2013 Changes in Store Mobility Meets Retail's Big Data

Transcription

1 10th Annual IHL/RIS News Store Systems Study 2013 Changes in Store Mobility Meets Retail's Big Data Analysts Lee Holman & Greg Buzek Publication Date: January 5, 2013

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3 About IHL Group Who We Are IHL Group is a global research and advisory firm specializing in technologies for the retail and hospitality industries. The company, based in Franklin, Tenn., generates timely data reports, offers advisory services and serves as the leading retail technology spokesperson for industry and vendor events. What We Do IHL provides customized business intelligence for retailers and retail technology vendors, with particular expertise in supply chain and store level systems. Our customers are retailers and retail technology providers who want to better understand what is going on in the overall technology market, or wish to identify specific equipment needs for the retail market. When We Started Greg Buzek served as Product Development Manager for two Fortune 500 retail technology suppliers for 6 years. Faced with making recommendations to senior management with spotty reports stuffed with technical jargon and unsubstantiated data, in 1996 he left to form IHL Group as an arms length consulting firm that delivers exacting research to corporate managers. How We Work Reliable market analysis is essential for corporations to accelerate revenue and expand their market share. Most research providers do not disclose data sources or statistically defend the validity of their assumptions. We do. We disclose in precise detail exactly how and why we reached our conclusions so that our customers can be comfortable with the data they are using. What We Know Our associates and advisors have over 100 years combined years of retail technology experience. Our associates have worked as product managers, sales representatives and executives in the retail market. We have the relationships, tools, and experience to meet your research and consulting needs Cedarview Lane Franklin, TN Phone

4 Table of Contents Summary of Findings Introduction Background and Objectives How to Read This Document Methodology Demographics Who Responded? Financial Expectations & Expanding Horizons Enterprise Growth IT Spend Growth Enterprise IT Spend Growth Store IT Spend Growth Store IT Spend Growth by POS Software Vendors Under Consideration Store System Priorities Store System Priorities Point of Sale Key POS Software Vendors with the Most Interest POS Software Purchase Intentions and the Impact on Vendor POS & Peripheral Purchase Trends POS Client Base System POS Software POS Printers POS Scanners (2D) POS Scanners (Image from a Cell Phone Screen) EFT / Debit / Signature Capture Other Store Systems Mobile Effect on Traditional POS Card Payment Security There s No Avoiding It, Mobile is Here to Stay Mobility Platforms for Store Managers and Associates Store Associate Mobility Plans Support for Consumer Mobile Applications Support for Payment Oriented Mobile Apps Which Payment Solutions Will Retailers Use? A Word on Big Data Channels Continue to Blur Copyright 2013 IHL Group All Rights Reserved. 4

5 9.0 RFID: Everything Old is New Again References List of Figures Figure 1 Respondents by Retail Segment Figure 2 Respondents by Title / Position Figure 3 Respondents by Annual Revenue Figure 4 Retailer s Plans for Store Count Growth for Figure 5 Retailer s Plans for IT Headcount Growth for Figure IT Spend Growth by Retailer Annual Revenue Figure 7 Enterprise IT Spend Growth for Figure 8 Store IT Spend Growth for Figure 9 Store IT Spend Growth by POS Software Vendor Figure 10 Top Store System Priorities Figure 11 Top Store Priorities by Retail Segment Figure 12 Top 10 POS Software Vendors Under Consideration Figure 13 Top 10 POS SW Vendor Responses by Retail Tier Figure 14 POS SW Vendors Considered by Retail Segment Figure 15 POS SW Vendor Share of 0 12 Month Purchase Intent Figure Month Purchase Intent Share of POS SW Vendors Figure 17 POS & Peripheral Purchase Trends Figure 18 POS Client Base Systems Purchase Trend by Retail Segment Figure 19 POS Client Base System Purchase Trend by Retail Tier Figure 20 POS Software Purchase Trend By Retail Segment Figure 21 POS Software Purchase Trend by Retail Tier Figure 22 POS Printers Purchase Trend by Retail Segment Figure 23 POS Printers Purchase Trend by Retail Tier Figure 24 POS Scanner (2D) Purchase Trend by Retail Segment Figure 25 POS Scanners (2D) Purchase Trend by Retail Tier Figure 26 POS Scanner (Cell Phone) Purchase Trend by Retail Segment Figure 27 POS Scanners (Cell Phone) Purchase Trend by Retail Tier Figure 28 EFT/Debit/Signature Capture Purchase Trend by Retail Segment Figure 29 EFT/Debit/Signature Capture Purchase Trend by Retail Tier Figure 30 Other Store Systems Figure 31 Reduced POS HW Purchases Due to Mobile Figure 32 Security Technology Purchase Plans Figure 33 Store Mobile Spending Plans Figure 34 Mobility Platform for Store Associates Copyright 2013 IHL Group All Rights Reserved. 5

6 Figure 35 Mobile Platform for Store Associates / Managers by Retail Segment Figure 36 Mobile Platform for Store Associates / Managers by Retail Tier Figure 37 Store Associate Mobility Hardware Plans Figure 38 Store Associate Mobility Hardware Plans Figure 39 Store Associate Mobility Software Plans Figure 40 Plans for Protecting Consumer Grade Devices Figure 41 Consumer Mobile App Purchase Intent Figure 42 Consumer Payment Through Smartphones Figure 43 Mobile Payment Solutions Plans Figure 44 Big Data Impact Figure 45 Cross Channel Purchase Intent Figure 46 Status of RFID Implementation Figure 47 Timeframe for Most SKU s to be RFID Tagged Copyright 2013 IHL Group All Rights Reserved. 6

7 SUMMARY OF FINDINGS In no particular order, here are some of the key findings contained in this report. Retailers expect to step up the pace of expansion as 66% of the respondents are planning new stores in 2013 and 58% are planning an increase in IT headcount. This increased expansion parallels IT investment, as both Enterprise IT spend and Store IT Spend are expected to grow for o o Enterprise IT Spend is expected to grow 4.8% from last year (last year s number was 2.6%). Mobile technology and Big Data will have a healthy say in the spend numbers. Specialty Softgoods and Hospitality providers are the expected leaders, as both anticipate a 6.6% increase over last year. Food/Drug/C Stores are at 4.6% and Specialty Hardgoods are at 4.5%. Tier III V retailers anticipate 6.2% growth over last year, followed by Tier II and Tier I (4.5% and 4.4% respectively). Store IT Spend is expected to grow 4.0% from last year (last year s number was 3.1%). Mobile technology, involving devices owned by both retailers and consumers, will have a big impact. Hospitality providers are the clear leaders as they anticipate a 6.8% increase over last year. Specialty Softgoods are next at 5.7%. Department Stores and Mass Merchants are anticipating a 0.6% decline from last year. Tier III V retailers are the leaders here as well, as they anticipate 5.5% growth over last year, followed by Tier II and Tier I (4.3% and 3.4% respectively). POS Shipments are showing growth, but it looks to be more subdued than in 2012, as the effect of Mobile continues to take hold. o Food/Grocery retailers are the leading targets for POS Hardware (25% plan to purchase in the next 12 months) and Software (31%). o o The smallest retailers are showing the greatest desire for POS Hardware and Software for the coming year, with 25% and 29% respectively planning purchases. The top store system priorities were the same as last year, as Mobile for Associates and Mobile for Consumers took the top two spots, respectively. Advanced CRM/Loyalty was third and Cross Channel Copyright 2013 IHL Group All Rights Reserved. 7

8 Integration was fourth. PCI Compliance continues to move down the list; it is tied for seventh this year, down from fourth last year. Longtime leaders Epicor, MICROS and Retalix are the POS software vendors with the most consideration going forward for the respondent retailers. That said, IBM, who has held the leading ranking in this report in years past, has dropped precipitously since their acquisition by Toshiba in This is less a technical issue than a marketing/name recognition issue (the new company name is Toshiba Global Commerce). As with the past couple of years, Mobile looms large, as nearly one third of retailers are looking to adopt Tablets or Non Rugged Handhelds in the next 12 months. o o o o Specialty retailers, already the spend leaders for In store Mobile, expect to further increase that spend, with Softgoods and Hardgoods retailers planning for increases of 7.2% and 5.5%, respectively. Softgoods retailers will be buying Tablets (38% claim a planned purchase). Hardgoods retailers will be buying Non Rugged Handhelds (smartphones, 44%). Department Stores offer the contrarian view, as they expect a decrease in Store IT spend, but a 2.9% increase in In Store Mobile spend. Forty percent (40%) of them plan to purchase Tablets for their stores. Thirty eight percent (38%) of Food/Grocery retailers plan to purchase Tablets in the next 12 months. Those retailers planning to use Mobile POS in the next 3 years anticipate a 12.4% decline in the number of traditional POS terminals they will be purchasing. Big Data makes its presence known this year, as 74% of respondents expect their IT spend on the technology to increase. o o Food/Drug/C stores and Specialty Softgoods retailers are the most bullish, with expected spend increases of 5.8% and 5.6% respectively. Department Stores will be the ones watching their investment most closely, since they are anticipating an overall decline in IT Spend of 0.4%, while their spend on Big Data increases 4.4%. Of the survey respondents, 53% were retailers with over $1 Billion in annual revenue. These are the players driving the most in terms of IT spend dollars. Twenty one percent (21%) of retailers claim that they currently have EMV/Chip&PIN capability in their stores (one year after VISA announced a new Copyright 2013 IHL Group All Rights Reserved. 8

9 push to accelerate the technology s use in the US). Another 37% plan to adopt within the next 24 months. Forty six percent (46%) of all retailers say that they use end to end encryption for payments, and forty three percent (43%) claim their payment app is on a separate network. These figure are both up from last year. Over one quarter of retailers (27%) indicated that they will adopt item level RFID for most of their SKU s within three years. Key payment apps for use on consumer owned devices include Daily Deals/Flash Sales (29% of retailers are making plans) and Coupons on a Mobile Phone (40% of Department Stores, 36% of Specialty Softgoods). Currently, 21% of retailers claim that their merchandise planning and allocation systems are truly integrated cross channel. Their expectations are to have 50% of them fully integrated within the next 2 years. Copyright 2013 IHL Group All Rights Reserved. 9

10 1.0 INTRODUCTION 1.1 Background and Objectives For the tenth consecutive year, we are again pleased to bring you the Annual RIS News/IHL Group Store Systems Study titled Expanding Boundaries. Each year RIS News, in conjunction with IHL Group, conducts a retail technology trends study to review the areas of technologies in which retailers are investing their IT budgets. This study consists of a) a survey which is sent to hundreds of retailers throughout North America, b) the analysis of the resulting data, and c) the reporting of the findings. We should note up front that this document is very data intensive. We have attempted to break down the results in enough detail that most of our readers will be able to get right to the most pressing issues of the survey in a quick and easily reference able fashion. Among the 60+ pages are dozens of charts and graphs to provide you with the information you need in a concise format. As with the past four year s studies, economic conditions in the US and abroad have dominated the news, so it is important for us to look at not only the changing nature of the store systems landscape, but also how the economy has impacted (and will impact) technology buying decisions. By all accounts, 2008 and 2009 were tough years for retailers, and many of them fell by the wayside. Most of these retailers disappeared because economic conditions simply wouldn t enable them to sustain their business practices. For this reason, they may be considered the low hanging fruit ; i.e., they were going to go out of business one way or the other, and the economy simply hurried things along. Of those retailers who survived (not thrived) through 2009, there are some who were shaken and stirred at that time, and when conditions in 2010 didn t improve rapidly enough, their weaknesses were brought to light. The years 2011 and 2012 had expectations of a recovery, but recovery is hardly an apt descriptor for the only one of eleven post WWII recessions that is marked by a) a more than 6% decline in employment relative to the peak employment month, and b) the failure to rebound to within 2% of peak employment within two years of the peak employment month (see Anyone reading this continues to ask the question How will this economy continue to impact our business? Based upon the results of this study, we would have to say that retailers are still somewhat aggressive when it comes to spending to stay competitive. That said, their spending is not necessarily consistent with their plans for technologies that we have addressed for the past several years, as Mobile is in the process of changing Copyright 2013 IHL Group All Rights Reserved. 10

11 all that. Retailers are being forced to embrace a game changing technology or risk losing out to their competition. Each year the study suggests that a great portion of the budget is set aside for POS technologies. The study looks deeply into what the specific drivers of the POS market are as well as when retailers are planning to replace POS going forward. We sent the study out to current RIS News readers in the autumn of The response we received from retailers was outstanding in terms of the breadth of responses as well as the depth that each retailer was willing to share about their current POS systems and future decisions. We were also pleased with the number of responses from large retailers whose decisions have the influence to move the market as a whole. We had over 80 respondents this year from a variety of retail segments. The fact that the respondent retailers have to do much more with less, leaves us very pleased with the response. There were 44 retailers with more than $1 billion dollars in revenue responding to the survey retailers such as TJX, Meijer, Sears, Home Depot, BJ s Wholesale, Hannaford Brothers, IKEA, Rite Aid, Macy s and Walgreens. Of those, 23 had revenues in excess of $5 billion. As we have said before, we value every response. However, the fact remains that these large retailers drive total IT spend as well as technology proliferation, while smaller retailers emulate their larger cousins in implementations. The fact that there were more responses from the larger retailers this year is encouraging, and would seem to indicate that these retailers are taking a step beyond last year s forward, but cautiously approach and are attempting to wring every advantage out of their retail technology decisions. Approximately 69% of the survey respondents indicated that their job responsibilities were IT related, with the most common position/title being that of CIO/CTO/VP of MIS (36%). In second place were those who listed themselves as IT Director/Manager (33%). Another 17% indicated that they were C or VP level executives. As with previous studies, we are confident in looking at the results contained herein as being from those who are in the know, who have the necessary insight into operational plans, and who are able to provide the most up to date perspective available. Our hope is that this document will be a reference tool that you use throughout the year as you look to make new spending decisions. If you are a retailer, we are confident that you will find plenty of data that will help you support your decisions in terms of how other retailers of your size and vertical segment have responded. If you are a vendor, this data provides tremendous detail in terms of retailers purchase intentions and will either validate or challenge some of your initiatives. Copyright 2013 IHL Group All Rights Reserved. 11

12 1.2 How to Read This Document Before you start reading these results we want to offer you some direction. First, although we talk about percentages of interest in things like POS Scanners, desires for certain new technologies, lack of interest in others, keep in mind that this is a purchase intention study not a market share study. And although there is a temptation to equate purchase intention with future market share, this would be an erroneous use of the data. There are many other factors that must be considered such as # of store locations, # of POS units, and whether all stores will be replaced that would have to be weighted to get a true market share document. Secondly, we are not naïve in our view of the market and the realization that a significant factor in any purchase decision is how far out the retailer is from actually signing the contracts. In our study we often reference several items where the data changes significantly as the date of final decision nears. It would be the data on decisions in the next 6 12 months that would be the best predictor of the final decisions. Finally, it may be important for you understand the complete context of the survey in the manner in which the questions are asked. If you would like to review the entire survey, you can do so at the following link: _FOR_COLLECTION&sm=Gw9LRFI%2b0%2fhSdreQUHReT%2bT1rtG7vT5WMnYD2x %2bmm14%3d 1.3 Methodology The data for this study were obtained by performing a web based survey, the invitations for which were distributed to RIS News readers during the October November 2012 timeframe. The survey consisted of 21 questions, the topics of which included: Demographic Information Retail segment, title/position, annual sales, store count, etc. Financial Issues Store & Headcount growth, spend trends, etc. Store System Issues Store system priorities, purchase timeframes, POS replacement due to Mobile POS, preferred POS software vendors, etc. Mobility Platforms being considered for Stores and the Enterprise, functions to be incorporated, mobile payment solutions, consumer interaction, etc Other Issues Payment security technologies, IT and Marketing relationship, technology impact on IT infrastructure, workforce management, cross channel issues, Big Data, RFID When the response timeframe expired, we set about cleaning and analyzing the data. Once we obtained the key summary points from the data, we delivered these for the Copyright 2013 IHL Group All Rights Reserved. 12

13 summary publication mentioned above, a live presentation at NRF, and a Webex presentation (which can be found at by clicking on the Events link in the navigation bar at the top of the page). After the summary data were delivered, detailed analysis work continued, with the result being this document. We believe the reader will be extremely intrigued by the results that we found. 1.4 Demographics Who Responded? Figure 1 Respondents by Retail Segment Respondents by Retail Segment Specialty Soft 29% Hospitality 5% Food / Drug / C Stores 25% Specialty Hard 33% Dept. Stores / Mass Merch 8% The 80+ respondents to this year s survey came from a variety of retail segments. Given the nature of increasing workloads and perhaps a more detailed questionnaire this year, we couldn t be more pleased with the response. As in previous years, the three most predominant categories of retailers responding to the survey were Specialty Hardgoods (33%), Specialty Softgoods (29%) and Food/Drug/C Stores (25%), which together accounted for 87% of the survey responses. This percentage is a bit higher than in previous years as we continue to see these retailers solidify their technology position. And while that 87% figure might seem like it is too large a portion of the sample as a whole, it is actually not an unreasonable Copyright 2013 IHL Group All Rights Reserved. 13

14 estimation of its position in the market as a whole. There remains a nice base from which we can draw comparisons to previous year s results. To the extent possible, we have taken the relative participation of the retail segments into consideration during our discussion in the remainder of the document. Figure 2 Respondents by Title / Position Respondents by Title / Position Other 14% Non IT VP Level 7% Non IT C Level 10% IT Dir Mgr 33% CIO/CTO/VP of MIS 36% Approximately 81% of the survey respondents indicated that their job responsibilities were IT related, with the most common position/title being that of CIO/CTO/VP of MIS (36%). In second place were those who listed themselves as IT Director/Manager (33%). Another 17% indicated that they were C or VP level executives. As with previous studies, we are confident in looking at the results contained herein as being from those who are in the know, who have the necessary insight into operational plans, and who are able to provide the most up to date perspective available. Copyright 2013 IHL Group All Rights Reserved. 14

15 Figure 3 Respondents by Annual Revenue Respondents by Annual Revenue Under $250 Million 20% Over $5 Billion 28% $250 Million $1 Billion 27% $1 5 Billion 25% There were 44 retailers with more than $1 billion dollars in revenue responding to the survey retailers such as TJX, Meijer, Sears, Home Depot, BJ s Wholesale, Hannaford Brothers, IKEA, Rite Aid, Macy s and Walgreens. Of those, 23 had revenues in excess of $5 billion. As we have said before, we value every response. However, the fact remains that these large retailers drive total IT spend as well as technology proliferation, while smaller retailers emulate their larger cousins in implementations. The fact that there were more responses from the larger retailers this year is encouraging, and would seem to indicate that these retailers are taking a step beyond last year s forward, but cautiously approach and are attempting to wring every advantage out of their retail technology decisions. Thirteen percent (13%) of our sample were in the Tier 2 range between $500 million $1 Billion in annual revenue, and another 34% consisted of retailers with less than $500 million in revenue. There are more of the smallest retailers represented in this year s study than in years past, and these tend to be forward thinking retailers with excellent financial results that stem from their view of technology as a means to drive store execution and deliver a superior customer experience Copyright 2013 IHL Group All Rights Reserved. 15

16 2.0 FINANCIAL EXPECTATIONS & EXPANDING HORIZONS According to the Census Bureau, the US population increased by a little more than 1% and retail sales increased 4.4% from 3Q11 to 3Q12. This sounds like a positive development, and it is when compared to what the industry experienced in the downturn. But it needs to be tempered by the fact that during the same one year period the overall consumer price index (CPI) increased 2.4% (key contributors include Gasoline up 9.1%, Medical Care up 3.7%, Apparel up 3.0% and Food Away From Home up 2.7%). Summing up, a good portion of the increased retail sales is due to inflation in certain categories. That said, the retailers in this study seem to be increasingly positive, as they are currently making plans to increase their growth plans. Their Enterprise IT Spend for 2013 is expected to be up 4.8% from 2012, with Store IT Spend up 4.0% (vs. 2.6% and 3.1% in last year s report, respectively). The big retailers are the key here; as a group they are showing a 4.7% increase in Enterprise spend, after a 0.6% decline last year. 2.1 Enterprise Growth Figure 4 Retailer s Plans for Store Count Growth for 2013 Store Count Growth for 2013 Decrease 10% Stay the Same 24% Increase 66% Copyright 2013 IHL Group All Rights Reserved. 16

17 This is the third consecutive year that we see consistent plans for store growth. This is encouraging, since retailers apparently continue to gain confidence in their business prospects going forward. Food/Grocery retailers are the most bullish when it comes to their expectations for 2013, as 88% of them expect an increase in store count. Specialty Softgoods retailers are not too far behind at 67% and Specialty Hardgoods retailers are at 61%. While the largest retailers (annual revenues greater than $25 Billion) are the laggards with only 40% expecting store count growth, over two thirds (68%) of retailers with annual revenues of $1 Billion or more anticipate increasing store count. Retailers may not be thrilled with the overall economy, but they have been able to demonstrate to themselves (and the market) that they can perform when the chips are down. Those that have survived to this point are looking to grow their footprint in days ahead, which means the competition for prime retail real estate will be fierce. Figure 5 Retailer s Plans for IT Headcount Growth for 2013 IT Hiring for 2013 Decrease 6% Stay the Same 36% Increase 58% In addition to growing their store count, retailers are also looking to add to their IT headcount. As before, Specialty Softgoods retailers are the ones who will be hiring most, as 67% of them expect to see an increase in their IT headcount, with an average increase Copyright 2013 IHL Group All Rights Reserved. 17

18 of 4.5%. Food/Drug/C Store retailers also expect to add to their numbers, as 57% expect to hire more, with an average increase of 3.1%. Specialty Hardgoods retailers will be trailing a bit, as 54% expect to add to their headcount, with the increase averaging 2.6%. The previous two figures indicate that retailers continue to be bullish on store count and IT headcount growth (66% and 58%, respectively) for Both these numbers are well up from last year, which means that retailers may be breaking out of their self imposed do more with less mentality IT Spend Growth Figure IT Spend Growth by Retailer Annual Revenue IT Spend by Retailer Annual Revenue 8.0% 7.0% 6.1% 6.8% Enterprise IT Spend 6.0% 5.0% 5.8% 5.5% 4.5% 4.5% 4.7% 4.0% Store Level IT Spend 4.3% 3.0% 2.0% 3.6% 3.5% 1.0% 0.0% Under $250 Million $ Million $500 Million $1 Billion $1 5 Billion Over $5 Billion From last year s study, we saw that IT spend for 2012 was expected to be up 2.6% for Enterprise IT and 3.1% for Store IT. For 2013, these retailers are claiming to want to increase Enterprise IT spend by 4.8% and Store IT spend by 4.0%. This would seem to suggest that growth is accelerating again. We might not be on the highway of growth, but at least we are now out of the school zone. Copyright 2013 IHL Group All Rights Reserved. 18

19 Enterprise IT spend for last year s largest retailers showed a 0.6% decline, while this year it is up 4.7%. This is significant, since these retailers represent the bulk of overall Retail IT spend. We believe that spend on Big Data and healthcare related IT overhead is responsible for this anticipated increase, and the forces opposing it include the declines in storage costs and cloud services (most of which were implemented last year). The smallest retailers show the heaviest increase in IT Spend growth, and this is due in part to the adoption of mobile technologies (which at this point are additive to existing systems). Those with plans for increasing their store count for 2013 are also more inclined to increase their IT Spend, with Enterprise IT going up 5.8% and Store IT going up 5.4%. Retailers do not necessarily look at capital spending for store expansion and capital spending for technology as an either/or proposition. They can do both, in measured amounts, and the data indicates they want to do so at a greater level in The flip side of that is valid also; those retailers who anticipate a net decrease in store count for 2013 are also expecting to see a decrease of 1.6% in Enterprise IT spend and a decrease of 4.3% in Store IT spend. The story there is these retailers are in a serious retrenching mode; they not only have to worry about footprint changes and the effect on profitability, they also have to make technology decisions while downsizing. Looking a bit closer at the data, 74% of our respondents plan to increase their Enterprise IT Spend for next year (compared to 54% from last year s study). Of those, the average of the intended increase was 7.0%. For those planning a decrease in Enterprise IT Spend for 2013, their average decrease was 4.9%, which puts us in mind of a haves vs. have nots scenario. Those planning for their Enterprise IT Spend to stay the same totaled 19% of the respondents. When it comes to Store IT Spend, 76% planned an increase for 2013, up from 52% last year. The average increase for these retailers is 6.0%, which is down considerably from last year s 7.6%. As with last year, the key purchases for these retailers are mobile devices, including Non Rugged Handhelds (36% of these retailers plan to make a purchase), Tablets (33%) and Rugged Handhelds (27%). Those mobile devices used for Mobile POS purposes continue to kick the slats out of traditional store system purchases, as only 17% of these retailers are planning a POS terminal upgrade within the next 12 months, and 22% plan to upgrade their POS software. Tablets are also at the top of their list, with 29% anticipating a purchase within the next 12 months. Fifteen percent (15%) of all retailers are anticipating a flat Store IT Spend for Of those, fully 69% claim that their current POS terminals are up to date, which means they have no serious upgrade plans for the next year. These data, coupled with that from Copyright 2013 IHL Group All Rights Reserved. 19

20 previous years, serve to confirm the cyclical trend that drives POS hardware replacement and the impact of mobile. The figures for POS Printer are at 13%, and the fact that 51% claim that their printers are up to date simply means that these upgrades were accomplished in the previous year or so Enterprise IT Spend Growth Figure 7 Enterprise IT Spend Growth for 2013 Enterprise Segment IT Spend Growth Overall % Overall % Food/Drug/C-Stores 4.6% Dept Stores/Mass Merchants 0.1% Specialty Softgoods 6.6% Specialty Hardgoods 4.5% Hospitality 6.6% This was the fourth year in which we asked retailers about their Enterprise (non store) IT spend, and the results are higher than we expected, given the uncertainty surrounding the economy. Typically, we assume that the bulk of annual IT spending will occur in the store. Looking a bit closer at the data, 74% of our respondents plan to increase their Enterprise IT spend for next year (compared to 54% last year). The size of the average increase is slightly smaller than last year at 7.0% vs. 7.2% last year. For those planning a decrease in Enterprise IT Spend for 2013, their average decrease was 4.9%. Those planning for their Enterprise IT Spend to stay the same totaled 19% of the respondents. Looking at the same data from a retail segment standpoint, we find that Specialty Softgoods retailers are the most aggressive in their Enterprise IT spend plans at a 6.6% increase over last year as they pay more attention to the Cross Channel, Big Data and RFID aspects of their enterprise (Hospitality providers also show a 6.6% increase, but theirs is a small sample size). The Food/Drug/C store retailers are next with a 4.6% increase, driven by the Food/Grocery portion at 5.4% increase, as they begin to adopt Big Data solutions and continue with their Advanced CRM efforts. Specialty Hardgoods retailers are next at 4.5%, as they continue a more across the board climb in Enterprise Copyright 2013 IHL Group All Rights Reserved. 20