Where Should a Retailer Spend Its Technology Budget?

As a retailer grows and matures, they will inevitably find themselves, at some point, needing to invest in merchandising systems. But which capabilities to prioritize?

There are huge calls on an IT department to deliver projects of all shapes and sizes in today's world, in retail it is even greater as the landscape for retailers is changing so fast. The exponential growth of online retail has created massive pressures to develop and implement new technology.

Now that we are passed the first phase of this new paradigm, most retailers have online trading set up, the focus must now be to get the delivery and customer satisfaction right. That means getting the inventory in the right place at the right time. This is not as easy as it used to be, it is all too easy to become a Multiple Channel Retailer rather than a Multi-Channel or Omnichannel retailer. That is not just semantics, many retailers duplicate inventory in different locations either physical or technically because they do not have an ability to manage inventory across their channels effectively. This often leads to higher costs, not only in inventory holding but also in labor to manage the various inventory channels. If you get it wrong you have inventory sitting in one location while sales are being lost in other locations – not something any Supply Chain Director wants to face in the Monday morning operations or board meeting.

Let's look at the opportunities and risks for the company.

Core Infrastructure

We often hear that if a company does not replace its ERP or POS solutions it is going to fall over. We also heard that if they did not replace their entire systems prior to 2000 the world would end, but it did not! Most ERP solutions are fit for purpose for many years as they are not expected to be the dynamic solution to evolving needs. If they are able to process transactions and hold the key data for the business they are unlikely to fall over as your business changes. They are the backbone to your business, but it is like a heart and lung replacement with very high risk, cost and time to replace. In today's retail world, if you select an all-encompassing ERP it is likely that by the time it is implemented it will be out of date anyway. It is the arms and legs of the business, the operational and value-adding technology that will deliver the business benefits and keep you competitive.

CRM & Customer Loyalty

These are vitally important to an omnichannel retailer, they connect the retailer to the customer and maintain that relationship. If used correctly they can increase sales and drive desired behavior from customers. It is important that with Social Media today they are also able to manage your image in the market and ensure that negative exposure is responded to and minimized as quickly as possible and before it gets out of hand.

Finance & Accounting Solutions

This is an obvious area to get attention when it is not performing, CFO’s carry a lot of weight and if not happy the IT department will not be a happy place either. However, when the pressure is on and budgets have to be prioritized, are they going to add value to the business – unlikely. Unless they are absolutely incapable of managing the financial process of the business they will not deliver a high return on investment, additional sales or significant reduction in operating costs.

Omnichannel Solutions

This is a new area and not always fully understood, a little bit like Pandora’s Box, you do not really know what you are getting until you turn the key. It is very true that many businesses have had to react to the market and invest in delivery solutions for the new online world. It is essential that for a retailer today to remain competitive must be able to fulfill the customer’s expectations in terms of the “online shopping experience” and the fulfillment of their requirements.

Warehouse Management

It has always been difficult to prove a return on investment for a Warehouse Management solution, you have to have them and they should make your warehouse operations more efficient and hence labor productivity improved. If they go down then there is a very serious impact on a business as stock does not get out to stores or customers. So if you do not have one or you are in danger of falling over then there is a very good case for this investment, but they do not increase sales or improve customer satisfaction.

Supply Chain Planning & Inventory Management

There are few if any areas of technology that offer larger returns on investment than Supply Chain Planning and Inventory solutions. They create large one-off injections of capital to the business as inventory is reduced, improved ongoing benefits of lower inventory costs, improved sales through greater availability and customer service at store and online, reduce end of line and end of season markdowns which directly hit profitability, reduce shrinkage of short shelf life and fresh products and finally but by no means the least improve efficiency in the replenishment and order placement functions reducing staff or enabling a company to redeploy this staff into more productive areas. Additional to this is the delay in having to increase expensive warehouse capacity in an expanding business or at crucial seasonal peaks. If the company is targeting improved customer satisfaction then giving them the best possible service by having the items they want to buy available is imperative, this leads to increased sales and satisfied customers.

‘Supply Chain Transformation: The Complete Guide’ leads you through the process of choosing and implementing the right supply chain planning solution for your business. Read our tips on what to keep in mind before and during a transformation process.


RELEX founders and experts have notably contributed to retail and supply chain planning research. Read our whitepapers for fresh insights here.

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