Thinking Positive About Retail

In retail, the prevailing wisdom is that big-box stores—well face it, Wal-Mart—are driving the industry.

The aforementioned retail kingpin forces its various vendors to adhere to its RFID and other technology standards, it wrings every cent possible out of its cost structure and forces other retailers out of business. A pretty bleak picture, no?

Um, actually, no, according to solution providers specializing in retail implementations. They maintain that the perception of Wal-Mart neutron-bombing the retail vertical with its policies is more myth than reality. Admittedly, it’s in their best interests to point out the opportunities opening in this market, but there is evidence that business is there—for both new retailers and solution providers—if you look for it and have the right skill set.

“There was a time when Wal-Mart was really devouring a lot of local businesses, but if you look across the street from any new Wal-Mart, you’ll see a new strip mall with a new breed of [retailers] providing services and products that aren’t available at Wal-Mart,” said Michael Nicholson, COO of POSitive Technology, a Rockville, Md.-based solution provider specializing in retail technology implementations. POSitive offers soup-to-nuts retail systems typically for companies with four to five stores but has at least one client with up to 200 stores. A soup-to-nuts solution includes the POS system, register, scanners, networking technology and all the relevant software. POSitive’s vendor partners include SonicWall, IBM, Microsoft and Symbol Technologies.

It’s easy to downplay the technological needs of mom-and-pop stores, but it’s also a mistake. Even small retailers have serious requirements. Anyone taking customer credit information, for example, has to be aware of security and take steps to ensure that data remains safe. It doesn’t matter to a customer whether the merchant that inadvertently disclosed her credit card information to an evil-doer is Hardy Spa on the corner or Bloomingdale’s, for example.

>> "There was a time when Wal-Mart was really devouring a lot of local businesses, but if you look across the street from any new Wal-Mart, you’ll see a strip mall with a new breed of [retailers]." --Michael Nicholson

Steele, Nicholson and other solution providers see gold in a new wave of retailers, either net-new players coming into the field fresh or older stores just now moving from non-computerized cash registers or updating character-mode POS systems to newer technologies. “There are a lot of green fields, still a lot of DOS [systems] out there,” Steele said.

Among the newcomers to retail, perhaps some people going into second careers, a good number are proving to be computer-savvy from their past work lives. They expect to have the tools and Internet access available to them that they enjoyed elsewhere. In addition, young people working summer or part-time jobs are less likely to balk or be expensive to train if they have systems resembling the state-of-the-art technology they’ve seen at home or school, according to retail solution providers.

Where others see a decimation of the retail category through “Wal-Martization,” Nicholson sees opportunity. He cites storefronts in strip malls that spring up around the big-box stores as huge opportunities for the channel. All of the solution providers contacted agreed that there is a surprising amount of DOS-based retail technology still out there just begging to be upgraded.

Leslie Capachietti, principal of Automated Financial Solutions, Winchester, Mass., specializes in helping independent retailers get—as you might guess from the company name—automated with Intuit solutions. Her QuickBooks roots give her a leg up in many of these small businesses, the vast majority of which already run QuickBooks accounting software, she said. For many businesses still using non-computerized cash registers, up-front investment is a concern, Capachietti said. Automated Financial Solutions can get in, implement basic entry-level software for about $799 retail or install a turnkey hardware system with a register drawer and printer for $1,400.

Her company’s customers include mom-and-pop shops, dental and medical offices and some larger entities. Intuit just this past year started a retail service provider program that lets partners either resell the software themselves or that enables customers to source the software as he or she sees fit. “When Intuit’s POS solution hit the streets, you could still buy it at CompUSA or Costco, but now I can also resell it and maybe even give the customer a better price,” Capachietti said.

“It’s a good profit center for us; we can make decent money on the product itself, which we couldn’t before,” she said.

While the bulk of the activity these partners described is at the “small” end of the SMB spectrum, there must also be life in the larger retail world despite consolidation of many major department store and drug-store chains. Otherwise Oracle wouldn’t have coughed up $670 million to snatch Retek, a retail ISV, from the clutches of rival SAP. Nor would SAP have responded by buying Toronto-based Triversity, another retail ISV, for an undisclosed sum.

For the larger retailers, it’s coming down to getting the most value out of the massive data they may already have. That is why many retailers are engaging in large data-warehousing projects—so they can sift through their sales and customer service data to better predict patterns of behavior and be better prepared for it.

“They want to understand customer buying power and tie all that into inventory replenishment,” said Bill Lewkow, vice president of business development for TUSC, a large Oracle consulting partner based in Chicago.

Recent figures from AMR Research back up that contention. The Boston-based research firm surveyed 60 senior IT people working for retail companies with 1,000 or more employees in the United States. Of those, 29 percent expected to increase the amount of IT dollars spent on software licenses in 2006 compared with 2005, 23 percent expect to spend more on software maintenance and 23 percent expect to spend more on third-party IT services. By contrast, just 4 percent expected to spend less on all three categories.

In addition, 25 percent expect to spend more on hardware next year vs. 9 percent that expect to cut their hardware budgets in 2006. Hardware remains the largest single line item on retailers’ IT budgets, soaking up 22 percent of projected IT spending this year. The bulk of those hardware investments come in the form of POS systems, mobile devices, kiosks and payment systems, according to AMR.

Of the executives surveyed, the biggest gripe among retailers pertained to the software ease-of-use category. Most retail software is not as intuitive as it could be, they maintained. Basically if it’s too hard to use, then merchants and sales clerks will turn it into shelfware, according to the AMR findings.

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