Retail Spending
Industry Groups Say U.S. Retailers Will Spend More on Technology
January 16, 2004 21:03
Industry Groups Say U.S. Retailers Will Spend More on Technology
By Leslie Brooks Suzukamo, Saint Paul Pioneer Press, Minn.
Jan. 17--Retailers will spend more on technology in 2004 than last year, according to recent studies, and that could benefit two Twin Cities software firms that have been waiting for a turnaround in software spending.
At the National Retail Foundation annual convention in New York this week, the NRF and BearingPoint, a McLean, Va., business consulting firm, reported that U.S. retailers are preparing to open their wallets for a wide variety of technology solutions.
The survey of 103 retailers showed keen interest in getting more out of the reams of data they already collect, starting with improving their security and disaster-recovery systems to adding new systems to track and manage inventory from the warehouse to the store shelf to sifting through sales data to determine everything from what to order and where to put it.
Meanwhile, Forrester Research of Boston predicts retailers are cranking up technology spending this year to generate more profits from their stores, a change from the past when they saw technology as only a cost-saving tool.
Retailers are focusing on four areas, Forrester analyst Kate Delhalgen wrote: streamlining their inventory and boosting gross margins, identifying their best -- and worst -- performing stores, upgrading their computerized cash register systems to reduce cost and improve service, and installing self-service technologies like kiosks and self checkout systems.
Among the nearly 20 companies she expects will have a good year are Lawson Software, St. Paul, and Retek Inc., Minneapolis.
The signs of improvement were evident at the NRF show, said Carol Mackenzie, director of Lawson's retail market products.
"The retailers we met were not just there to collect information as in the past. They had approved projects that they were shopping around to spend on," she said.
Lawson's revenue was off 2 percent through the first six months of its fiscal 2004, to $172.3 million. Its fiscal 2003 sales of $344.3 million was 20 percent below the previous year. But investors have sent its shares up 10 percent so far in 2004, to $9.15 a share.
Lawson until now focused primarily on serving the health care industry, but it acquired two small British software firms over the past 18 months that beefed up its retail software offerings. The St. Paul company is starting with mid-level and up grocery stores chains like the Twin Cities' Supervalu, which owns Cub Foods, as a way to attack a new market.
Worldwide, grocery spending on information technology reached $20.65 billion, and it's expected to grow 3.8 percent annually, according to Gartner, a Boston-based technology research and consulting firm. In the U.S., grocery IT spending will grow by 5.4 percent annually through 2006, Gartner says.
Information technology spending among retailers tends to be about 2 percent of total revenue but the latest figures show it will be "inching up" to 3 percent in 2004, Lawson's Mackenzie said.
The downturn in IT spending over the past three years was particularly strong among retailers, who typically hang onto back-office systems for up to 10 years before overhauling them, she said.
But surveys show that retailers are beginning to loosen those purse strings, though. The NRF-BearingPoint study, for instance, reported 83 percent of retailers expect to upgrade aging computerized cash registers with the latest "point of sale" software to provide real-time customer information.
Retek sells 30 different types software, including such point-of-sale systems, some of which are used by Best Buy stores, to allow sales people to know instantaneously what's in stock and where it's located, said spokesman David Naumann.
Its revenue through the first nine months of 2003 was $124.25, off 20 percent from the same period in 2002. Investors are also keen on Retek, sending its shares up 22 percent so far in 2004, to $11.30.
Of all IT systems, point-of-sale devices will receive the most attention in the retailers' IT budgets, according to a Gartner survey this month. More than 35 percent of respondents said they replacing their point-of-sale hardware, with another 28 percent saying the machines would be replaced in the next two years.
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Posted by Craig at January 19, 2004 10:19 PM