RANDOLPH, NJ--(Marketwired - Dec 19, 2013) - Technology is viewed as a strategic enabler for customer-centric retailing, driven by the need for deeper customer insights, omnichannel integration, enterprise mobility and a host of other priorities. Yet retail's current IT (Information Technology) cost structure isn't aligned with these strategic priorities, putting many retailers at a competitive disadvantage, according to a new research report from EKN.
The New Cost Structure of Retail IT, is a one-of-its-kind report that takes an in-depth look at retailers' current IT cost structures, surveying 120+ retail industry executives and focusing on IT's role in retail. The report is sponsored by Cisco, Earthlink and Tata Consultancy Services and is available for download here.
EKN's research found that while retailers acknowledge the importance of technology in building the capabilities to thrive in a consumer-driven retail environment, 70% of retailers consider themselves at par or behind competitors in terms of strategic use of IT -- a telling indictment of the inability of retailers to leverage IT to drive competitive differentiation.
Key findings of the report include the following:
- Customer engagement is not IT's top priority. For all of IT's supposed strategic relevance to driving customer engagement, retailers consider technology as primarily a tool to improve operational efficiency. Retailers that use IT as a way to differentiate themselves from the competition are more the exception than the norm.
- IT is not seen as a strategic business unit. The organizational alignment is off-center, forcing IT to be driven more by cost-reduction than by strategic business growth. The fact that retail leadership still considers IT a cost-center is reflected in its leadership alignment. According to EKN's research, in 2013 45% of CIOs reported to the CFO or COO, while 65% of CMOs reported to the CEO or the Board. Shifting this mentality will not be easy, especially as few retailers possess the ability to measure investments in IT against business outcome.
- IT budgets are constricted. Over the past decade, 1.5% of revenue has been the industry benchmark for IT spending, and budgets will remain flat in the coming year. However, retailers are spending more on technology directly through business functions such as Marketing and eCommerce. And, this trend is expected to continue to drive IT spending in retail.
- Retailers are under-spending on web, mobile, BI and analytics. 50% of retailers state they are under-spending on web and mobile. With 30% of brick and mortar retailers' revenue expected to come from web and mobile by 2016, this points to a strong disconnect between business demands and current IT spending. The need for deeper customer insights to drive stronger customer relationships is near or at the top of every retailer survey that EKN has undertaken in the past year; yet, 45% of retailers state they spend too little on Business Intelligence & Analytics.
"Technology must become a strategic enabler of new-age retail, and this report is the first to provide an honest, open assessment of the true state of retail IT," said Gaurav Pant, Research Director, EKN. "The good news is that retailers can take steps to improve their strategic alignment and bring IT's priorities in line with the true needs of the business."
To learn more about how to participate in future EKN surveys or gain access to the EKN portal, please contact David Weinand at [email protected]
EKN (www.eknresearch.com) is a research and content service that was built based on feedback and advice from retail executives. Part of the Edgell Communications family, EKN is a subscription-based portal that provides retailers with access to the site's powerful decision-support and data analysis tools, allowing them to leverage EKN's industry-leading database of original research, user-generated vendor indexes and market trends. EKN also lets members share insights and real-world experiences through ongoing peer forums, both virtual and in person.