If ever there was an industry that must do more with less, it's the supermarket business.
As IHL Consulting President Greg Buzek told us earlier this summer in an IT Business Edge interview Where Will Retailers Spend IT Dollars in 2007?, the average supermarket clears less than one cent in profit from every dollar; that doesn't leave lots of room for increases in IT spending.
Yet they won't have a choice when it comes outdated point-of-sale hardware. According to a recent eWEEK article in which Buzek is interviewed, some 100,000 aging POS systems will need to be replaced over the next three years.
Proprietary legacy systems become a particular problem in acquisitions and mergers, when IT departments are faced with the issue of making them communicate with each other and with a single central system.
Such systems can't be neglected, Buzek told IT Business Edge, because they are a key point of customer interaction. "You need clean, reliable POS data to do everything else."
Other key spending areas for supermarkets are workforce management and business intelligence and analytics.
Workforce management can help reduce the cost of labor, which is second only to the cost of merchandise for most retailers. "Optimizing the labor to adequately staff, but not overstaff, has a big impact on the bottom line," says Buzek.
And business intelligence can help supermarkets improve their loyalty programs, which Buzek says in the eWEEK article are largely not living up to their potential. Supermarkets tend to use them mostly as simple discount programs rather than as a way to better understand their most profitable customers.
Supermarkets spent about $9.1 billion on IT in 2006, according to IHL research, with much of it going toward hardware ($3.4 billion) and services ($2.7 billion).