she wishes.
There are unresolved issues for many retailers — some technical and many cultural — to make omnichan-nel retailing real. The availability of Analytics that are Actionable is high-est at 71% unresolved, followed by Training of Merchants (64%), and Ac-curate Inventory for Customers (57%).
It is clear that the implementation of omnichannel strategies will have a big impact on store associates and costs. This study takes the first crack at quantifying the impact and we find that overall retailers expect add-
ing omnichannel services and func-tions to stores will increase associ-ate hours by 25% and increase store
costs by 2.4%. For a billion-dollar company this means an increase in in-store costs of $123,000. •
FiGuRe 1
FiGuRe 2
STUMBLING BLOCkS fOR OMNICHANNEL READINESS
Omnichannel Function Completion Continuing Unresolved
Major IssueResolved
Few Issues Resolved
Business Intelligence/Analytics That Are Actionable
71% 7% 22%
Reorganizing / Training Merchants to Think Omnichannel
64% 9% 27%
Providing Accurate Inventory Counts Externally to Customers
57% 16% 27%
Integrating Inventory Systems 49% 15% 36%
Providing Motivation/ Compensation to Stores/ Employees for Ship From Store
47% 19% 34%
Providing Accurate Inventory Counts Internally To Associates
44% 19% 36%
Figuring Sales Credit for Stores vs. Web vs. Other Channels
44% 10% 46%
HOW OMNICHANNEL STRATEGIES ARE IMPACTING STORE COSTS
Same Staff Level, Different
Functions
Added Hours Costs
Overall 75% 25% + 2.4%
Food, Drug, C-Stores 58% 42% + 3.3%
General Merchandise 80% 20% + 2.4%
Hospitality 100% 0% + 0.3%
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