Retailers regularly adapt to customer trends by investing in new systems technology. But they may not be aware that a system's initial purchase price is only 20 to 45% of the total cost of ownership of their system, and there's more to understand about the true cost of your purchase. Find out more on investing in the information system for your unique business.
Understanding Total Cost of Ownership in Building an Advanced Store Systems Business Case
W H I T E P A P E R Sponsored by: IBM
Scott Langdoc January 2008
G L O B A L R E TAI L I NS I G H T S OP I N I O N
Retailers are working overtime to firmly establish their competitive 188 place in an industry where hypercompetition reigns and 7.8 macroeconomic challenges such as higher energy and housing costs 89.8 increasingly impact the consumer's wallet. Many merchants see the 05. opportunity to create a new shopping experience — supported by F advanced store systems technology — as the best path to improving 004 business performance on all levels, including higher sales, improved 4.5 profits, and increased customer satisfaction. But the approaches and 39.8 models used to assess point-of-sale (POS) technology platforms have 05. broadened far beyond just capital investment, and new Global Retail P Insights research has shown that retailers across different segments AS often view their investment priorities differently. Global Retail U 10 Insights has identified a number of important criteria for evaluating 710 both the true costs and the key business value of a new store systems AM strategy. ,mahgnim I N T H I S W HI TE P A P ER arF t This white paper provides a detailed view of the considerations eert required to evaluate advanced store systems platforms and how to S ne ensure that the retailer's business priorities are fully addressed in the ep business value analysis. It examines the importance of using a total S 5 : cost of ownership (TCO) model as a more accurate reflection of sret investment cost and benefit than mere asset purchase. It analyzes rau research results that show the different store systems evaluation qda priorities used by different retail industry segments and provides eH l sample retailer models and financial metrics to use as guides, abo concluding with a review of the full value proposition that can result lG from a broad, strategic investment in new retail POS technologies.
January 2008, Global Retail Insights #GRI210287 S I T U A TI O N O VE R VI E W P r e d i c t i v e I n s i g h t a n d E f f e c t i v e S t o r e E x e c u t i o n D e f i n e M e r c h a n t L e a d e r s
To say that retail is highly competitive seems a gross understatement. Not only do global megamerchants continue to dominate the low-price battle based on their sheer economies of scale, but new market entrants (e.g., Tesco in the United States, Best Buy in China), along with a blurring of traditional market segments, are making a complex industry even rougher to navigate. This ubercompetitive battle will be hard to win on price alone, so retailers that want better brand value and improved performance are aligning technology changes at store level to ensure delivery of a consumer experience that results in bigger transactions, higher trip frequency, and higher shopper satisfaction.
To deliver the levels of service, personalization, and efficiency that savvy consumers demand, more retailers are ramping up long-delayed POS replacement projects as they realize that their legacy systems do not have the capabilities to support the required new store-centric strategy. IDC's 2007 Worldwide Retail IT Spending Guide forecasts that worldwide POS hardware and software spending in 2008 will be $9.58 billion, increasing to $11.8 billion by 2010. A s s e s s i n g P O S T o t a l C o s t o f O w n e r s h i p : T h i n k i n g B e y o n d J u s t t h e P u r c h a s e
Given the capital requirements necessary to complete a chainwide Acquisition costs are trending downward —store systems replacement project, it is understandable why many toward 20% of the retailers become transfixed by only equipment acquisition costs. total cost of ownership. However, a focus on initial POS capital spend leaves out most of the — Scott Langdoc, cost and benefit elements realized during the entire operational life of Research VP, Global the equipment. Store systems projects that orient their financial Retail Insights assessment around the TCO are more likel... [download for more]
