Sunrise Breakfast: CIO's Challenge

SUNRISE BREAKFAST: CIO’S CHALLENGE
REFOCUSED IT BUDGETS FOR DIGITAL
GREG BUZEK, President, IHL Group
JEFF ROSTER, VP, Strategy, IHL Group
DAVID STROBELT, SVP/CIO, Modell’s Sporting Goods
SCOTT EMMONS, Director and Founder, Innovation Lab, The Neiman Marcus Group

Sunrise Breakfast
The CIO’s Challenge –
Refocused IT Budgets for Digital

About IHL
Helping Retailers/Hospitality Make Better IT Decisions
o Managed RFP Process, Contract Reviews
Syndicated Research and Data Services
o Retail Benchmarking
o IT Forecasts - WorldView
o Sophia Data Service
Advisory Programs
o Retail Executive Advisory Program
o Strategic Operations Exchange
Custom Research

Holiday Sales
Overall retail sales up 3.6%-4.9%
o Not all segments well
o Dept. Stores and Specialty Struggled
o Sporting Goods and Electronics shined.
o If you extend to restaurants and entertainment, numbers even stronger
o Christmas Week Sales Up 6.5% in Stores
Online sales up 11-17%
Online 21-24% of holiday spend 46-60% of sales growth
Amazon 38% of all online sales for Holidays,
o 49% of all online sales December 18-21
o Shipped over 2 Billion items
Sources: NRF, RetailNext, Slice, First Data, Customer Growth Partners, CNBC

Online Dominance
$3.71B of $12B

Retail’s Biggest Problem
Over 50% of US Households Have Prime Membership
66 Million Households
70% of Households > $112k Income
AWS – 10% of Revenue, 60% of Net Income +58% growth
But…. Spent estimated $17B on Shipping (~Starbucks), Lost $9B (~GameStop)
Sources: Piper Jaffray, Consumer Intelligence Research Partners, Business Insider, Statistica, IHL Group

Retail Is Being Outgunned In IT
Spending on Innovation
$15.1 B

More Than These Retailers - Combined

Source: IHL Group Research
Studies
According to Top Retail CIOs
87% - 237%
Avg. IT Spend
Increase
4.7%
Retailers
Amazon has a TIGIR by the Tail

Keeping Retailers Up At Night
How do you solve a problem
like
?

To Effectively Compete
1. Make massive investments in Unified Commerce
2. Leverage Cloud Computing for jumpstart
3. Take advantage of Mobile
4. Create the WOW customer experience

You are either at the table of
Unified Commerce
or you are on the menu!!!

You Don’t Have To Beat Amazon

Retailers, Leading and Otherwise
Average sales growth in the study was 4.1%
For purposes of this study, we stratify retailers according
to their financial performance in 2016. The results are as
follows:
o Leaders – We define a Leading Retailer as one who claimed that
their 2016 revenues would represent growth of 5% or more. This
comprised 30% of the retailer pool for this study.
o Average Retailers – We define an Average Retailer as one who
claimed that their 2016 revenues represented growth of between 0%
and 5% from their 2015 revenues. This group consisted of 38% of the
retailer pool for this study.
o Below-Average Retailer – We define a Below-Average Retailer as
one who claimed that their 2016 revenues were flat or declined. This
group consisted of 32% of the retailer pool for this study.
Source: 2017 RIS News/IHL Store Systems Study

Foundational Technologies
Single View of the Order (OMS) across channels
Single View of the Customer across channels
(loyalty works everywhere)
Up-to-date POS that can access the order, inventory,
and loyalty in real time

Study Highlights
Store counts and Remodels up 4.9% & 4.2%
Enterprise & Store IT Spend up 4.5% & 4.7%
POS spend up for 2017
(25% of retailers for HW, 32% for SW)
Cloud spend up for 2017
(34% of all software)
Unified Commerce gains momentum

IT Spend Growth by Retail Tier
4.6%
3.1%
4.7%
4.8%
2.3%
4.8%
Tier III Tier II Tier I
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
Enterprise IT Spend Store IT Spend
Enterprise IT Spend
Avg. = 4.5%
Store IT Spend
Avg. = 4.7%

2017 Spend Growth
8.8%
7.4%
3.8%
5.0%
1.3%
1.8%
Enterprise IT Spend Store IT Spend
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
Leading Retailers Average Retailers Below Average Retailers

23%
23%
27%
29%
30%
34%
38%
46%
46%
55%
59%
Store Comms Upgrade
IT Transformation
Empowering Store Associates
WFM Software/Hardware
Mobile for Associates
BI/Analytics for Store Associates
Lowering Supply Chain Costs
Inventory Visibility
Single Order Management Across Channels
Single View of Customer Across Channels
Upgrading CRM Loyaly Programs
0% 10% 20% 30% 40% 50% 60% 70%
Top Retail IT Priorities

Top Retail Priorities
Leaders rate:
IT Transformation 135% higher priority
Lowering Supply Chain Costs 145% higher
Associate Training / Tools 194% higher
Inventory Visibility 55% higher
Clienteling / Assisted Selling 26% higher

Software IT Spend in Cloud
27%
Store Systems
33%
BI/Analytics
47%
eCom
46%
Sales/Marketing
30%
Core ERP
29%
Merch
25%
Supply Chain
31% increase in % of software budget in cloud

Cloud Spend by Retail Tier
Cloud Solution Tier I Tier II & III
E-Commerce 39% 57%
Sales / Marketing 44% 49%
BI / Analytics 33% 33%
Core ERP 28% 33%
Merchandising 37% 22%
Store Systems 20% 40%
Supply Chain 28% 21%
Tier 1 Merchandising grew from 19% in 2016 to 37% in 2017 (95% growth in
budget)
Tier 1 Supply Chain from 18% in 2016 to 28% in 2017 (56% budget growth)
1 of every 5 dollars in Store Systems now being spent on Cloud Solutions for
Tier 1 (up from 13% in 2016), and 40% of Tier II and III.

14%
20%
27%
15%
32%
25%
22%
16%
11%
7%
12%
11%
Digital Signage
POS Software
POS Client - Base System
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
Up to Date/In Place Within 12 Months 12-24 Months 24-36 Months
Store Systems Purchase Timeframe

5%
22%
24%
25%
24%
25%
25%
35%
18%
23%
18%
18%
7%
9%
2%
4%
Consumer Mobile Checkout
Mobile POS
Mobile for Associates (non-POS)
Mobile for Managers
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
Store Systems Purchase Timeframe

Leading Retailers – Store
Systems
Leaders are:
250% more likely to be using Mobile Devices for
Associates
150% more likely to be using Mobile POS
96% more likely to have Up-To-Date POS HW/SW

22%
21%
33%
33%
46%
25%
14%
11%
24%
5%
23%
21%
13%
20%
14%
9%
4%
9%
9%
4%
Holistic Merch. Across Channels
Click & Collect
Ship from Store
Central Order Management
Return Online Purchases at Store
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
Cross-Channel Commerce Timeframe

24%
32%
32%
45%
25%
16%
30%
16%
18%
16%
11%
15%
2%
7%
4%
4%
Split ticket
Order Inventory at Other Stores
Order Online from POS
Check Inventory at Other Stores
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
Cross-Channel Commerce Timeframe

Cross-Channel Commerce Leaders
By the end of 2017, Leaders are:
46% more likely to be using OMS
52% more likely to be doing Ship from Store
58% more likely to be using Split Ticket

Technologies That Move The
Needle
Sales growth increases vs those who don’t:
2.1x for retailers who Market Cross-Channel Capabilities
2.1x who can use Customer Preferences in All Channels
2.0x that do Cross-Channel Demand Planning
1.9X when using Mobile POS
1.8x who use Loyalty Profiles Available in Real Time
1.7x have Integrated Marketing Across Channels
1.7x those Mobile Devices for Associates
Source: Joint NCR/IHL Study

Vendors to Visit
Sales growth increases vs those who don’t:
Integrated Marketing Across Channels
OMS
BI
Geospatial
Cross-Channel Demand Planning
Mobile POS
Loyalty Profiles Available in Real Time
IT Transformation

Sunrise Breakfast: CIO's Challenge

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