45% of Retail IT Budgets Will Increase in 2002

A More Consumer-Focused Retail IT Strategy Will Strengthen the Retailer/Consumer Relationship and Reduce Costs While Driving Growth

Nearly forty-five percent (44.6%) of retail IT budgets will
increase in 2002 with the bulk of that spend going toward maintenance and production, according to a survey of retail executives from CapGemini Ernst & Young's Consumer Products, Retail and Distribution practice.

The Executive Technology/Cap Gemini Ernst & Young Retail ITResearch Report 2002 also gives insight into the relationship between a consumer-focused business strategy and IT operations. The report is featured in the June issue of Executive Technology, abusiness-to-business publication published by Fairchild Publications.

The study points out that consumers are generally interested in technology applications that provide greater convenience, speed and cost savings. For example, nearly 80% of consumers used, plan to use or would use an automated payment facility at gas pumps. Consumers also use automated teller machines (75%) and debit/credit self-operated keypad machines at checkout (66%). Technology that is least likely to be used by consumers includes Internet access in stores (25%), automated meal planners/budgeters (12%) and promotions/specials that can automatically be sent to wireless devices (11%).

"The changes in consumer wants and needs should be the driving force behind strategic and technology business decisions," said Fred Crawford, executive vice president and global managing director of CapGemini Ernst & Young's Consumer Products, Retail and Distribution practice. "Our survey revealed, however, that the role of the consumer is rarely taken into account when retail IT decisions are being made.The consumer should be at the very heart of any retailer's business strategy and that strategy should, in turn, drive IT decisions and investments."

The research revealed a significant lack of alignment between technology investments and business strategy among retailers. Two-thirds of retail executives said their technology is only somewhat or not at all aligned with their current business strategy. Such a lack of alignment can hamper bottom-line profitability and can result in operational inconsistency, value leakage, and misdirected and unnecessary IT spend. The study also found that executives tend to view their company's IT process areas in a very limited way - as a
necessity for day-to-day business operations, rather than as a strategic tool that can enable differentiation or competitive advantage.

In addition, retail executives were queried about the technology applications, systems and programs that they felt were critical to their company's overall business strategy. Only 25% of respondents consider customer relationship management and data warehousing as mission critical. Only one in five view inventory management,
warehouse management systems and a new generation of point-of-sale equipment as critical for their retail strategy.

The survey also uncovered a distinct disconnect between the business and IT sides of the retail industry. For example, two-thirds of CEOs and other senior non-IT executives indicated that capabilitieswere in place for price optimization, in contrast to the same number of top IT executives who said investment in this area was needed.