Retailers’ Investment in Technology: An Industry Perspective

Technology touches almost every aspect of commercial activity. And with the rapid pace of technological innovation, its impact on business enterprise will only increase in the future. Like many other industries retailers are being impacted by technology advancements, as well as changing shopping habits.

Technology is being embraced by retailers to realize operational improvements, and also in response to changing consumer behavior. The list of technology imperatives faced by retailers is lengthy. These include social, mobile, cost containment, Omni-channel initiatives, and security, among many others. Today, customers experience a brand, rather than a specific shopping channel. This fragmentation in shopping channels away from brick and mortar stores is forcing retailers to meet consumers on their terms, which is causing a lot of upheaval in the retail business and further fueling the drive toward technological innovation.

Notwithstanding these challenges and opportunities, it has been advanced that retailers, as an industry, underinvest in technology. For example, CompTIA’s 2012 Retail Sector Technology Adoption Trends report, states “… relative to the size of the retail sector and compared to other industries, retailers are underinvested in information technology.” CompTIA is not the first firm to advance this position. In a 2008 study by Accenture, it was noted that “Retailing has historically invested lower percentages of revenue compared to other industries. Typically, IT spending represents 1 to 15 percent of a company's revenue… The financial sector is on the high end of the spectrum, while retailing is near the bottom.” The same Accenture report found that “According to the last several years of the RIS/Gartner Retail Tech Trends Study, retailers allocate less than 2 percent of revenue to their IT budgets. This figure … is two or three times lower than other industries.”

In this Research Article, we look at published data, and also compile Census Bureau data, to consider the level of technology investment being made by retailers. In general, we find that the published data does not support the proposition that the retail industry underinvests in technology. Looking at Census Bureau data does, however, present a much different perspective that supports the conclusion that the industry generally underinvests in technology.