produced by research partner title sponsor · bob hetu is a research director with the gartner...

2 7 T H A N N UA L R E TA I L T EC H N O LO GY S T U DY

R E S E A RC H PA RT N E R T I T L E S P O N S O RP RO D U C E D BY

E D I T O R ’ S N O T E

Don’t Mess It Up

Joe SkorupaEditorial Director

RIS News

LAST YEAR we made some big changes to the Retail Technology Study. After 25 years of existence, it was time to recalibrate one of the most highly regarded studies in retail technology.

The timing was driven by the addition of Bob Hetu of Gartner as the study’s new principal analyst. Jeff Roster, who had previously served in this role for 15 years, had left Gartner and subsequently moved to the IHL Group. This was great news for RIS, because we rely on IHL as a research partner for our annual Store Systems Study.

However, we were also faced with a classic dilemma — if it ain’t broke, why fix it? To further make the point, Roster’s parting advice to Bob and I was “don’t screw it up.” In other words, be sure to carry on the high standards and quality that the study achieved under Roster’s care.

Looking at the year-over-year data it is clear we did indeed ask the right questions and as a result we received insightful answers. We recorded responses from 100 retailers, 41% of which are vice president-level or higher. All major retail segments are represented and nearly half have annual revenue greater than $1 billion. With a data pool this deep we are now able to do more cross-tab analysis than ever before.

We also systematically tracked more than 80 different technology solutions to benchmark their deployment in terms of being up-to-date, in-progress or planned for future deployment. Most of the data presented in the study shows overall averages, but we plan to break out segmented findings in deep-dive reports in the near future to leverage the depth of the respondent pool.

So, in the end, Bob and I did not mess up the study. On the contrary, I believe we made it stronger than ever, as should happen when undertaking a well-planned process of evolutionary change. It wasn’t broken, but we fixed it anyway to make it more relevant and appropriately aligned with the needs of the industry today.

16 MARCH/APRIL 2017 I RISNEWS.COM

18

M E T H O D O L O G Y

Who Responded?

The RIS/Gartner Retail Technology Study polls senior-level retail executives who work for national and large regional chains. This year’s study aggregates detailed responses from 100 retailers. Of these, 41% are at the vice-president level or higher. Nearly a third (27%) have a C-level title. A job title pool of this caliber clearly represents senior-level decision makers.

All respondents are headquarters execu-tives. Store managers and regional directors are not included. In addition, small main-street type retailers have been excluded. All respondents have significant responsibility for making or contributing to IT decisions about technology strategy, implementation and purchasing within their organizations.

There is significant representation in the re-spondent pool in the three major retail segments: apparel/footwear/accessories (20%), food/drug/convenience (25%), and specialty (29%).

Nearly half (46%) of the retailers in the study have annual revenue greater than a billion dollars and of these 15% have revenue greater than $5 billion. Large retailers have large IT budgets and generally set trends for the rest of the retail industry to follow. The majority of respondents (62%) have annual revenue greater than $500 million.

A partial list of participating retailers in-cludes such major names as Macy’s, Carter’s, The Container Store, The Home Depot, Beall’s, Perry Ellis, Circle K, Shoprite, Guitar Center, Guess?, Genesco, Boscov’s, Dillard’s, Loblaws and Modell’s.

The primary business model of the re-spondents is brick-and-mortar retailing (89%) with a small representation of e-commerce (8%) and direct marketing retailers (3%).

The overall respondent pool closely matches those of previous years, so year-over-year and multi-year comparisons can be made with a high degree of confidence.

MARCH/APRIL 2017 I RISNEWS.COM

Annual Revenue

Job TitleRetail Segment

Director/Manager of IT 27%

Primary Business Model

Department Manager/

Director 22%CIO 14%

Other 10%

VP of IT 9%

CEO 8%

Other VP 5%

<$100 million15%

$100 million to $500

million 22%

$500 million to $1 billion

16%

$1 billion to $5 billion 31%

$5 billion to $10 billion 5%

>$10 billion 10%

Apparel/ Footwear/

Accessories 20%

Food/Drug/Convenience

25%Department Store/Mass Merchandise/ Discounter 12%

E-commerce 6%

Specialty 29%

Other 8%

Brick-and-mortar 89%

Digital/E-commerce 8%

Direct Marketing/Catalog 3%

About GartnerGartner research is a leading provider of research and analysis about the global information and technology industry. It worked with RIS News to produce this study, which was conducted dur-ing the first two months of 2017. In conjunction with the RIS editorial team, Gartner created the survey, performed the analysis of the data, and co-wrote the report. Gartner was not paid for its involvement and RIS did not involve any of the advertisers in the report during the preparation or analysis phases.

CMO/VPMarketing 5%

E X E C U T I V E S U M M A R Y

20 MARCH/APRIL 2017 I RISNEWS.COM

Top 10 Major Strategies Over Next 18 Months

IT’S TIME TO SNAP OUT OF BAND-AID SOLUTIONS AND MAKE THE SHIFT TO UNIFIED RETAIL COMMERCE

BY BOB HETU, GARTNER

Retail Gets a Digital Slap in the Face

THE QUESTION IS AS SIMPLE as it is com-plex: Does your company have a digital retailing strategy? Unfortunately, the answer often goes something like, “Yes, we have e-commerce.” That’s nice, however, if you think of e-commerce as THE DIGITAL STRATEGY needed to succeed today — snap out of it!

For retailers, it is no longer just about understanding how consumers are shop-ping or buying. It is about first understanding how consumers are using technology in their everyday lives, and then deploying technology to embed the retail brand as an indispensable part of their lifestyles. Digital business oppor-tunities based on these principles will usher in an unprecedented convergence of people, pro-cesses, things and data to create new revenue opportunities.

Gartner describes this strategy as unified retail commerce. Regardless of the number of retail channels a retailer uses the reality is that all customer-facing processes must be uni-fied in order to deliver an exceptional shopper experience, one that meets customer expecta-tions for consistent and flexible shopping.

To facilitate a unified retail commerce experience, customer-facing processes should be defined in their most basic terms: consume, search, transact and fulfill, all passing through a customer-centric lens. Then retailers of all types must engage in digital business trans-formations that are built on a foundation of deep customer understanding.

Stages of Digital TransformationThis year we asked a new question in our survey: “What best describes the stage of your organization’s digital transformation?” Recently Gartner asked the same question in an unre-

lated study of global CIO’s and the results were both consistent and very informative.

The competitive landscapes clearly indi-cates this is a time for retail to lead and not follow. For the 23% that are “desiring” or do not have a digital strategy, well, let’s just say it was nice shopping with you. We will soon likely add you to the ranks of once great retail

brands that are no more. The good news is that many retailers are

stepping up, showing a considerable lead in delivering and scaling digital transformation (2017 Retail Technology Study – 48%, and Gartner Retail CIO Study – 52%) when com-pared to other industries (Gartner All Industries Study – 41%). With such a high level of deliver-

What Stage Is Your Organization’s Digital Transformation?

2017 RANK 2017 2016

RANK 2016 DELTA

Increasing customer engagement 1 52% 7 40% +12

Developing personalized marketing capabilities 2 49% 1 51% -2

Expanding unified commerce (omnichannel) initiatives 3 48% 5 44% +4

Leveraging social media 4 45% 3 46% -1

Advancing mobile commerce 5 42% 6 43% -1

Advancing mobile store/enterprise capabilities 6 39% 10 23% +16

Network and IT systems security 7 37% 2 47% -10

Pricing optimization 8 33% 8 26% +7

New payment technologies 9 33% 4 45% -12

Adding predictive analytic capabilities 10 29% 9 26% +3

2017 Retail Tech Study

Gartner Retail CIOs

Gartner All Industries

Desiring 15% 13% 17%

Designing 27% 29% 28%

Delivering 26% 36% 29%

Scaling 22% 16% 12%

Harvesting 1% 2% 3%

None 8% 4% 11%

E X E C U T I V E S U M M A R Y

MARCH/APRIL 2017 I RISNEWS.COM 22

ing and scaling activity shown here we should expect significant levels of harvesting value in the coming year.

When it comes to the top 10 major strate-gies, responses remain roughly the same year-over-year, however there has been a significant change in priority. Increasing cus-tomer engagement shot up the list to number one this year selected by 52% of respondents. This is encouraging as customer engagement across channels is a key element of an effec-tive digital strategy.

2017’s Big Challenge – StoresThe top 10 challenges saw a good deal more shifting and two timely new additions — em-ployee engagement and nurturing innovation. Informed and engaged associates are the key to unlocking effective customer experiences and one can argue that innovation can also help this effort.

Falling just below nurturing innovation, “Amazon and other online retailers” again makes a prominent appearance on the list as a major challenge for most retailers. These two challenges must be tied together. You will not out-Amazon Amazon, but you can learn a great deal from how they constantly innovate using a customer-centric lens.

The underlying theme of the top challenges’ list for 2017 can be summarized by the ques-tion, “What can we do with stores?” After a rash of closing announcements in the headlines, it’s a good reminder for multichannel retailers that stores are a point of differentiation.

This is clearly reflected in the emphasis placed on optimizing stores as a growth chan-nel and upgrading store-level bandwidth and infrastructure. High levels of investment in stores are required not only to boost brick-and-mortar sales but also as an extension of a retailer’s digital business strategy.

When it comes to technology solutions, it is clear that respondents are focused on the cus-tomer experience. Gartner recently published research showing that over 70% of retail CIOs see the customer experience as the area of greatest impact from digital transformation. In this survey, respondents listed customer related solutions in the top three of four spots on the list of top technologies for 2017.

Another area of urgent need for retailers is

found in the skills gap. Gartner research shows that retail CIOs see the skills gap as the num-ber one impediment to their digital strategy success. Respondents in this survey astutely added both “recruitment and on-boarding” and “mobile workforce and HR management” to the top technologies list for 2017.

Bob Hetu is a Research Director with the Gartner Retail Industry Services team. His responsibilities involve tracking the technology markets and trends impacting the broad-based retail merchandising and planning areas as well as advanced analytics for retail. Hetu is an expert in the areas of brand, vendor and assortment management, mer-chandise planning, allocation, and replenishment. Contact him on Twitter: @bob_hetu

2017 RANK 2017 2016

RANK 2016 DELTA

Retiring legacy systems 1 44% 2 46% -2

Optimizing digital commerce as growth channels 2 44% 3 39% +5

Customer data security 3 38% 1 49% -11

Optimizing stores as a growing channel 4 35% 5 29% +6

Upgrading store-level bandwidth and infrastructure 5 35% 8 24% +11

Employee Engagement 6 34% N/A New N/A

Application integration 7 32% 4 35% -3

Nurturing Innovation 8 30% N/A New N/A

Amazon and other online-only retailers 9 29% 10 21% +8

Developing apps to enable newly empowered consumer 10 27% 9 21% +6

Fighting intrusions and breeches off 17% 7 26% -9

Consolidating channel silos off 16% 6 28% -12

Top 10 Technologies for 2017

Top 10 Challenges Over Next 3 Years

1 Multi-channel frequent shopper tracking

2 CRM/Personalization

3 EMV compliance

4 Multi-channel customer

behavioral segmentation

5 Campaign analysis & forecasting

6 Mobile POS*

7 Real-time store monitoring KPIs*

8 Recruitment & on-boarding*

9 Social media analytics

1 0 Mobile workforce & HR management*

*New. Did not appear on 2016 list.

ConclusionWhile this survey is very technology driven, it’s important to remember that digital transfor-mation is not just about technology. Digital business is about the emerging trend of creating new and innovative business designs by blurring the physical and digital worlds. Multichannel retailers are rich in physical as-sets. The store will continue to be the leading channel for multichannel retailers and must function as a hub of commerce activity. The challenge is how to enhance the physical as-sets by combining them with new strategies, technologies and experiences that will facili-tate the evolution of unified retail commerce.

All technologies contributing to the suc-cessful execution of a customer journey should allow customers to start, stop, continue and complete their shopping journey anywhere within or outside the retailer’s landscape. To enable this, the retailer’s IT architecture must be open and flexible enough to seamlessly deliver customer experiences on a unified retail commerce platform.

Digital Transformation in Retail Engagement

QCustomer Engagement is the top strategy cho-

sen as a long-term goal. How does technology

fi t into that mission?

Technology is now the go-to solution for in-store customer engagement because the on-line experience has raised the expectations of to-day’s shoppers. With the next generation of retail technology, retailers can bring about the digital transformation that allows them to incorporate all the strengths of online engagement into the stores. They can know exactly where inventory is across their entire enterprise, promise that inventory to any sale in any channel or loca-tion, and deliver complete product information to their employees and shoppers. With mobile tools, they can also free their associates to move out from behind the counter and collaborate with the customer anywhere in the store.

QRetiring legacy systems and optimizing digital

commerce are at the top of the major obsta-

cles list. Many retailers are apparently stuck

in a brick-and-mortar world. How can they

break out of it?

Retailers need to stop using Flintstone tools in today’s Jetsons world. Legacy ERP systems weren’t designed to support the more fl uid, cross-channel behaviors of today’s shoppers. Trying to integrate multiple stove-piped systems or replicate data across multiple standalone sys-tems built for a single channel can’t deliver the seamless, consistent interaction that customers want with a brand.

The innovative retailers we work with are pioneering a new approach called Converged Commerce. They’re deploying a single selling platform for all their channels—one that accom-modates different user experiences in each chan-nel but uses one set of product data, one pricing structure, and one picture of the customer.

If you want to survive in today’s retail cli-mate, you have to be able to compete with the

likes of Amazon and other pure-play ecommerce sellers—but it’s crucial to differentiate the expe-rience you provide. That means building on the inherent strengths of the store and combining them with aspects of the online experience. To do that, you need a single platform designed specifi cally for this new shopping paradigm.

QMobile POS and mobile in-store applications

are one of the top investment areas in 2018.

What’s driving this retail trend and why now?

Mobile solutions are key to providing the interactive experience that customers are look-ing for when they visit a store. Shoppers come to stores because they want to touch and feel products, but they don’t want to give up access to product and inventory information. Mobile helps bridge that gap. Also, shoppers still want advice. An ecommerce site or app can offer product re-views and ratings, but they don’t offer the same depth of expertise that a well-informed associate can provide. Mobile solutions can support the type of consultative sale that makes the store visit a richer experience than online shopping alone.

QDigital natives of all ages are having a huge

impact on retailer strategies for 2018. How

are tech-savvy shoppers changing the face

of retail?

This latest generation of shoppers was born with technology in their hands. They would rather look something up than ask someone for an-swers. They don’t have strong brand affi nities, and they’ll switch providers if they can get better service or pricing. When they do make the effort to come to a brick-and-mortar location, you have to wow them. They expect employees to be at least as informed as they are. That’s why equip-ping associates with mobile tools for accessing product and inventory data is so important. Mo-bile helps eliminate any disconnect between the online and in-store experience.

HOW CONVERGED COMMERCE IS REDEFINING RETAIL STRATEGIES

David DorfVice President of Product Strategy, Digital and CXInfor

A D V E R T O R I A L


Infor Retail is changing the way people work by crafting a new generation of enterprise-level user experiences that disrupt preconceived notions of retail software. We are reimagining the retail experience across every channel—through beautiful design, engaging experiences, the unprec-edented power of science, smart data, and predictive analytics. Visit www.infor.com/retail.

17.rts0317_v2.indd 1 3/9/17 3:55 PM


I T B U D G E T S

CAN RETAILERS CATCH a target moving faster than the speed they are chasing? The answer seems obvious but it is a question worth asking because what else can explain the recent avalanche of store closings, bankruptcies and shopping mall vacancies except bad judgement in the face of fast-moving market forces?

Speed in this scenario refers to the pace of change, which has never happened this fast before and will never occur this slowly again. The moving target (or targets) in this scenario are a handful of disruptive retailers who are posting impressive growth numbers while many others are struggling. The select group of retail winners (the targets) include Amazon, Walmart, a handful of innovators, extreme discounters, and emerging startups who are nipping at every retailer’s heels.

Another key question to ask is this: why has the fast-pace of change, which is fraught with dire consequences for laggards, not been fully appreciated nor effectively responded to by many retailers even though the phenomenon has been evident for sev-eral years? Inertia? A body at rest tends to stay at rest?

We hope that retailers have reached an inflection point now that we have witnessed the death of so many iconic brands in the last 18 months. Or maybe the death of the mall as we know it is the slap in the face that is too hard to ignore.

In any case, things can’t continue as they are. Traditional business models, corporate structures, customer bases, merchandise management strategies, technologies and even senior-level management can no longer be trusted to deliver the kind of sales and profits a re-

tailer needs to remain a healthy competitor.It is time to reimagine retail in the age of

digital transformation.

The Amazon Effect Part 2A familiar phrase heard today is “you can’t out Amazon, Amazon!” This means that Amazon is so highly efficient at nurturing, creating and implementing game-changing innovations that most retailers can’t hope to match them at this game. Ten years ago, maybe the largest might have succeeded, but that train is long gone.

Change in Year-Over Year IT Budget

Increase >10%

Increase 5%-10%

Increase 1%-5%

No change

Decrease 1%-5%

Decrease 5%-10%

Decrease >10%

Technology is not the solution to all retailer challenges, but it is an indicator of a retailer’s commitment to making an effective response to disruptive market forces

BY JOE SKORUPA

Reimaging Retail in the Age of Digital Transformation

Retailers plan to increase their IT budgets by 3.5% year-over-year, which is virtually the same as last year. However, the overall percentage is misleading because it includes the struggling apparel segment, which plans no year-over-year increase in their IT budgets.

3.5%

4%

4%

3%

29%

27%

26%

6%

3.5%

24


I T B U D G E T S

26

Nearly six out of 10 retailers will raise their IT budgets year over year with 31% saying the increase will be greater than 5%.

59%

Additionally, Amazon has become too large and too rich with financial resources for any retailer to go head-to-head, except maybe 10 or 20 of the largest retailers in the world.

As a result, the notion of going to battle with Amazon has morphed into an existen-tial debate about whether or not the wisest course of action is for a retailer to become a partner with Amazon. Clearly, some revenue will be generated by joining the mammoth Amazon Marketplace, where millions of con-sumers shop every day.

Retailers are nothing if not pragmatic and becoming a partner with Amazon is a safe, cautious option. The problem is that it will never compensate for revenue and prof-its lost through their own channels. Only a relentless focus on innovation and transfor-mation can do that.

Impact on IT BudgetsDeploying advanced technology is not a so-lution that will solve all retailer ills. However, it is a leading indicator, a signal of commit-ment for taking steps and making an effec-tive response to disruptive forces.

For calendar year 2017, we find that retailers plan to increase their IT budgets by 3.5% year-over-year, which is almost exactly the same increase our study found last year. So, as an aggregate number it appears to be business as usual for retailers — the same-old, same-old. This is not a good sign for the industry.

However, the overall percentage is mis-leading because it includes the struggling apparel segment, which plans no year-over-year increase in their IT budgets. That means zero, nada, nothing new in 2017 (on average) for the apparel segment.

In fact, a shocking 27% of apparel retail-ers say they will decrease their IT budgets year-over-year. This figure is more than double the percentage of retailers as a whole in the study. Of the apparel retailers planning a decrease, 16% say it will be more than 10%. That is a stunning revelation.

Clearly, apparel retailers have been whipsawed by wave upon wave of change and disruption. Many are suffering. Evidence of the stress appears virtually every week in business headlines and is confirmed by data in this study, where the self-destructive investment plans among apparel brands points to a continued winnowing process for those who have been too slow to change.

Mind the Innovation GapJust as there is a gap emerging between apparel retailers and other retail segments there is also gap emerging between the handful of fast-moving retailers and the rest of the industry moving at a traditional pace. While the fast-moving retailers focus on innovation and disruption, stragglers are trying to catch up slowly or are in survival mode.

To get a picture of what it is like to fall behind the brutal pace set by Amazon, Walmart, Alibaba, the big shopper market-place platforms, and emerging startups we asked respondents a question about what it would take to truly catch up and close the innovation and disruption gap.

We asked retailers to tell us the amount of increase to the IT budget it would take to achieve: a) their own internal competitive and financial goals, and b) knowing that to reach these goals it would require matching the firepower of market leaders poaching their customer bases.

What we found was a major takeaway — retailers say it would take an increase of 10% to 20% in their IT budgets to reach their goals and catch up to fast-moving market leaders. For a billion-dollar retailer this would amount to an increase of roughly $20 million to $40 million dollars.

However, this figure is somewhat mis-leading because it is an average of leaders and laggards. Nearly half (47%) say the

Struggling Retailers Planning to Decrease IT Budgets Year-Over-Year by Segment

Apparel, footwear, accessories 27%

Specialty 11%

Food, drug, convenience 5%

Department store 0%

59%


I T B U D G E T S

Amount IT budget needs to increaseto achieve competitive and financial goals

Current IT budget stays the same

<10% higher

10%-20% higher

20%-30% higher

30%-50% higher

>50% higher

18%

8%

24%

19%

21%

7%

increase in IT budgets would actually need to be 20% to 30%, and of these, 28% say it would need to be greater than 30%.

The reason the dollar amount is so high for an effective one-time fix is that most re-tailer’s tech stacks and sales channels were built in silos over a long period. This means they do not deliver smooth interoperability on the back-end and often produce frustra-tion for the customer on the front-end. This is especially true in the age of cross-pollina-tion between digital and physical channels, which are increasingly merging.

Frustration is not exclusively limited to customers. Retailers are frustrated, too, because the multi-channel, multi-stack and multi-silo approach is expensive to manage and maintain. Additionally, it is difficult to manage and maintain, because it delivers untrustworthy data integrity that takes considerable effort to normalize and cleanse. It also becomes an innovation-killing chokepoint for rolling out next-gen advancements.

All of these factors add up to a big problem that requires replacing and/or consolidating foundational elements in enterprise IT architecture. The current name for this kind of massive IT transformation is “unified commerce.” For unified commerce to become a reality, retailers need to em-brace two core components: 1. Foundational systems that operate with one consolidated version of the truth on top of which retail applications should be layered; and 2. Pre-sentation to the customer in every channel must be consistent and seamless without

evidence of back end-barriers that prevent transparency of a host of retail services that are quick, easy and convenient.

The key foundational elements that are essential to a successful unified commerce strategy are: 1) Single view of shopper orders across all channels (i.e. advanced order management), 2) Single view of the cus-tomer across all channels that includes cus-tomer profiles, purchase histories, CRM and loyalty program, and 3) Real-time transpar-ency of enterprise data about inventory and customers in all channels, especially in store systems.

To accomplish all of the above is a mas-sive task and retailers tell us it will require investing millions of dollars beyond their current IT budgets. The percentage increase to the IT budget for most retailers will be well into the double digits.

In many retail organizations, an increase of this size is a non-starter. At the same

time, it is difficult to see how the red ink of technology debt accruing for many retailers will be erased without increasing both the technology and innovation budgets.

Other potential solutions include col-laborating with technology companies to leverage their expertise, pursuing mergers and acquisitions, investing in startups and seeking a buyout. Whichever of these paths is pursued, and there may be others, something needs to be done and the sooner the better.

Amount IT budget needs to increase to eliminate tech stack problems and implement advanced technologies to reach competitive and financial goals for growth.24%24%


R E T A I L S Y S T E M S

Analytics and in-store technologies dominate future retailer investment strategies while merchandising and supply chain solutions show positive signs of multi-year maturity

BY BOB HETU AND JOE SKORUPA

Racing Toward Unification

THE MISSION of this chapter is to track retail solutions that large regional and national retailers most frequently use in their day-to-day businesses. We then analyze the data from two perspectives: 1) The current up-to-date install base to pinpoint what is and what is not commonly used in the industry; and 2) Short-term and long-term purchase plans to show what solutions retailers are investing in to achieve strategic goals.

The study takes this approach for 83 specific solutions grouped into seven core categories. The categories are: Store Tech-nologies, POS/Checkout, Analytics, Merchan-dising Management, Supply Chain, Workforce Management and E-Commerce.

Most of the study’s 83 solutions are highlighted in this chapter in seven charts, however due to spatial considerations several emerging and low-adoption solutions have been left out. RIS plans to publish follow-up reports to cover the missing technologies and provide a more comprehensive look and deep analysis into the solutions that are driving the retail industry. These reports, called RIS Retail Techscapes, slice the data by annual retailer revenue levels, retail segment (i.e. ap-parel, specialty, grocery, etc.) and technology categories.

The charts in this chapter are complex and loaded with detail. Here are some tips about how best to interpret them:

• Up-to-date technology in place: This refers to retailers who have recently installed new or updated software. This datapoint serves as one way to benchmark the install base

of the industry as a whole for competitive analysis. For example, if 26% of retailers say their in-store shipping solution is up-to-date that means about a quarter of retailers in the industry have recently installed new or updated software. Conversely, it also means that about three quarters are potentially considering a purchase decision.

• Started but not finished a major upgrade: This refers to retailers who are currently

working on a new implementation or major upgrade today. If 26% of retailers say their in-store shipping solution is up-to-date and 16% say they are installing the solution now, then we can add these two together and make the assumption that the remainder (58%) are potentially considering a purchase decision for an in-store shipping solution. To get a more accurate figure we can subtract those retailers who say they have no plans for implementation.

WiFi for customers

In-store pickup/return of web goods

In-store shipping

Mobile devices for associates/manager

Real-time store monitoring/KPIs

Digital devices (signage, kiosks, etc.)

Shopper tracking capability

Clienteling/guided selling

In-store video analytics

Electronic shelf labels

Location-based sensing for marketing

Item-level RFID

35% 14% 17% 15% 19%

29% 14% 16% 7% 33%

26% 16% 9% 10% 37%

24% 26% 15% 13% 21%

24% 22% 16% 8% 29%

15% 18% 13% 18% 36%

14% 17% 18% 16% 33%

10% 18% 10% 10% 50%

8% 13% 8% 15% 54%

6%3%

5% 15% 71%

6% 8% 24% 24% 38%

3%

11%

2%

4% 80%

In-Store Technology Benchmark & Investment Plans

• Up-to-date technology in place • Started but not finished major upgrade • Will start major upgrade within 12 months

• Will start major upgrade within 24 months • No plans for upgrade


• Will start major upgrade within 12 months: This refers to retailers who have budget ap-proval for the new solution or major upgrade and plan to begin the implementation within 12 months. The chart in the Execu-tive Summary called Top 10 Technologies of 2017 (See page 22.) is based on the sum of the categories “started but not finished major upgrade” and “will start major upgrade within 12 months.” All 83 solutions are stack ranked based on this number and the top 10 make the list. The logic behind this ranking is that both categories indicate actual work is being done now or will begin within the calendar year.

• Will start major upgrade within 24 months: Planning two years in advance is a smart move for retailers but tricky to predict. Many retailers are in the habit of postponing long-term plans. Still, knowing that retail-ers have something on their radar screens is important for analyzing purchase intentions.

Store Systems and POSWe track 22 solutions in the core areas of Store Systems and POS/checkout, which have been heavy areas of technology invest-ment in the run up to the EMV deadline in the fall of 2016. As many retailers internally predicted, the EMV deadline arrived with

much of the industry still working on their de-ployments, others installing non-integrated workaround solutions on a temporary basis, and still others who had not yet begun.

The evidence of EMV carryover beyond the deadline is found in several areas in the study. First, only 39% say their EMV payment solutions are up-to-date, which means that for three out of five retailers EMV is still a work in progress. Since just 31% of retailers say they have begun (but not yet finished) their EMV project we can assume that nearly

POS/Checkout Benchmark & Investment Plans

POS peripherals (signature pads, pin pads, printers, etc.)

POS terminals (traditional, fixed)

POS software

EMV payment (Europay, MasterCard, Visa chip cards)

NFC (Near Field Communication) payments

SaaS POS (software as a service or cloud-based)

Mobile POS

Split tickets (any combination of in-store and digital)

Self-checkout terminals

Checkout and payment on customer’s own device



51% 22% 13% 5% 9%

50% 15% 18% 5% 12%

47% 18% 15% 11% 8%

39% 31% 12% 6% 11%

24% 12% 15% 8% 40%

15% 5%6% 15% 59%

11% 17% 22% 14% 35%

9% 12% 11% 17% 50%

6% 6 8% 10% 69%

3% 3%

15% 19% 59%

Weren’t retailers supposed to be EMV compliant on October 1, 2016? Yes, but

only 39% are. Nearly a third are still working on implementing chip readers.

39%

32

39%




months and another 24% will begin within two years.

The financial health of the store is a major concern in retailing today and we see evidence of retailer concern in several key areas. Increasing customer engagement and advancing mobile store/enterprise capabili-ties make the list for Top 10 Major Strategies over the Next 18 Months (See page 20.) and mobile POS and real-time store monitoring KPIs make the list for Top 10 Technologies for 2017 (See page 22.)

Analytic Benchmark & Investment Plans

Product purchase history analysis (POS and transactions)

Market basket analysis

Replenishment optimization

Inventory optimization

Assortment optimization

Markdown optimization

Competitive analysis (benchmarking competitors, market share, etc.)

Multi-channel frequent shopper or loyalty tracking

Social media analytics

Price optimization (modeling for pricing elasticity, sales & margins)

Promotion optimization

Pricing intelligence (real-time competitive pricing data)

Campaign analysis and forecasting

Space optimization

Predictive analytics

Multi-channel customer behavioral segmentation

Data visualization

In-store shopper tracking analytics

Artificial Intelligence



16% 13% 11% 15%42%

10% 19% 11% 23%34%

10% 19% 11% 23%32%

14% 17% 16% 20%29%

12% 16% 19% 26%23%

18% 13% 14% 30%22%

17% 15% 12% 31%22%

27% 19% 12% 20%21%

20% 16% 18% 22%21%

22% 13% 14% 31%17%

17% 22% 18% 25%17%

13% 20% 7% 42%16%

25% 19% 12% 25%16%

11% 17% 14% 41%15%

17% 17% 21% 28%14%

22% 19% 14% 31%13%

19% 12% 17% 36%11%

9% 18% 16% 44%10%

5% 10% 12% 69%

2%

one in three retailers plans to take their chances with checkout fraud and assume the risk. If payback fees are levied by credit card issuers to these retailers, then they are essen-tially counted against the cost it would have taken to become EMV compliant.

All of this activity surrounding EMV was enough to place it on the Top 10 Technolo-gies for 2017 list (See page 22.) in the number three position. However, this ranking is lower than the number one spot it occupied on the list last year. We expect EMV will continue its

descent on the list over time and ultimately drop off entirely.

Other areas in the In-Store Technology and POS/Checkout areas that show strong levels of current investment are mobile POS, mobile devices for associates/store manag-ers, and real-time store monitoring KPIs.

Looking at investment plans that extend between one and two years we see that location-based sensing for marketing/com-munication is by far the strongest solution — 24% will begin implementation within 12



AnalyticsIt is clear from the high levels of investment interest across the board for advanced ana-lytic solutions that retailers anticipate this area of technology will have a major impact on the execution of their core functions. However, the influence of one analytic tool, artificial intelligence (AI), is not something that will have much of an immediate impact, according to study findings, probably be-cause it seems a bit farther over the horizon and perhaps even nebulous.

Adding predictive analytic capabilities, however, is a major investment area for nearly three out of 10 retailers (29%). It is an impor-tant building block for optimizing enterprise applications by facilitating execution through algorithms. Algorithms are formulas or steps to accomplish tasks. They are used in such key areas as demand planning, forecasting, as-sortment planning, and many more.

Use cases for predictive analytic capabili-ties are emerging that apply rules and ma-chine learning to retail processes. This allows for deeper understanding of tasks by using big data tools that improve decision accuracy and speed to market.

The prevalence of optimization technolo-gies in investment plans shows that retailers see it as a point solution or best-of-breed strategy, one that supports a particular problem or business process. Optimization, however, is not a solution and is instead an algorithmic approach that uses science to determine suggested actions based on a combination of rules and advanced tools, all of which lead to a desired outcome.

Unfortunately, conversations with many retailers reinforce a lingering failure to opti-mize most core functions, and when they are installed, the optimization capabilities are often unused by team members and do not truly have an impact during execution.

Promotion optimization is a bright spot in the study. It has taken a leading role in the overall pricing optimization group for many retailers and we see that promotion optimization is targeted by 40% of retailers for future investment within the next two years.

Supply Chain Technology Benchmark & Investment Plans



Warehouse management

Logistics

Fulfillment

Real-time inventory visibility

Returns management

Distributed order management

Sourcing

Transportation management

Drop-ship management

Radio frequency identification (RFID) case or pallet

16% 11% 7% 15%48%

17% 14% 4% 19%43%

18% 9% 7% 20%42%

18% 12% 12% 14%41%

15% 11% 4% 29%37%

15% 12% 9% 25%36%

11% 16% 5% 32%33%

15% 12% 6% 32%32%

21% 9% 6% 33%28%

6% 9% 11% 63%8%

Merchandise Management Benchmark & Investment Plans

Replenishment

Item master data management

Category management

Allocation

Merchandise assortment planning

New product or private label development

Merchandise financial planning

Core Enterprise Resource Planning (ERP)

Price management/execution

Campaign SKU/product management

Micro space planning (planograms)

Product lifecycle management

Macro space planning (allocation of floor/space store design)

Trade promotion management

• Up-to-date technology in place • Started but not finished major upgrade

• Will start major upgrade within 12 months • Will start major upgrade within 24 months • No plans for upgrade

45% 18% 16%

3%

14%

42% 18% 17% 7% 11%

40% 12% 15% 9% 20%

40% 16% 13% 5% 21%

38% 10% 15% 16% 17%

38% 14% 9% 9% 26%

37% 16% 10% 12% 21%

37% 18% 10% 8% 24%

32% 21% 11% 12% 20%

32% 22% 9% 8% 25%

24% 13% 12% 9% 38%

24% 18% 6% 12% 36%

20% 16% 8% 14% 39%

16% 18% 6% 13% 43%



retailers. These implementations are ardu-ous because of the shift to customer-centric assortment planning across locations, which typically requires major changes in business processes. New implementations are driven by advanced analytic assortment planning capabilities that transform the function into a hub of merchandising activity, which reaches from early pre-season analysis and planning through in-season management.

Supply chain functions, like those in the merchandising area, have also been experi-encing a multi-year overhaul. Of the 10 tech-nologies tracked in the study we find six are either up-to-date or currently being updated. The beneficiaries of this multi-year effort are:

1. Warehouse management 64%2. Logistics 60%3. Fulfillment 60%4. Real-time visibility 59%5. Returns management 53%6. Distributed order management 51%Logistics, drop-ship management, and

real-time visibility are areas that show the strongest current activity. For logistics, 17% say they are currently working on a major upgrade and 14% will begin one within 12 months. For drop-ship management the numbers are 21% upgrading now and 9% within 12 months. And for real-time visibility the numbers are 18% upgrading now and 12% within 12 months.

Workforce ManagementOne major trend bubbling up in retail today is nurturing employee engagement. Retailers have finally concluded that associates and managers in stores are pivotal faces of the brand and hold the key to building brand loyalty among customers and marketplace differentiation among competitors, especially online competitors.

Pending legislation in the areas of employee complaints about split shifts, short notice of shift changes, and limiting hours have also been factors driving retailers to reconsider transforming their workforce and human re-sources (HR) strategies from top to bottom.

Workforce Management Technology Benchmark & Investment Plans



Time and attendance

Human resources and benefits

Labor scheduling

Education and training

Recruitment and on-boarding

Task management

Mobile workforce and/or HR applications

Real-time store/employee monitoring

Employee engagement management/monitoring

10% 10% 5%62% 9%

21% 12% 4%45% 14%

16% 14% 5%44% 17%

19% 15% 2%41% 19%

21% 17% 5%36% 17%

15% 13% 3%33% 31%

21% 15% 4%28% 28%

6% 14% 7%27% 40%

16% 21% 7%26% 26%

Across the board, retailers in the study tell us they are devoting a significant portion of investment budgets to analytic solutions. Pricing optimization and adding predictive analytic capabilities make the list of Top 10 Major Strategies Over the Next 18 Months (See page 20.), and multi-channel frequent shopper tracking, and campaign analysis and forecasting make the list of Top 10 Tech-nologies for 2017 (See page 22.)

While very few retailers are investing in artificial intelligence today, we find that 22% plan to invest in it in the next 24 months. The current hype concerning AI will surely cause increased interest and spending plans, however Gartner estimates that AI maturity in retail will be five to 10 years away.

Merchandising & Supply ChainMerchandising has been experiencing a multi-year overhaul as retailers come to the full realization that Excel spreadsheets cannot support a unified retail commerce transformation. We can see evidence of this multi-year effort in the nine technologies that are either up-to-date or currently in the up-dating process by more than 50% of retailers:

1. Replenishment 63%

2. Item master data management 60%3. Allocation 56%4. Core enterprise resource planning (ERP) 55%5. Campaign SKU/product management 54%6. Price management/execution 53%7. Merchandise financial planning 53%8. Category management 52%9. New product or private label

development 52%Many of these technologies also have

future investment interest that is greater than 20% over the next 24 months. If these planned investments hold true, a significant number of these merchandising manage-ment technologies could reach up-to-date status of 70% or more in the next two years.

The one area with the highest future spending interest at 31% is merchandise as-sortment planning, which continues to be a major emphasis for retailers. Today, 38% say they have up-to-date technology in place in this area, which is up from 31% in 2016.

Gartner has been tracking the merchan-dise assortment planning market for several years and corroborates the strong emphasis uncovered in this study, especially by large



As a result, a new focus has emerged that shifts the focus away from more mature technologies. Time and attendance, for ex-ample, is a mature technology, which can be seen by the high number of retailers who say they are up-to-date in this area (62%) and the 10% who are currently working on a major upgrade. As a result, future investment plans for time and attendance solutions are only 15% over the next two years.

Other areas that indicate maturity when looked at this way are traditional human resources, labor scheduling, and education and training.

However, there are several areas that show stronger levels of work being done today and investment interest within 12 months. These solutions are: Recruitment and on-boarding (21% working on it now and 17% planning to start within 12 months), employee engage-ment management/monitoring (16% working on it now and 21% planning to start within 12 months), and mobile workforce and human

resources applications (21% working on it now and 15% planning to start within 12 months).

Of this latter group, two made the list for Top 10 Technologies for 2017 (See page 22.): recruitment and on-boarding and mobile workforce and HR management.

E-CommerceAt this late point in the online revolution, the e-commerce channel and technologies that support it have been strong areas of focus for many years. As a result, of the 11 solutions tracked in the e-commerce category five have mainstream deployment rates of more than 50% penetration, which is an indication of a mature technology.

These five are: e-mail, mobile, text mar-keting/messaging (51% up-to-date and 22% currently upgrading), e-commerce platform (48% up-to-date and 21% currently upgrad-ing), product/catalog management (45% up-to-date and 21% currently upgrading), customer reviews and/or ratings (40% up-

to-date and 19% upgrading), and product recommendations (36% up-to-date and 20% currently upgrading).

However, it must be stated that calling e-commerce technology “mature” comes with a caveat. Unlike other older technology areas, such as warehouse management or labor management, e-commerce solutions require upgrading at a much quicker pace. In fact, it has been frequently noted that e-commerce platforms need major upgrades every three years. This means that even if your platform is up-to-date today, you are only three years away from an upgrade. The same is true for most of the other e-commerce functions tracked in the study.

Three areas show strong future invest-ment interest. Two of these are CRM/per-sonalization, which is critical in an online environment, and dynamic pricing, which is becoming increasingly essential to preserve profits and remain competitive.

The third area of strong future investment interest is a cutting-edge technology —chatbots. This emerging technology is being used by leading retailers for conversational commerce functions that drive sales or for managing customer service, where it is often deployed as part of the call center function.

Although chatbots are still officially clas-sified as an emerging technology, data in the study shows that 24% of retailers plan to invest in them within the next two years. This shows strong interest and a rapid pace of adoption. Many new technologies have long ramp-up periods before heavy investment takes hold among mainstream retailers. However, chatbot technology could be an exception to the rule and reach widespread deployment in just a couple of years.

Chatbot APIs, open-source architecture that supports them, and an ecosystem of competing vendors and developers have emerged with lightning speed. Already there are dozens of chatbot rollouts and pilot tests among leading retailers and by next year’s study, chatbots could be one of the hottest technologies in retailing.

E-Commerce Technology Benchmark & Investment Plans

E-mail, mobile, text marketing/messaging

E-commerce platform

Product/catalog management

Customer reviews/ratings

Product recommendations

Distributed content management/repository

Remarketing

Community

CRM/Personalization

Dynamic pricing

Chatbots



51% 22% 10%

3%

12%

48% 21% 9% 8% 12%

45% 21% 9% 4% 19%

40% 19% 8% 6% 24%

36% 20% 11% 5% 24%

34% 14% 10% 5% 41%

30% 15% 6% 5% 34%

27% 20% 8% 9% 34%

24% 24% 20% 8% 22%

14% 13% 13% 8% 49%

6% 7% 14% 10% 59%

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