Midmarket Retail Tech Investments Soar WorldwideBy Evan Schuman | Posted 06-06-2005
AMI Partners Inc. defined the midmarket retailer as one with between 100 to 999 employees.
There are several reasons for the projected increase, but a key reason is accelerated IT investments in overseas marketsespecially China, India and Korea.
Another key factor is intensified acceptance of credit cards and online applications, which makes it easier for smaller companies to compete, said Anin Bose, an AMI senior analyst. That top-line growth amounts to a CAGR (compounded average growth rate) of 6.9 percent, AMI Partners said.
Although the report does focus extensively on Asian and European retailers, it concludes that retail technology spending will increase across almost all regions.
For the same 2004 to 2009 projection, the report has "mature markets"including the U.S, the U.K., Canada, France, Italy, Scandinavia and Germanyrising from $20.3 billion to $27.85 billion (a 37 percent increase and a CAGR of 6.5 percent).
The "emerging markets"including India, Brazil, Mexico and Russiaare projected to move from $1.33 billion to $2.27 billion (an almost 71 percent increase and a CAGR of 11.4 percent).
The "newly industrialized markets"including China, Korea, Singapore and Taiwanare expected to increase from about $500 million to $840 million (a 68 percent increase and a CAGR of 10.9 percent).
"We definitely didn't expect this kind of growth rate," Bose said.
Some of the increases can be statistically misleading, as many of the emerging markets are increasing from such low numbers that one healthy upgrade can cause a huge percentage increase. But Bose said that the increases are often truly substantial. He also pointed to "leapfrogging" opportunities as an example of growth.
Leapfrogging would be where a retailer might move from a very low-end approachsuch as manual purchase entries or a simple electronic cash registerto a much more modern approach, such as migrating to an RFID-enabled wireless POS (Point-of-Sale) system, thereby bypassingor leapfroggingthe traditional POS.
Bose added that many midmarket retail IT investment differences are influenced by geography. "Midmarket retailers in the mature economies of North America and Western Europe are battling slow-to-moderate top-line growth by resorting to innovative customer acquisition and retention tactics, including micro segmenting/defining new target markets for their wares and moving to multichannel retailing.
"This is driving these firms to up their investments in customer relationship, business intelligence, data warehousing, wireless and online transaction solutions," the report said. "Growth in per capita consumption is driving investments in basic computing, supply-chain and inventory automation in high-growth emerging markets such as China and India."
The specific nature of those regional retailers also plays a major role.
"Emerging economies such as China and India have always had a large homegrown retail sector dominated by small neighborhood stores," the report said. "This retail format, while still dominant, is facing competition from newly minted entrepreneurs that have scaled to midsized businesses and are targeting a larger share of the consumer's wallet with Western-style shopping formats and concepts."
Another AMI analystSenior Vice President Deepinder Sahnisaid midmarket retailers have also had to react quickly to changing customer demands and profiles.
"The IT focus for these retailers is more on growth and supply chain automation [in order] to scale up and meet the explosion in consumer buying capacity," Sahni said. "Online transactions and CRM [customer relationship management] capabilities have yet to develop in a meaningful way in emerging markets, since credit card usage and online infrastructure is still in the early growth stages. In the meantime, there is an explosion of retail outlets in these emerging markets that drives demand for POS, bar coding and related automation."
Retail Center Editor Evan Schuman can be reached at Evan_Schuman@ziffdavis.com.
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