Tip for Retail Tech Vendors: Seek out Specialty Stores

Mar 31, 2005 12:15 AM  By

Got a cool new retail automation program to sell? A specialty store just may snap it up. Only 39% of North American specialty stores are automated to any significant extent, according to “The 2004 Retail Automation Equipment Vertical Market Analysis,” a study by Venture Development Corporation. The “unserved market opportunities“ in retail, notes the report, are worth an estimated $5 billion. Key technology offerings that vendors should focus on include EAS, handheld scanners, mobile terminals, payment processing terminals, POS terminals, receipt printers, and stationary scanners.

The report cites a high level of technology investment in the general merchandise sector, resulting from heavy dominance by a limited number of category killers such as Wal-Mart, Target, and Sears. Tier 1 companies operate nearly 70% of all stores–far more than any other sector. This leads to a high retail automation penetration rate among Tier 1 companies, which are often early adopters of technology.

For retail tech vendors, the health and personal care market could prove lucrative. Faced with increasing pressure for speedy tracking and delivery, pharmaceutical retailers will soon adopt electronic tracking services, including medical/prescription histories, printouts for tax purposes, customer messages, education, and information about drug interactions. Furthermore, self-checkout terminals can aid retailers in decreasing labor costs, give shoppers the perception of a faster checkout, and improve traffic at checkout lanes.

Another hot spot: convenience stores. According to the report, convenience stores trail the technology adoption cycle, with only 25% using high-tech equipment. This market is hard to crack, though, because of the small size of individual locations, small number of items purchased per customer, low volume of transactions per day, and limited investment funds.

“The specialty store segment is by far the largest retail sector in terms of number of store locations,” says VDC analyst Taylor Smith. “However, unlike other sectors such as grocery or general merchandise, there are few category killers, with smaller organizations controlling the lion’s share of store locations. With small businesses reluctant to invest in automation technology, solution providers are left with the task to develop effective marketing strategies, pricing programs, and sales processes in order to capitalize on the market opportunity.”

For more information, contact Marc Regberg, vice president of VDC, at (508) 653-9000, ext. 111, or at msr@vdc-corp.com.