August 19, 2009 -- In order to manage the current fall in U.S. retail spending, technology service providers (TSPs) must tailor their offerings to a different market, Gartner says.
Retailers have decreased IT spending this year and a cautious attitude from consumers is contributing to the market slowdown for new projects, according to a Gartner survey of 83 senior retail executives with significant IT decision-making responsibilities.
Gartner is advising TSPs to focus on segments of the market that have remained resilient and shift their focus from Tier 1 retailers to late adopters of IT, non-adopters and smaller Tier 2 and 3 retailers.
“Software providers that were focused exclusively on the Tier 1 arena (retailers greater than a billion dollars) need to expand their base. It’s clearly time for any company that’s only focused on Tier 1 to look at broadening their base to Tier 2 and so on,” said Jeff Roster, research vice president at Gartner.
The shift in focus from large retailers to smaller groups brings some positives, Roster said. Software with baked-in best practices will appeal to Tier 2 and Tier 3 retailers currently priced out of the supply chain application market.
“You can’t sell a complex solution to a Tier 2 company, best practices need to be blended in to the solution,” Roster said. “By appealing to smaller retailers, there’s validation that the software has matured enough that the customer can use it without a lots of customization.”
“At the moment, what we are seeing retailers do is focus on the customer. And, we’re seeing fewer retailers purchasing merchandizing solutions,” he said. “We’re not saying spending is decreasing dramatically but there is a softening, and retailers are very aggressively looking at were they are placing their bets going forward.”

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