Product Type: Market Research Report
Published by: Datamonitor
Published: May 2009
Product Code: R313-51166Description Introduction
The increasing economic pressures affecting the retail industry means that companies will increasingly look to outsource technology and business processes to cut costs and focus on core skills. This report provides a detailed analyss of service providers capabilities in selling to the retail sector through the current recession.
Scope- Contains analysis of the difficulties and opportunities retailers face in the current economic downturn.
- This report looks at the opportunities available to IT and BPO service providers in North America and Western Europe.
- Provides analysis on leading players in the market and discusses future predictions
- The report also offers recommendations to vendors about how best to target the retail sector based on recessionary requirements.
Highlights
A large number of retailers in North America and Western Europe are suffering as a result of low consumer confidence; even to the point of bankruptcy in some cases.In this uncertain environment, the priority for a retailer will be to protect margins.
Cutting down on staff and inventory, the two biggest costs for a retailer, will be the principal areas of focus. Retailers are also cutting costs in other areas: one of the biggest current hurdles to outsourcing is the industry-wide reduction of capex in retail.
Choosing the right service provider is very important. Retailers will expect outsourcers to not only know the demands of the retail industry, but also the challenges of their particular retail sector. As such, a service provider must take strides to understand the pulse of the business in order to work in partnership with the retailer.
Reasons to Purchase- Learn about the business goals and priorities for retailers which provide opportunities for outsourcing.
- Offers an overview of the current competitive landscape in the services to retail market
- Provides recommendations to vendors interested in selling into the retail sector
Table of Contents - Overview
- Catalyst
- Summary
- Key Messages
- Falling consumer confidence causes economic woes and puts many retailers at risk of bankruptcy
- Cost reduction is the main driver for outsourcing in recession-hit retail
- Previous experience and small capex makes retailers reluctant to outsource
- IBM is the leading service provider to the retail sector, but recent technology and services market consolidation could change that
- Retailers require, strong, flexible partnerships that can evolve with their business
- Table of Contents
- Table of figures
- market opportunity
- Falling consumer confidence puts many retailers at risk of bankruptcy
- Around the globe, alarming numbers of retailers are going bankrupt
- The credit crunch has hit consumer confidence, causing a drop in retail sales
- Low consumer confidence causes further economic uncertainties
- Poor consumer spending hit sales and margins hard
- Some retailers are thriving despite the downturn
- Retailers' focus in the downturn provides opportunities for outsourcing
- Four key retail focus areas have developed as a result of the economic downturn
- The number of retail outsource contracts is up, but the value of individual contracts is down
- Retailers are using BPO savings to fund larger technology projects
- Cost reduction is the main driver for outsourcing in recession-hit retail
- Staff cuts force retailers that are short of skills to consider outsourcing
- Outsourcing back office functions is an attractive option for retailers cutting back on staff
- Outsourcing can ensure customer service levels are maintained with fewer members of staff
- Holding inventory is costly, but cutting inventory can worsen retailers' problems if not done properly
- Managing the supply chain is complex; retailers want more than outsourced warehousing and logistics
- Cutting capex is a quick and easy way to show immediate improvement to the bottom line
- The recession has increased the importance of operational efficiency in retail
- Outsourcing IT support and infrastructure management has proven popular in the retail sector
- BPO is growing as technology and best practices make for leaner retail organizations
- Retailers must improve the customer experience to grow sales from existing customers
- Retailers will invest in customer retention and conversion to maintain satisfaction
- Datamonitor predicts the demand for analytics outsourcing in retail will multiply in 2009-2010
- Global expansion plans will continue as growth cannot be guaranteed in home markets
- Although global expansion plans may have been scaled back in the recession, plans are still afoot for entry into new markets
- Replicated store formats offered by outsourcers offer a quick and cost effective way for retailers to expand
- Outsourcers with local knowledge and expertise are invaluable for retailers expanding into new markets
- Customer Impact
- Previous experience and reduced capex makes retailers reluctant to outsource
- Previous experience of outsourcing in retail has led to a reluctance to sign deals
- Reduced capital expenditure budgets must stretch further; retailers require flexible payment structures
- Retailers of different sizes benefit from outsourcing for different reasons
- Retailers require providers whose services address key recession priorities
- Flexible staffing and relevant skills are a key requirement for retailers
- Retailers benefit from the project focus and speed to implementation offered by service contracts
- The retail boardroom expects an offering personalised to its unique business challenges
- The CEO and CFO have taken charge
- Pilots help retailers understand benefits of outsourcing, but are not suitable for cost driven projects
- Retailers require relevant case studies in the vendor decision making process
- Case Studies
- Wipro Technologies for Morrisons Supermarkets (UK) in January 2009
- Atos Origin for neckermann.de (Germany) in July 2008
- IBM for Carphone Warehouse Group (UK) in March 2009
- EDS for Belk (USA) in September 2008
- Atos Origin for First Quench Retailing (UK) in July 2008
- Clear expectations written into SLAs are key to a successful contract in retail
- The retail business is fast paced and forever changing; retailers require flexible, scalable contracts
- Monitoring SLAs to ensure they are being met
- Competitive Landscape
- IBM is the leading service provider to the retail sector, but recent technology and services market consolidation could change all that
- The top 2 service providers hold over 22% of the overall retail, wholesale and distribution markets
- The leading service provider is being challenged by market consolidation
- IBM Corp
- IBM is the global retail services market leader
- IBM's strategy in retail is to focus on small, flexible contracts under the 'managed services' umbrella
- HP Services
- HP Services is defining a verticalized go-to-market strategy
- HP Services does not pose a threat to IBM in the short-term
- Fujitsu Services
- Fujistu Services has become a global partner
- With global presence no longer an issue, an expanded offering for retail should be the next step
- Tata Consultancy Services (TCS)
- TCS will look to beat a rising cost base with its vertical focus and innovation
- Steria
- Go to Market
- Sell against the key challenges retailers face in a recession
- Provide evidence that outsourced services provide the solutions to key issues for retail in a recession
- Identify retailers seeking to differentiate in the recession through innovation
- Knowledge of local retail markets is needed to service internationally expanding retailers
- Retailers require, strong, flexible partnerships that can evolve with the business
- Retailers need partners, not just suppliers
- Transparency is vital: help retailers understand internal requirements to prevent surprises
- Partners need to be flexible in order to cater to the fast paced, forever changing needs of the retail industry
- Recommendations
- Sell against the recessionary requirements of retailers
- Become more than just a supplier; become a partner
- Flexibility is key to a successful working relationship
- APPENDIX
- Definitions
- Methodology
- Further reading
- Ask the analyst
- Datamonitor consulting
- Disclaimer
- List of Figures
- Figure 1: The UK retail sector will experience negative growth in 2009
- Figure 2: Cutting cost is the biggest priority for retailers in North America and Europe in 2009
- Figure 3: Big value services deals in global retail are on the decline
- Figure 4: IT support and infrastructure management have been the most popular choice of IT services for retailers between January 2005 and January 2009
- Figure 5: Retail CEOs and CFOs in the US, UK and Germany haven taken charge of IT decisions in 2008
- Figure 6: Reasons for a SLA
- Figure 7: The key requirements from an in-house management team for managing a SLA
- Figure 8: Selected service providers share of the retail, wholesale and distribution services market in 2008
- Figure 9: Selected service providers' revenues from retail in 2008
- Figure 10: Over 18% of IBM's 2008 services revenues in retail were from maintenance and support
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