5 things CIOs should consider before purchasing a retail system

Anyone in the retail industry will tell you that times are tough. Margins are tight and competition is fierce. Low consumer confidence, the absence of economic stimulus, and consecutive rises in interest rates did not help Christmas sales figures, resulting in shoppers spending less than the year before.

In 2010, the main thing CIOs need to ensure is that their IT systems don’t impede their ability to handle the difficult economic environment. The systems must work reliably, must be cost effective, and must support the business in its efforts to move ahead. The essential importance of these factors are often overlooked.

Springboard Research has estimated that the retail software market will grow at a cumulative rate of 9 per cent this year, so retailers will continue to spend on technology. So, if you need a new retail system, what should you look for when choosing one?

Has it been designed for retail?

Retail has many unique characteristics. A retailer needs to know what stock it has available, the size, colour and location of its products and which ones are selling and where, so it can plan future marketing campaigns or sales. It is important therefore to consider whether the new IT system has been designed specifically for the retail industry.

Many software vendors take the approach of implementing generic software and adding in a ‘retail module’, leaving customisation to their partners. Such systems take much longer to implement, usually involve a third party and are far more complicated and difficult to maintain. The bottom line: don’t buy a camel when all you need is a horse. Otherwise, you will suffer the consequences for long time.

Does it provide value for money?

An obvious point, especially in these challenging economic times, but some of the larger software companies would have you believe that you need to spend millions to get the retail systems you need. The truth is that you don’t. Some of the retail systems available today are too expensive and too complicated. A few years ago a chain of hardware stores in Australia operating 160 outlets spent $100 million on its new IT system when $2 million would have been more than enough.

The question of on going operating costs is also critically important. Ultimately, a company should look to have one IT person for every 100 shops it operates to handle end-to-end retail functionality. Such ratios are easily achievable if the right technology is used.

Is it scalable?

Can the new retail system actually grow with the business or will you be looking for another system again in a couple of years? Are you planning to expand into other countries? Can the system be supported in other languages and currencies? Can it support tax rules in other countries? Can it support another retail brand, or will you need to buy another system?

Businesses must not assume that the system they originally adopted when the company started up will be able to handle their needs as the company expands. As the organisation grows, the system must be able to grow with it.

Can it be implemented quickly and is it fully supported?

Time is money. The retail industry moves fast and retailers shouldn’t have to wait years for a new IT system to be implemented. So, look for a system that can be implemented in a few months rather than years.

Then consider the question of ongoing support. If you implement a system that requires significant changes, you will find support lacking. Unless the software vendor makes sure that your software belongs to their mainstream product release, sooner or later you will be in trouble. Also, it is always preferable if the software vendor supports their own product. The moment you get a third party involved, the support will be hard to get.

Is it proven and reliable?

As with any new IT system purchase, make sure that the technology is proven and reliable. Has the vendor got a number of happy retail customers that you can talk to? Again, you may think that the well known software brands are a ‘safe choice’ but this can be deceptive. Large software vendors are often inflexible and will tend to neglect smaller companies.

It is therefore important that you choose your retail systems wisely. If a mistake is made, it will hinder the potential growth and success of the business for years. Running a retail business without a good retail management software can impede not only on profits but also on customer service levels, stock management and sales conversions.

Andrew Gorecki is managing director of Melbourne-based POS software vendor Retail Directions.

Copyright © 2010 IDG Communications, Inc.

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