ICT Retail Spend in SA is on the Increase, Despite a Struggling Economy

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Despite economic pressures, investment by the South African retail sector into information and communication technologies (ICT) seems to be holding steady. New analysis by Frost & Sullivan titled “ICT Enterprise Spend in Retail, South Africa, Forecast to 2019” shows that cloud-based services, managed services and cellular connectivity are expected to represent close to ZAR1.8 billion in retail ICT spend by 2019. The focus of ICT spend, however, is now shifting from bigger capital expenditure to smaller operational models.

“The demand for lower-priced solutions within the retail sector presents IT and telecom service providers with an opportunity to differentiate their services portfolio by developing innovative usage- and value-based pricing models,” says Digital Transformation Senior Industry Analyst Naila Govan-Vassen. “Flexible service-level agreement (SLA) contracts, along with focus on the client’s business and IT strategy, will be crucial for the service providers to increase competitiveness.”

Retailers are experiencing many issues along the value chain – from logistics from distribution centres to suppliers and retail stores, right through to customer delivery. Effective integration of legacy and new systems to garner timely and reliable data is a challenge for ICT service providers, while the perceived lack of flexibility in SLAs is a key restraint to uptake.

“Retailers often feel trapped by contracts that leave little scope to upscale or downscale according to changing needs,” notes Govan-Vassen. “Essentially, this creates an opportunity for ICT service providers to become business partners as opposed to technology partners. They can increase industry expertise, build dedicated industry-focused teams to cross-sell, offer innovative branding and price strategies, and, most importantly, offer a full range of ICT solutions through flexible contracts.”

Large enterprises are clear on how to implement IT to save cost and increase efficiency, but small and medium enterprises will need more guidance. This will also allow service providers to engage better and increase overall knowledge about their solutions. Key growth opportunities for ICT vendors will revolve around:

Cloud-based services as a measure to increase work effectiveness;

Workforce mobile solutions to nurture efficiency across key working groups along the value chain and ensure real-time communication; and

Retail analytics focussed on developing strategies and plans that aid in mitigating stock outage and stock layout challenges, while enabling track routing systems and store optimisations.

Overall, ICT vendors for retail enterprises must offer bespoke IT solutions. Cashless transactions, big data strategy, and cybersecurity will be influential trends shaping retail investment. Successful solutions will enhance customer experience for clients by creating an omnichannel platform that ensures two-way communications between the customer and the enterprise. Managed systems to provide a single view of sales, inventory, and customers will also be in demand.

“Although retail enterprises seek to implement IT solutions that empower employees and decision makers, reduced budgets will force them to accomplish more objectives with limited technology”, concludes Govan-Vassen. “While cloud solutions are important, enterprises in the retail industry are also inclined to having third-party service providers manage non-core/centralised IT systems. In so doing, enterprises are better positioned to focus on developing strategies that enable exceptional services.”

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