Retail IT Needs A Late Round Comeback

The "Brockton Blockbuster" (Rocky Marciano) would spend the early rounds of a fight mercilessly pummeling his opponent's arms until they were too sore to lift. Marciano would then deliver devastating uppercuts and overhand rights to the head and body until he was declared the victor, 37 times by knockout.

To fully investigate the exact role technology plays in keeping retailers' margins at a healthy level, we should begin by looking back about two years ago, when IT personnel were confidently taking on all comers. Senior executives were giving CIOs wide latitude to purchase and implement systems, believing technology could add new marketing channels, accelerate sales, automate vendor management, and build customer loyalty.

Part of this perception resulted from the Internet euphoria that had the double impact of introducing many executives to the potential for technology, but also badly inflating their expectations for its usability and effectiveness. Despite the measurable ROI many retailers have obtained by implementing systems for marketing, sales, vendor management, and customer loyalty, unrealistic assumptions about the scope of improvements IT would deliver have still soured the senior management view of technology.

Therefore, retail IT executives would be wise to give their CEOs and CFOs a crash course on exactly what technology is and is not. A brief primer follows:

Technology Is Not:

• An Aspirin. Technology is a long-term enabler of superior business practices, rather than a short-term remedy for incidental glitches, mistakes, and other day-to-day "headaches" all retailers experience.
• An extra staff member. Technology is able to provide human employees with advanced resources to do their jobs better, but it is unable to do their jobs for them. For example, algorithmic decision support systems can aid merchants in buying and distributing inventory, but they cannot make purchases or allocate goods on their own.
• Einstein-in-a-box. While vendors often promote "intelligent" solutions, the reality is that IT systems possess no independent thinking capability. The most sophisticated data analysis solution on the market is only valuable if it is fed the correct information to crunch.
• A get-rich-quick scheme. When properly implemented and utilized, IT systems can, over time, increase operational efficiencies and reduce costs. But they cannot increase the top line by millions of dollars overnight.
• A rabbit in a hat. There is no "magic" involved in how systems work. Anyone who implements a solution, yells "presto," and waits for something magnificent to happen will be sorely disappointed.

Technology Is:

• A ruler. Analytical systems are among the best tools available to retailers for measuring operational performance and determining how much further they can stretch the profitability of their business models.
• Rationale. Technology is logic in action. By automating processes, retailers strip them of emotion. This means, for example, that data sharing between two departments with a history of friction can be made smooth and painless.
• An issue spotter. Through processes such as exception-based reporting, systems can detect hidden issues and negative trends that might otherwise go unnoticed. Many retailers have dramatically reduced theft and shrink rates with loss prevention solutions.
• A multi-tasker. Technology can perform mundane tasks such as store polling and invoice matching with speed and scope that would be otherwise unavailable. This allows personnel to focus on higher-level matters without sacrificing the "nuts and bolts" of the operation.
• An unbiased perspective. Systems take in data, analyze it according to mathematical equations and predictive rules, and produce results uninfluenced by outside factors. Human intuition and judgment are still crucial to retail success, but they can be greatly aided by neutral input from analytical tools.

Senior executives at small and large retailers alike are taking on the role of a big-time boxer at the beginning of a fight, wearing down IT managers with punches in the form of questions about the overall contribution of systems to the bottom line. Systems personnel need to fend off these inquiries with clear-cut answers before top management starts winding up the knockout punch.