This applications market sizing report analyzes the 2009 performance of the top 10 applications vendors in the retail vertical, which includes general and convenience stores, and restaurants.
While most retail applications vendors have seen declining sales in 2009 because of the recession, the renewed consumer spending could spur retailers into action by investing in new applications in order to win back customers or in some cases erecting barriers to prevent future competitors from entering their markets.
On the other hand, large retailers are devising plans to expand around the globe, while working closely with suppliers and partners to bridge the visible gaps between their order management and supply cha in systems. In any case, the worst appears to be over for the retail vert ical and applications vendors are anticipating a new wave of technology implementations by shoring up their product portfolios through acquisitions or stepping up their development efforts.
Top Line and Bottom Line
On the top line, retailers are beginning to invest once again. Early tallies of publicly -traded applicat ions vendors that focus on the retail vert ical have reported either rising software sales or stabilizing business in their most recent quarters. Micros, for instance, saw a 7% rise in software sales during the first quarter of 2010 cit ing improved demand from its retail customers. The same applies to DemandTec, Par Technology and Radiant Systems. Radiant attributes the 26% jump in its system sales in the first quarter of 2010 to new store openings and capital spending among its Americas hospitality customers comprised of mostly quick service and table service restaurants.
The bottom line is that after a sharp drop in sales to the retail vert ical applications vendors have begun to experience pent-up demand that could mean double-digit growth over the next 18 to 24 months because of relatively low comparisons in year-earlier period.
The market for applications for the retail vert ical plunged 8% in 2009 as big chains and small retailers slashed their IT expenditures in order to ride out the recession with little hopes of a quick recovery.
Some retailers such as Nordstrom did venture into full-scale IT projects. In 2009 the specialty retailer embarked on a program to rationalize multiple merchandizing and supply chain systems that it had been relying on for the past several years.
The 193-store chain found that its business processes and IT strategies were not properly aligned leading to heavy dependence on customized systems. It picked Oracle Retail planning application, Siebel CRM, and supply chain systems for a co mplete ma keover. So far the new strategy appears to be yielding positive results with Nordstrom’s latest monthly same-store sales in May 2010 rising 5.4%.
Applications vendors, on the other hand, have set their sights on acquisitions. Last year JDA, for example, revived its bid to acquire i2 Technologies, a supply chain applications vendor that sold to ret ailers such as Gap, Payless ShoeSource, and Woolworths South Africa.
SAP, on the other hand, ramped up its push into the retail vertical by picking up IP assets including the global forecasting and replenishment applications from SAF in July 2009. SAF focuses on selling applications for retailers that operate superstores and warehouse stores.
As retailers search for a better way to serve their customers, multi -channel selling, mobility and social media integration will be crit ical for them to stay relevant to the discerning buyers, who now have more information than ever. Hence, the challenge for retailers is to simplify the shopping experience in a way that provides buyers with easy access to rich product information, while still asserting the control of pricing, availability, and upselling and cross-selling capabilities by relying on advanced analytics and single version of truth on its interactions with customers. All these will depend on how retailers leverage the latest applications designed to steer sho ppers to the checkout areas with optimal results.
Implications Of The Great Recession of 2008-2009
The recession has dealt a severe blow to retailers, many of which have either been forced into bankruptcy or insolvency as consumer spending tumbled.
Now as the economy started perking up again, shuttered restaurants and empty stores began to reopen under new names or owners.
While major retailers such as Wal-Mart continued to post anemic growth especially in mature markets like North America, their international operations fared much better. Restaurant chains experienced the same trajectory for their outlets in fast-growing regions from Asia Pacific to Latin America. Subway, which is vying to become the largest restaurant chain in the world, plans to add hundreds of locations in countries such as China and Thailand over the next few years.
Following the recession, the retail marketplace has woken up to the fact that innovation will play a much bigger role than ever, perhaps eclipsing cost containment as the new priority. Judging from the spectacular success of Apple Stores, something that Microsoft and many other companies are trying to replicate, any retail and merchandising head would have to pay attention to creative retail concepts as consumers remain wary about frivolous purchases. The same applies to online branding and social media market ing, which have upended the retail marketplace.
What it boils down to is the fact the world of retailing will never be the same as many retailers have been brought down to their knees. In order for retailers to restore growth, smart use of technology will continue to be a key differentiator for those that seize the opportunity to innovate and deliver better customer experience.
In the coming years retailers are expected to regain control of such fundamentals as pricing, availability and positive customer experience through system standardization. Successful retailers will be those that make the most out of mission-critical applications for financial management, HR performance management as well as operations efficiency.
Retailers in fast-growing regions such as Asia Pacific, the Middle East and Africa have already taken the cue from their counterparts in the West by building a scalable and standardized infrastructure that allows them to meet customer expectations in terms of value-based pricing, just-in-time availability and comprehensive after-sale service. What they plan to do next is to up the ante by incorporating new technologies such as mobility support into their environment seamlessly, something that their Western counterparts are still trying to adapt.
Top 10 Applications Vendors In Vertical
The following table lists the 2009 shares of the top 10 applications vendors in the retail vert ical and their 2008 to 2009 applications revenues(license, maintenance and subscription) from the vertical.
Vendors To Watch
Despite the market consolidation, a long list of applications vendors have emerged as disruptive forces in the retail vertical. They include Clarity Commerce, KSS Retail, Predictix, Retail Pro, and Revionics. The forecasting and replenishment applications from Predictix have helped customers better manage their inventory, while delivering more accurate forecasting data on critical areas such as product returns.
After years of aggregating customer and supplier information, the challenge for retailers is to have a simple to use but powerful system that serves up real-time information on customer purchases.
The advent of such systems that combine master data management and customer informat ion management could be the next frontier of retailing. Some companies like Microsoft have spent hundreds of millions of dollars building such systems that contain billions of rows of customer informat ion. The issue is whether it can scale up or down to meet the needs of everyday’s requirements of a retailer.
Another development to watch lies in mobility support, which has yet to be connected to the shopping experience. Coupons that can be easily downloaded onto a mobile phone, for example, are being tested for broad -based deployment by retailers with the help of technology providers such as Tech Mahindra. Suffice it to say the future of retailing will still be based on how retailers can effectively and profitably sell and deliver goods via mult iple channels, but mobile technology will be a constant presence in every step of the buying and fulfillment process.
As the retail vertical is regaining its momentum, applications vendors are focusing on specific segments such as warehouse stores, specialty retailers and fast-growing countries like Indonesia and Brazil where local retailers are scrambling for best-in-class applications in order to help them accentuate their key differentiators.
On the upside, retailers are setting their sights on tangible differentiat ion that draws and retains customers. That can only achieved by years of tending to their needs. Now technologies have replaced long-term observation with predictive analytics, customer informat ion management and financial control to determine customer needs and the prerequisites to meet them precisely.
On the downside, legacy systems abound in the retail vertical where many operators are still loath to invest in new technologies that may require considerable customizat ion and integration. Social media, for example, is still a phenomenon that leaves retailers more bewilderment than excitement. Meanwhile retailers are still trying to establish the base line where they can measure how and when to deploy a whole new breed of applications with predictable outcome.
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Retail Market Report 2009-2014