IHL: Leading retailers have distinct IT spending plans for 2024

Retailers with the best 2023 sales growth have IT spending strategies unlike those of their lower-performing peers.

According to a new study from data from analyst firm IHL Group, retailers with 2023 sales growth greater than 10% are planning to increase their IT spend in 2024 by 16.2%, more than four times the 3.6% IT spend growth planned by average performing retailers.

The study, “Winning the Race of Innovation: How Top Performing Retailers are Investing in Technology,” also reveals some other key differences in technology usage between leading retailers and below average performers. Comparatively, leading retailers are: 

• 31x more likely to be using RFID in their stores.
• 16x more likely to be using 5G at the store level.
• 6x more likely to already be using a data lake (centralized repository for all data, including raw and unstructured data).

IHL Group research also indicates that data maturity and the use of artificial intelligence (AI) with machine learning (ML) across a variety of software functions is becoming a true differentiator. The research looked at AI use in 11 categories of software (forecasting, order management, order fulfillment, supply chain/warehouse management, merchandise allocation, pricing/promotions, BI/analytics, loss prevention, sales and marketing, HR/workforce management/app development/customer service, other). 

According to IHL, those retailers already using AI/ML technologies in their solutions on average are seeing the following results compared to those retailers not using AI/ML technologies:

• 2023 sales growth 2.3x.
• 2023 profit growth 2.5x.
• 2024 sales projections 2.4x.
• 2024 profit projections 2.6x.

In another recent study, IHL analysis determined that Macy’s Inc. could see more than $7.5 billion in business improvements by the end of the decade due to AI technology deployments.  This total figure includes as much as $3.8 billion in increased sales; $2.1 billion in improved gross margins through lower product costs, more optimized pricing, and supply chain improvements; and then reduce by $1.7 billion sales and generative administrative costs through 2029.

The potential $7.5 billion in business benefits also includes gains that can be made through traditional AI and machine learning (ML) technologies, generative AI, and the potential for artificial general intelligence. 

“It’s like a race between me and Usain Bolt,” said Greg Buzek, president of IHL Group. “He’s not only ahead on the first step but every other step he gets further ahead.”