Turbulent economic conditions are demanding that retailers operate more efficiently and more cost-effectively, especially as they take in fewer discretionary consumer dollars.
CIOs continue to fine-tune project lists to determine which initiatives will remain priorities and grab a piece of the tight 2009 IT budget. While all retailers’ plans differ, there is one common theme across chains of all sizes and segments: CIOs are allocating IT resources toward core retail solutions that will centralize operations and support globalization.
By the end of 2008, retailers were still reeling from the impact of ongoing bankruptcies and store closings. Even now, chains are still recovering from a dismal holiday shopping season. These factors have pushed retailers to take a step back and re-evaluate business processes.
“This is the advent of transformation,” Lane Cooper, contributing editor, InformationWeek, said during a webinar, “Business Trends and CIO Leadership,” sponsored by InformationWeek. “It is not enough for companies to harness technology. They have to use IT to expertly conduct business,” he said. “It is about using technology to redefine processes that will allow you to conduct business today in spite of the economic hell impacting the industry. It also positions you for success in the future.”
For some, redefining processes may seem like a gamble in the current economic landscape, especially when IT budgets are expected to grow by a sparse 2.3% in 2009, according to consulting firm Gartner, Stamford, Conn.
“Companies are cut to the bone, but that is not a reason to stop spending on IT,” Cooper said.
IT spending at the Children’s Place Retail Stores, Secaucus, N.J., for example, will remain flat compared to 2008, but projects are still planned, according to David Levitt, the chain’s senior director, store systems.
The retailer will increase approximately 20% of its hardware investments this year. However, “This will be offset by about the same decrease in our total software spend,” he said.
One way retailers are revamping systems is to focus on more centralized solutions. This includes deploying common operating procedures, consolidating key infrastructure elements, and using open and standards-based technologies. According to a poll from Hyderabad, India-based global IT consulting firm Satyam Computer Services Ltd., 67% of companies plan to have a more centralized IT organization this year, compared to 2008.
For The Children’s Place, this means using more Web-based solutions to centralize in-store systems. While this is not a new strategy for the chain, this year’s efforts will make the company almost entirely Web-managed.
The company plans to dedicate about 20% of its store systems resources to enhance Web-based systems this year. “We will focus on labor management, inventory management, key performance indicator reporting and store hour administration,” Levitt explained. “This will just about complete ‘webifying’ our portfolio of store systems’ applications, with the exception of point-of-sale.”
Financial strains are forcing many chains to curb nationwide expansion plans, but the time is ripe for globalization. Even in this economy, globalization remains front and center for many organizations. In fact, 57% more companies said they plan to support a more global business in 2009, according to a Satyam poll.
“As companies shift their priorities to do business more cost-effectively, they will find there are opportunities to going abroad, from expanding their brand to cost arbitrage,” he said.
Canton, Mass.-based Casual Male Retail Group COO, CFO and executive VP Dennis Hernreich agrees, and plans to support the chain’s globalization plan further this year.
The company has been operating a Rochester store in London for approximately four years, and it launched six separate online stores last summer. These serve shoppers in the United Kingdom, Spain, Germany, France, Italy and the Netherlands, respectively.
As the economy tightens, Hernreich is making inventory efficiency across all channels a top priority for the coming year.
“CMRG’s direct and retail channels currently operate on two separate platforms, so we are in the midst of moving the product inventories onto one platform,” Hernreich said. “This will allow both channels to share inventory, and it will merge the supply chains. This project requires that we modify most of our merchandising.”