Other Voices: Armed with lower budgets CIOs want 360° view of consumers
Chief Marketing Officer, Aldata Solution July 12, 2011
Editor’s Note: The following column by Allan Davies, Chief Marketing Officer of Aldata Solution, is part of Modern’s new Other Voices column. The series, published on Wednesdays, will feature ideas, opinions and insights from end users, analysts, systems integraters and OEMs. Click on the link to learn about submitting a column for consideration.
In the midst of what appears to be an economic recovery, we can’t help but expect IT budgets and consumer behaviors to return to what they were before the country was forced to tighten its belt. However, the results of our 2011 Global Retail CIO Survey reveal the opposite.
According to information culled from interviews with retailers from across 26 countries in the Americas and Europe conducted by Martec International, the economy is still considered the most important issue facing retailers. Subsequently, it was found that reduced IT budgets are the new “normal” and with a desire for customer insights, CIOs will have to strategically find ways to connect with the post-recession consumer.
With a total of 136 CIOs and IT directors in category-management-style retailers interviewed, the 2011 Global Retail CIO Survey provides insights into current retail spending plans and priorities. Incorporating the views of retailers whose combined sales represent $555 billion from more than 117,000 stores, participants included a mix of both food and non-food retailers.
In its third year, the survey has shown some interesting year-over-year statistics when it comes to retailer’s reaction to the recession. This year was no different as IT budgets dropped once again from 1.3% to 1.1% of sales despite a perceived upturn in our economy. What’s more, half of the retailers surveyed believe that budgets will remain the same for the next year. Thus, CIOs are being forced to do more with less, including investing in technologies to cut overall store operations costs and attract post-recession consumer spend.
While we weren’t surprised to find that the economy is still the biggest concern for retailers today, we didn’t expect that almost double the number of mid-size retailers rated it their number one concern compared to the larger and smaller stores. This indicates that mid-size retailers struggling to compete with the larger chains need to leverage their close relationship with the consumer to better serve them while trying to make more money. Customer loyalty is a critical differentiator and isn’t being leveraged as well as it should be in that segment of the industry.
The survey also made some interesting insights into the profile of the post-recession consumer. Still conscious of the rising price of fuel, this consumer is emerging from tough economic times with a desire for quality and convenience. Suffering ‘promotion fatigue’ the survey found that retailers will not be connecting with consumers through promotions as they have in the past. In fact, promotion management has gone from the number one investment priority in 2009 to the ninth in 2011. CIOs will now focus on gaining a full understanding of consumer buying behaviors to improve inventory margins while keeping shelves stocked – allowing consumers to buy exactly what they want, when they want it.
The rising price of fuel is not just affecting consumers. Spiraling transportation costs are motivating 39 percent of surveyed CIOs to invest in demand forecasting technologies that ensure that efficient shipping and supplier orders are meeting customer demands this year. These technologies help retailers prioritize customer knowledge to understand consumer buying patterns and reduce spend on wasted raw materials. This last point is particularly noteworthy because waste simply cannot be tolerated during a time when budgets are tight.
This year’s survey results show that retailers and consumers alike have been forever changed by the recession. The relationship between the two will be a top priority for retailers and will be the key differentiator for those looking to cut operations costs and increase consumer spend. Thus, despite the continual IT budget cuts, retailers and manufacturers looking to attract dollars will need to gain a true 360° view of their consumers and tailor their product mix accordingly. While we have experienced an uptick in the economy, Americans are sticking to frugal behaviors for now and successful retailers will gain an understanding of this new consumer and adapt.