BI, Analytics, Customer-Centric Solutions: Drivers Of Retail Software

Despite unfavourable economic conditions in countries such as the United States and Japan, the prospects for the retail software market look particularly promising in the emerging Asia Pacific and Central and Eastern European (CEE) markets. This upward trend will continue, as retailers in these regions continue to focus on Business Intelligence (BI), analytics and customer centric solutions.

New analysis from Frost & Sullivan, World Retail Software Market, finds that the retail software market earned revenues of over $9.31 billion in 2007. Of this, software licencing accounted for $3.07 billion in 2007 and will reach $5.88 billion in 2014.

Retailers have been substituting their legacy systems for modern day solutions built on industry-leading platforms, facilitating the flow of business information across the entire value chain. The implementation of these solutions helps manage performance enhancements by offering a detailed, explicit perspective of all business information within the purview of the enterprise or retail chain. As these solutions offer extensive performance enhancements, there is a wide scope for the uptake of advanced end-to-end solutions.

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"The primary driver of the growth of the retail software industry is the growing focus on business integration and optimisation," offers Frost & Sullivan research analyst Prasanna Prakash. "Using advanced end-to-end solutions, retailers can reduce their total cost of ownership (TCO) and make more informed business decisions on a day-to-day basis."

Besides reducing TCO, retail software also assists in providing uniform brand communication across various channels. Optimisation across the various processes and channels allows the retailer to respond quickly and more efficiently to customer requirements.

Retailers are also turning to retail software solutions, particularly customer-centric solutions and BI, to build enduring customer loyalty and improve the customer shopping experience through merchandise and promotions management. Solutions such as customer relationship management (CRM) enable retailers to target premium customers using customised promotions and advertisements, thereby increasing the customer lifetime value (CLV) involved. Investing in cross-channel solutions can also result in effective understanding and management of their business.

However, the economic slowdown could prove to be an impediment, and in Asia Pacific and Latin America, price pressures are restraining market progression. Investments have taken a backseat to cost-cutting. With the closure of several chains in North America due to economic conditions, more of such announcements are expected to follow, as retailers are usually heavily leveraged and the credit crunch has resulted in banks tightening their credit standards. Retailers are hesitant to invest in solutions such as point-of-sale (POS) upgrades as they incur additional expenditures on hardware.

Software as a service (SaaS) can help counter this, as it guarantees a reduction in upfront capital expenditure. It has proven to be economical because it is leased out to retailers on a yearly basis. Another attractive feature is its service-oriented architecture (SOA), which allows the software modules to be used as middleware once SOA has been deployed in the store.

"The growing popularity of the SaaS model and packaged solutions in Asia Pacific and Latin America will gradually make the solutions more affordable for small- and medium-sized enterprises (SMEs)," explains Prakash. "Further, to overcome competitive pressures from regional vendors, global vendors need to increasingly focus on after-sales services, such as maintenance and consulting, and customised solutions."

Overall, the increased penetration of retail formats, such as hypermarkets, and the transition toward organised retail in several countries across Asia Pacific, Central and Eastern Europe, Middle East, and Latin America, coupled with increased liberalisation and disposable incomes, present huge opportunities for the growth of the retail software market. While the market is currently undergoing consolidation, the overall market is still expected to remain fragmented. Competition will intensify, as more vendors start focusing on mergers and acquisitions to expand their product portfolio and increase their foothold in the market.