Managing Director & Senior Partner
To be a chief information officer (CIO) at a traditional retail company today is to face a new kind of pressure. The CIO’s job is no longer just to keep the company’s internal systems running and to produce data that management can use for operational decisions. Retail CIOs today are part of a team that faces a “do or die” imperative with digital.
It’s not that consumers have lost their taste for brick-and-mortar retail stores. No one who ventured into London’s Harrods or New York’s flagship Macy’s store in a holiday shopping season in recent years would have come away with that impression. There would have been, in those stores and in other megastores in major cities, the usual crush of humanity. But what matters in retail is not what happened yesterday; it’s what’s happening now and what’s going to happen tomorrow. And what’s happening now is that consumer habits are changing—fast.
With online sales growing at almost five times the rate of traditional retail in the West and even faster in Asia, The Boston Consulting Group surveyed retailers to get a baseline on their information technology activities. We strongly believe that retail CIOs need to find ways to reduce their everyday IT operating expenses and apply the savings to digital innovation. We asked survey participants about both their current IT activities and their plans for doing things in new ways.
Here are our main findings:
Median IT operating expenses in the retail industry are 1.2% of revenue.
Retailers’ ability to innovate using IT hinges on their investments in e-commerce infrastructure and on continued development of their omnichannel capabilities.
Overall, there is still not enough IT-enabled innovation.
One might expect that the highest IT spenders would be the most innovative. In many cases, however, retail full spenders don’t exhibit the hallmarks of innovation leadership. And there are some frugal spenders that qualify as innovation leaders despite their relatively small IT budgets. (See Exhibit 1.)
Retailers’ ability to innovate is limited in part by their lack of speed in adopting new tools and approaches.