Retailing Gets Smarter; New National Tech Study Shows Retailers Are Increasing Their Technology Budgets as Part of an Alignment with Their Core Business Strategies

CHICAGO--(BUSINESS WIRE)--May 17, 2004--

The Retail Industry Undergoes a Fundamental Shift: It's All about the Consumer and the Science of Shopping

“It's clear that the retail industry is going through a major technology transformation. Retailers undoubtedly are linking technology with their core business processes and making capital investments based on a fully aligned strategy”

Signs of smarter retailing have finally arrived. According to the 14th Annual Retail Technology Study conducted by RIS News and Gartner and sponsored by Lawson Software, Inc. (NASDAQ: LWSN), retailing is no longer a technology laggard compared to other industries. For the first time, a major milestone has been attained: IT and operational strategies are linked as a seamless entity and retailers are fueling the competitive fires by increasing their IT budgets. The combination of these two forces is setting the stage for a major transformation and the findings are in sharp contrast to previous studies that have shown that IT and business strategies were not in close alignment.

"A major landmark in retailing has been achieved," said Andrew Gaffney, group publisher, RIS News. "The retail industry is now moving toward the kind of fast-paced, agile adaptation to customer demands and business trends that can only be achieved when IT and core business processes are closely linked. It is a dramatic shift that validates the growing importance of the CIO within the retail corporate structure and the expanding and important role technology plays in achieving business results." The study polled approximately 122 key retailers across various retail channels. Over half of the respondents were CIO level or higher. Gaffney reports that compared to 2003, more than half (55 percent) of the survey respondents stated that IT budgets are expected to increase; only a small percentage (13 percent) predicted a negative IT budget.

Highlights of the Study:

Wal-Mart Changes for Rules for Retailers

-- The 2004 Retail Tech Trends Study asked retailers: "What Scares You about Wal-Mart?" Almost half (48 percent) stated that their main concern is Wal-Mart's unprecedented purchasing power and interestingly 47 percent indicated disregard. Only 11 percent mentioned that Wal-Mart's global reach was a cause for concern. The survey shows that retailers have a complex view of Wal-Mart, the world's largest retailer claiming sales of $256 billion annually and gobbling up market share in a myriad of categories from toys and games to clothing. The editor of RIS News speculated that the key to competing with Wal-Mart is through differentiation in a competitive marketplace. Mark Elliott, vice president, Retail, Lawson Software, a leading IT solutions provider added, "This compels retailers to focus and even define possibly for the first time their core competencies and to better communicate their competitive point of difference and what makes them unique. The bottom line is not for retailers to go head to head with Wal-Mart like K-mart did, but to employ sophisticated retail software solutions that give retailers in-depth knowledge of who their customer is and ways to increase profitability and streamline operations."

It's All about the Customer: Retailers Increase their Understanding of the Customer

-- The study found that retailers today are placing more emphasis on getting to know their customers and engaging them in ways that generate important and competitive information based on customer metrics. Customer metrics is not a new retail concept, it has been around for years, but it is being done today with more sophistication and "with gusto." As a result, more and more retailers are developing marketing and promotional programs based on customer analysis. More state-of-the-art customer-centric tools are now in place in an effort for retailers to better understand their customers and basically what makes them "tick." Nearly half of the study respondents report being involved in customer data and intelligence projects - 32 percent in the last three years and 14 percent currently.

Segmenting the Customer

-- Nearly a third have short-term customer segmentation plans. Retailers are reporting that they are currently involved in customer segmentation on a much larger scale: an enterprise-wide level. The study also found that 31 percent are using consumer-specific databases; 26 percent are involved with frequent shopper programs; and 25 percent are utilizing some type of customer traffic tracking. "Traditionally, retailers have focused on merchandising and the supply chain; however, in an effort to be competitive and improve the shopping experience for consumers, retailers are realizing that it is critical to put customer knowledge to use and harness the value hidden in consumer transaction data," commented Elliott, "Retailers, in order to survive in today's retailing environment, must understand the consumer and how they can use their buying patterns to their advantage. As a result, customers are being treated differently. They must be approached in a very different way than in years past. The easiest way to build a customer base and get that customer back to the same retail store over and over again is through in-depth customer metrics."

Technology Strategy and Business Process Alignment Sets the Stage for Real-Time Retailing

-- "It's clear that the retail industry is going through a major technology transformation. Retailers undoubtedly are linking technology with their core business processes and making capital investments based on a fully aligned strategy," said Jeff Roster, Principal Analyst, Global Industries, Retail, Gartner. This is huge shift from past studies conducted by RIS News and Gartner. The study findings also indicate that real-time retailing is gearing up. There is a significant amount of evidence throughout the study that shows real-time retailing is gaining a foothold among merchants. The main indicator is that there is a high level of activity in Web-enablement. Retailers are taking the critical measures toward creating the real-time enterprise by deploying Web services as a key integration strategy. In fact, 36 percent of those polled have pursued a Web services strategy in the last three years and an additional 16 percent are currently involved in Web services projects. Gaffney said, "This is a dramatic data point, because retailers must achieve a massive amount of application integration if they truly intend on becoming a flexible enterprise that reports and responds in real-time."

Sarbanes-Oxley Deadlines Push Financial Systems to Top of Priority List

-- One of the key drivers that made financials a number one priority is the Sarbanes-Oxley Act of 2002. As a result of the new regulations and deadlines and penalties, many survey respondents have greatly improved the speed and accuracy of their financial data and the audit controls for in-place technology. 55 percent of those surveyed stated that financial systems, inspired by looming deadlines in the Sarbanes-Oxley Act, are a Top 10 Retail Application.

Wireless and Self-Checkout are Hot

-- As with real-time retailing, another trend evidenced in this year's study is technology that reaches all the way to the store. Two emerging technologies that show surprising transaction in this area are wireless POS and self-checkout. Wireless POS terminals, such as mobile POS and cart-mounted shopping assistants, are being deployed by a combined total of 21 percent of study respondents. 31 percent have plans to install these new emerging technologies in the next two years. Self-checkout, which has been gaining popularity in the last few years, are showing signals of growing adoption especially in a few retailing categories, such as grocery, supercenters and, to some extent, home improvement. However, self-checkout terminals are not at the high levels recorded for wireless POS.

The RFID Era Begins

-- 14 percent reported current involvement with RFID (radio frequency identification) projects. Gaffney said, "This percentage is surprisingly high for a technology that is relatively brand new. We expected that RFID in the supply chain would hardly register as a blip on the radar screen, especially since Wal-Mart announced its RFID strategy last spring 2003. This is a good indicator that there are many more retail pilots underway."

About RIS News

RIS News, published by Edgell Communications headquartered in Randolph, New Jersey, is the most influential retail technology publication, read by the most influential retailers. Over the past 16 years, RIS has focused on helping retail executives integrate emerging technologies into business strategies. Each issue addresses the unique challenge that retailers face and provides a resource with which they can benchmark themselves against their peers, stay competitive and gain market share in their business operations. For more information, visit www.risnews.com.

About Lawson Software

Lawson Software provides business process software solutions that help services organizations in the healthcare; retail, professional services, public sector, financial services and other strategic markets achieve competitive advantage. Lawson's solutions include enterprise performance management, distribution, financials, Human resources, procurement, merchandising and services automation. Headquartered in St. Paul, Minn., Lawson has offices and affiliates serving North and South America, Europe, Asia, Africa and Australia. Additional information about Lawson is available at www.lawson.com.