By Hayley Mooney, MD at Crayon
From the pandemic to the global recession, the past few years have been marked as a period of upheaval and change for all retailers. This is especially true when it comes to their relationship with modern technologies.
In the first throes of the pandemic, the ability to digitalise and do so quickly became the lifeline to survival. As trends towards online and hybrid buying accelerated, it created an industry-wide shift towards multichannel fulfilment and a redefined customer experience. At the heart of this was investing in the right technologies, and, as a result, digital investment surged.
Current economic conditions marked by the cost-of-living crisis have resulted in consumers spending more cautiously even when online. A recent report revealed that UK shoppers spent £8.2 billion online in March 2023, a 2.9% monthly decrease and a fall of 10.5% compared with the same time last year.
In response to these changes, retailers, like many other businesses are compelled to cut costs as the need to do more with less has never been higher. However, many are overlooking the potential benefits of optimising technology spend.
A tough economic climate
Undeniably retailers are under significant pressure due to the very challenging global macroeconomic environment. Recent research reveals that 69% of consumers say they have reined in their retail spending due to high inflation. This has resulted in mass layoffs across the sector, with nearly 15,000 positions cut in just the first two months of the year.
However, retailers need to realise that reducing employee headcount is not the only way to cut costs when projected revenue falls short. This should be their last resort.
Instead, it’s worth closely evaluating IT spending and how well it aligns with the wider organisational needs. Crayon’s recent research report, ‘The state of IT cost optimization in 2023’, underscores the growing importance of managing IT expenses for retailers.
For instance, 42% of the retailers surveyed reported that they had implemented a framework to measure the success of IT cost management initiatives within the last 12 months. Additionally, 94% reported that they have some processes to identify and remove unused software licenses which is more than the average across other industries (90%).
This represents important progress because managing cloud spend, in particular, can be an arduous process for retail organisations. Software licenses are just the tip of the iceberg for a complex picture which can encompass issues such as contractual consumption commitments with cloud providers, a lack of internal clarity around budget responsibility, uncontrolled workloads being spun up by engineering teams, and the difficulty in consolidating legacy and new solutions.
Optimising for the future
While there’s been progress, much remains to be done when it comes to IT cost optimisation in the retail sector. Currently, a mere 4% of retailers believe that their IT costs are completely optimised. Meanwhile, one in five (22%) think that their IT spend could do with a total overhaul.
In our difficult economic climate, retailers can ill afford to overspend on IT, especially when doing so risks losing the human beings who are central to their operations.
This is why it’s never been more crucial for retailers to have oversight of their IT spending. When this oversight is built into the IT estate itself, a retail organisation can become truly data-driven, unlocking new efficiencies and enhancing the customer experience – two things that can enable them to gain a competitive edge.
Finding the right vendors who can work in collaboration to unify IT systems can be challenging but rewarding too. After all, time restraints, knowledge gaps, and limited insights are the biggest obstacles to effective cost optimization among stakeholders.
Through working with a consultancy, retailers can plug these gaps and tackle the always-on operation of IT cost optimisation. Working together to achieve full visibility across all resources – and how they are being utilised – will enable retailers to ensure that IT spending never outweighs usage and prime them for success, regardless of future uncertainties.