2009 Retail Automation Investments Hampered by Store Closings and Shifting IT Priorities, Spurring Holistic Innovation Among Tier 1 Suppliers

We have nearly completed our research campaign with leading and emerging suppliers of retail automation solutions.  We’ve learned that 2009 was a challenging year for many of these suppliers, as leading retail chains extended their refresh cycles for core POS solutions and related components.  This contraction left many retail automation suppliers with a short list of less than compelling strategic alternatives likely to create margin compression that could adversely impact the industry long after these markets recover. 

Thankfully, many of the thought leaders we interviewed took a different tact, innovating well beyond feeds and speeds to address the operating requirements of deploying enterprises more holistically, all while reducing the CAPEX burden and providing a clear migration path to next generation technologies.  As the appetite for retail automation investments rebounds in 2010, these suppliers are reaping the benefits of investments made to broaden their software and managed service offerings:

• Access to new sources of revenue
• Increased customer retention
• A higher degree of insulation against competitive displacement

We’re seeing examples of this type of holistic innovation in many of the retail automation technical segments we cover including self check-out, kiosks, and digital signage, reflected in the revenue contribution many suppliers are attributing to software and services compared to previous years. 

We believe the viability of managed services as a growth strategy is strongest for those suppliers who have direct selling relationships with their key accounts, broad product portfolios, and the strategic alliances required to support new application development and commercialization.  As the retail automation markets rebound in 2010 and beyond, these suppliers will emerge better positioned to address the requirements of their key accounts with flexible and scalable managed services offerings, providing a viable source of differentiation against more hardware-centric suppliers of retail automation.

These themes and other trends will be expounded upon in many of the retail automation technology market analysis volumes being published in the weeks ahead.  Stay tuned.