Retail CIOs loosen their purse strings

The role of chief information officers in retail is changing from primarily being concerned with minimising risk and cost to prioritising return on investment and other measurable business results, according to new research from Gartner.

“Retail CIOs are investing in analytics for both near-term benefits like decision making and to prepare for innovations such as smart machines, [artificial intelligence] and augmented reality – all of which will require robust datasets,” Gartner analyst and senior director Molly Beams said.

This shift is reflected in the rise of spending on technology. Australian retailers are expected to spend $4.9 billion on technology products and services in 2019, a 3.2 per cent increase from 2018, according to Gartner’s latest forecast. This figure is slightly below the 3.6 per cent lift in technology spending in retail globally.

Gartner noted that retail has traditionally lagged other industries in terms of its digital maturity and, consequently, technology spend. But this is changing, and retail now outspends most other sectors on IT.

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Christian McGilloway, chief technical innovation officer at Retail Zoo, which owns Boost Juice, said there has been a fundamental shift in how technology budgets are being allocated.

“Previously, there were massive projects where you had to do a business case and get board approval because you would do one big infrastructure project that would take months,” he told Inside Retail.

“Now, you’ve got cloud computing, which is scalable, so you can do a massive project for a one-month campaign and downgrade [the technology] after that.”

McGilloway said that Retail Zoo has increased its spending on technology every year for the past three years, with one recent project involving the rebuilding of Boost Juice’s mobile app to focus more on omnichannel and loyalty.

According to Gartner, software is the fastest growing area of retail tech spending globally, as CIOs prioritise analytics, digital marketing, mobile applications, e-commerce platforms and artificial intelligence to deliver business results.

Given Gartner’s prediction that Alibaba and Amazon will have captured 40 per cent market share of e-commerce by 2023, up from 33 per cent in 2017, this seems more about catching up to retail’s digital leaders, rather than getting out in front.

But speaking at the Gartner Symposium/ITxpo on the Gold Coast on Monday, Gartner analyst and senior director Thomas O’Connor said that contrary to popular belief, physical retail is thriving, with global retail sales expected to increase 4.8 per cent in 2018, more stores opening than closing and consumer confidence remaining high.

“In retail, there is only one battle that matters – the fight for the customer,” he said.

“There are many ways for retailers to differentiate from e-commerce giants, and therefore profitably coexist.”

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