IT Spending Forecast - Yenra

Nine percent growth in retail information technology spending in 2004 - even subtracting RFID expenditures


Retailers are increasing their IT spending by more than nine percent in 2004, indicating a dramatic upward trend in an industry typically conservative in its approach to technology. AMR Research announced these findings today at its Retail and Consumer Goods Conference, based on the results of a joint study held with The National Retail Federation (NRF), the largest retail trade association in the world.

"IT spending in the retail industry has not increased this dramatically since the invention of bar code scanners," said Tony Friscia, President and CEO of AMR Research. "The pressure to continue to realize cost savings from supply chain efficiencies while improving customer service has forced retailers to accelerate their technology investments. This is clearly an indication of the industry's commitment to realizing the benefits of IT systems that the rest of the business community has already adopted."

The joint study is the first collaborative survey published by AMR Research and the NRF as part of the strategic partnership that was formed in 2003 between the two organizations. Drawn from a survey of 27 NRF CIO Council members representing over $180 billion in annual sales, the research provides the first comprehensive, line-item level IT budget analysis seen in the U.S. retail industry. The partnership is spearheaded by AMR Research Vice President for Retail Scott Langdoc and Dave Hogan, Senior Vice President and CIO of NRF.

"The report's projected expenditures did not include RFID compliance investment," Friscia added. "2005 is around the corner, and retail spending for this technology alone should continue the upward trend in retail IT investment. Our report with NRF has validated the trend that AMR Research has witnessed through our client discussions -- that we should plan on seeing continued investment in retail technologies."

The average budget increased from $219 million in 2003 to $239 million in 2004, nearly doubling the increase in total spending growth reported in previous retail IT spending surveys for 2003 and 2004.

2004 capital expenditures among study participants are projected to be more than 27 percent higher than 2003. This significant rise includes more than a 57 percent increase in capital spending on store-based technology hardware, validating the importance retailers see in improving the consumer's shopping experience.

Study participants are increasing spending in network communication technology more than 20 percent, indicating increased store bandwidth to support better responsiveness and more centralized application deployments.

Retailers are budgeting an average 16 percent increase in training for IT personnel, reflecting the need to gain faster understanding of new application technologies and business processes affected by accelerating IT investments.