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Midmarket Retailers Will Up IT Investments
North America and Western Europe invest for customer intimacy, service differentiation, and supply-chain efficiencies; increases in per capita consumption spur investments in emerging economies.
Posted May 31, 2005
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Midmarket retailers' interest in IT is in the midst of an upsurge--to the tune of more than $8 billion (a CAGR of 6.9 percent), according to a study released today by consultancy AMI-Partners. In fact, "The Global Model," which examines the adoption and spending patterns within the SMB sect spanning 28 IT sectors and 15 countries across a five-year span, forecasts that IT expenditures among midmarket retailers will expand from $22 billion in 2004 to $30.97 billion in 2009. More specifically, at year's end investments in CRM, wireless networking, and Web hosting are expected to reach $678.6 million. By 2009 that figure is projected to experience a 9 percent uptake in CAGR to hit the $946 million mark. The study also reveals that during 2005, midmarket retailers are expected to drive $161 million in ERP/supply chain management, with more than 80 percent of spending attributed to firms in mature markets like North America and Western Europe. Additional findings indicate that total IT spending by midmarket retailers in emerging markets will grow at 11 percent annually over the next five years, while growth in mature markets is expected to average 6.5 percent. The retail sector represents 12 percent of worldwide midmarket IT spending and represents 10 percent of all midmarket firms. The study's results coincide with additional research released by the firm in May entitled "2004-2005 U.S. SMB Business and Applications Software Market Overview and Assessment." Based on its survey of 1,000 SMBs in the United States, results indicate that 19 percent of small businesses are planning to implement an ERP application in 2005, up 16 percentage points from just 3 percent in 2004. Twenty-three percent intend to implement a CRM solution, compared to only 4 percent in 2004. The firm attributes increased investments in CRM, BI, data warehousing, and wireless and online transaction solutions from midmarket retailers in North American and Western Europe to their efforts to achieve customer intimacy, differentiation based on service, and supply chain efficiencies. Emerging markets, including China and India, are dealing with competition from businesses that have grown to midsize and are pursuing more consumer buy-in by using western shopping formats and concepts. Deepinder Sahni, senior vice president at AMI-Partners, says that this set concentrates "more on growth and supply chain automation to scale up and meet the explosion in consumer buying capacity." Additionally he says "online transactions and CRM capabilities have yet to develop in a meaningful way in emerging markets since credit card usage and online infrastructure is still in the early growth stages. In the meantime, there is an explosion of retail outlets in these emerging markets that drives demand for point of sale, bar coding, and related automation solutions."
Related articles: SMBs Are Shopping For ERP and CRM Solutions U.S. Service Vendors Target--and Profit From--the Midmarket SMBs Are Adopting Right-Size CRM
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