IT Savvy: Retailers intensify investments in technology

Retail IT spending in Singapore is estimated to grow by 5.8% y-o-y to $163.21 million in 2011 or far above the compound annual growth rate of approximately 4%, says a research firm.

According to Kumar Goursundar Das research manager of IDC Centre for Consultancy and Research, aside from intense competition, retailers have to face more cost pressures in doing business in Singapore as the global economy continue to recover from the ill effects of the financial crisis which took a toll in 2008 and 2009.

Retailers however, says Mr. Das, will achieve significant business benefits and overcome the risks by intensifying investments in new retail technology – be it on more efficient infrastructure (including cloud), more modern enterprise resource planning and back end systems, packaged retail-specific applications like loyalty, demand forecasting and automated replenishments, and more efficient point of sale systems, multichannel sales platforms and real-time analytics.

Here’s more from Mr. Das:

The Risks and Challenges

The cost of doing business in Singapore is relatively high as real estate is premium and retailers need to have a wide range of customer right Store-Keeping-Unit's based on the purchase baskets. This has led to a lot of stress being given to engage loyal customers.

The scope for improvement in productivity is huge and with the economic recovery, cost pressures are likely to rise. The cost of labor is expected to increase and rentals may face upward pressures. The cost of advertising and promotions could also go upwards pick up as well. The rising cost would hurt retailers profitability, most of them should be able to bear with the increase in costs as long as retail sales continue to improve in tandem with the economic recovery.

Growth Opportunities

Rising cost pressures and decreasing disposable income would lead to greater dependence on e-stores. There is a lot of opportunity for mobile based retailing services, the expectation to use mobile devices for retail transactions will be a norm rather than the exception for consumers, and this would not stop retailers from investing massively on opening new stores. Retailers would invest on IT costs with primary focus on IT infrastructure productivity, including store networks, and increased usage of in-store wireless technologies. Retailers would invest more time and dollars in understanding customer loyalties, pricing, sourcing etc.

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