IT Outlook in the Retail Sector & NRF Wrap-up

Yesterday I attended the 98th annual NRF (National Retail Federation) show, right here in NYC at my least favorite place in the world (the Javits center!)

Going into the event, I was very interested in what the mood would be, as well as how the foot traffic looked, being that retail is probably the most battered industry sector in the U.S. due to the steep drop-off in consumer spending.

Well, to cut to the chase, it was pretty lame... and a tad depressing. I heard a few rumors that attendance was calculated to be around 50% lower than last year (which itself wasn't so stellar), and I think even this estimate was a little rosy.

Notably absent from NRF this year was Lawson Software, who essentially left the core retail apps market when it canceled the next generation of its merchandising solution (Armature); and I also didn't see (or at least couldn't find) many of the Indian offshore players booths besides Cognizant....

As its been reported and rumored about for a week, both SAP and Oracle have made some cuts to their workforce. The best estimate I can find so far has been around 7-8% worldwide for SAP (and perhaps as much as 20% in the US) and anywhere from 500 to 8,000 cuts at Oracle depending on who you believe... Nonetheless, in retail where certainly some of those cuts have touched sales and consulting, both companies stated that investment/R&D levels will remain the same as before for retail-specific product development. My take on this is that if they both want to continue to play in this market, they have no choice. Retailers were reluctant when both companies marched into this market more aggressively 4-5 years ago, and retailers today are watching closely to see the level of committment offered in tough times.

In general, both Oracle and SAP are bringing different messages to the retail market; both are aiming at offering shorter-term ROI, given the economic realities. SAP quite focused on Business Objects tool-sets for helping customers make more informed decisions on their operations in the current climate; while Oracle has been producing extensive process orchestration flows across its acquired retail modules for areas like assortment management and in-store processes.

While these solutions are very interesting, it really doesn't matter. Right now I see retailers in two distinct camps: 1) very sick, and seeing where business KPIs are following this dismal holiday season, and perhaps looking for funding to keep the lights on! And hence, definitely not thinking about a major enterprise apps roll-out...

And 2) retailers that have made it through okay so far, but are in a state of paralysis, in order to see which competitors will be left, where are commercial real estate prices going, whether consumer spending has bottomed, etc., etc. In order for camp #2 to move forward with new projects, the dust from the coming industry shake-up and bankruptcies will need to settle, and there will need to be some glimmer of hope around the consumer, at this point, even under 1% declines or flat growth would suffice.

In the mean time, IT suppliers are going to have to do some work themselves, to assess their own retail customer base's health, and target retailers that might be leaner, but are alive, and may have a few less competitors than before, which could equate into richer margins in the long-term. IT services firms will have to be more involved with the business and more innovative than before to win new business. For those retailers that are still standing, I believe many will take this period to reinvent themselves to a degree, whether it be a shift away from stores to more multi-channel, creating more customer intimacy, or having the ability to diversify their product categories.... in nearly all cases, IT will be a very important factor in success.