Advanced technologies have revolutionized the retail industry. According to a recent report, the total global retail software market is already worth an estimated $55 to $60 billion. This figure is expected to reach over $77 billion by 2021.
Many retail companies have no full-time IT professionals. As a result, owners and staff often make “untrained” decisions about software. Unfortunately, that can mean retailers end up with ineffective solutions; or none at all.
To investigate the issue further, Brightpearl partnered with OnePoll to survey investment decisions on IT solutions in the United States retail sector. The Retail Tech Stack report asked 200 US retail professionals what they were spending money on and how they were making decisions when it came to IT solutions.
To retain a competitive edge, retailers should learn what others in the industry are investing in and what is motivating their decisions. For small and mid-market retailers, this exercise is doubly hard since most of them don’t have in-house IT professionals. Hopefully, the findings of this report will help anyone in this predicament.
Companies are Facing Too many choices
Many retail tech decision-makers (68%) expected software investment to increase in 2020. However, the majority also agree (51%) that information overload is becoming the norm and impacting purchase decisions.
The study segmented the retail technology stack to more clearly show the relationship between investment in software and IT strategy more clearly. The result is a continuum of retail operations from “what to sell” to “how to scale up the business”:
Respondents made investments in all retail software categories. Customer-centric concerns such as customer service (56%) and customer acquisition (55%) received the highest level of investment, while product sourcing (51%) was the category that received the least investment.
Product sourcing and vendor management strategies
Retailers’ technology needs for product sourcing and vendor management depend on their supplier relationships and needs. Some retailers source products from the manufacturer and others do so via wholesale. Some retailers manufacture their goods themselves. Others may have to manage a mix of these sources. Thus, retailers invest in solutions to meet the following needs:
Research and analysis
Market demand analysis
Product design, prototyping or sampling
These sourcing strategies resulted in an increase in the purchase of large ecosystem back-office software applications that carry out product-market analyses and identify profitability. Almost half (49%) of retailers surveyed indicated that they had purchased this type of solution over the last 12 months.
In turn, product sourcing links to broader strategic considerations, such as product availability, risk, and overall pricing strategy. From this, retailers can estimate demand levels and profit. Solutions in this space may provide:
Product categorization analysis
Recommendations on who to buy from and where to sell.
In a saturated market, getting new customers is difficult. Retailers have been forced to invest heavily in customer acquisition. Four main activities make up the customer acquisition process, each requiring attention and investment.
The first is to make potential customers find and visit the website. Next is to convince the visitor to make a purchase (conversion). Then comes re-engagement, or to get the customer to make more purchases. Finally, the in-store experience needs to satisfy customer requirements, so this is where features such as point-of-sale or endless aisle come in.
Retailers mostly invest in social media marketing (63%) to attract customers, followed by advertising software (55%) and affiliate marketing (47%). You should always consider the quality of traffic when deciding how to invest in each channel—also factor in the number of conversations, sentiment, and click-through rates.
To build customer trust, merchants should provide relevant and personalized experiences. Allowing customer reviews (53% already invest) and setting up live chats can accomplish this. Web personalization (64%), marketplace optimization tools, or a full e-commerce suite can also prove useful.
Both email marketing and marketing automation were two channels that saw significant investment. Of the total respondents, 62% and 59% respectively, had invested in these two fields.
Customer retention is also important. Just over half of US retailers (53%) indicated they had invested in loyalty program software in the last 12 months.
Order fulfillment and customer choice
The service aspects of order fulfillment has seen some of the highest levels of investment over the last 12 months. Investments in online payments top the list at 62%. Investments in areas such as shipping options (55%) and carrier integration software (49%) underscore the importance of lowering the risk of order cancellation by establishing trust in the delivery process.
Fraud detection was the second most popular software investment choice in the last 12 months. Given that 30% to 70% of orders declined at checkout are legitimate, this is an area where retailers can significantly increase revenue generation.
Customer service technology and delivery tracking solutions seem to be a higher than average priority for US merchants, as almost 60% have invested in these technologies.
Retailers look to deliver a seamless end-to-end experience to ensure customers come back and make repeat purchases, which accounts for this level of investment.
On the other hand, delivery tracking solutions not only provide customers with better experiences by allowing them to track the location and status of their delivery, but it can also help retailers to engage customers with the brand by providing clear status updates regarding the delivery process.
Returns management has been a growing area of focus for retailers, with the rise of services such as ’try before you buy.’ In another BrightPearl survey, 25% of respondents said they had bought multiple items before while intending to send some back. Generous return policies encourage this behavior, including the promise of cheap or even free returns.
In response to this, 56% of respondents said they have invested in new technology to tackle this problem over the last 12 months.
Retailers need clear visibility over their inventory to benefit from better data and inventory management. This may be the reason why inventory management software and barcoding and scanning were both high on the priorities list for US retailers in the past year, with over 60% investing in these technologies.
A recent survey reveals that over 70% of online shoppers would look for an item elsewhere rather than wait for it to come back in stock. This underscores the importance of demand planning and managing inventory in today’s competitive market.
Only 49% have invested in demand planning and forecasting solutions over the last 12 months. As the stakes of losing customers due to poor planning and forecasting increase, expect retailers to pour more money into forecasting and planning software this year.
Back office and operations
In back-office operations, HR systems top the list for investment with 59% of respondents. This is followed closely by accounting at 58%.
Internal collaboration seems to be the lowest priority for retailers, yet retailers should not discount it. Internal collaboration tools can help improve collaboration.
A problem of choice in a crowded market
Retailers are investing significantly in technology. It’s of concern that half of those surveyed have neither the time nor expertise to select a technology vendor confidently.
The vast amount of software options on the market has dissuaded 41% of businesses from making a technology investment in the last 12 months. The best approach? Look holistically at the retail software technology stack, identify strategic areas where you need to invest, and create a plan.