The budget providing a $20,000 tax break allowing companies to claim back purchases up to this amount is welcome news for retailers. Any business with an annual turnover of up to $2 million can claim immediate tax deductions. The good news for smaller retailers is that any hardware or software (provided it is not developed in house) is included in the $20,000. My informers tell me that the phones have already been running hot with POS vendors offering their wares. Many of these vendors when they
found the POS market heavy going some time ago, branched out into planning software and so this too is on offer.
The bad news is that not many POS vendors (with exceptions) have done this successfully.
I can cite a true and fairly recent example. The retailer retained us to explore merchandise planning software, which we did. This resulted in three vendors being short listed. We recommended two of the vendors and warned against the third who was invited to bid because they were the incumbent POS vendors. They had no planning software but – wait for it – they said they were going to build it from scratch. In this way they could tailor it to the retailer’s needs, and of course there would be zero integration problems. Sounds good – doesn’t it?
Because the retailer was fairly new to merchandise planning, they decided that it made sense to grow and develop alongside the vendor. The other two packages were rich in functionality, but this was overwhelming and more than they needed for some time to come.
So our advice was rejected and they went ahead.
Five years later, which is about now, I have a similar situation with a client wishing to use their incumbent ERP vendor to develop merchandise planning software. Again we have warned against it and we await their decision.
The crux of the matter is that software has an incubation period which cannot be shortened by throwing more resources around. The resources start falling over each other’s feet. Give or take a little, my experience is that software of this nature takes 10 years to mature.
So back to the retailer which went with the incumbent POS vendor. In view of a similar situation with our new client, we decided to follow up with the retailer to establish how things were going.
Please be seated. About 16 months ago they had installed OTB. Other than that nothing had been achieved in five years. Consider the lost opportunity costs and bear in mind that those of us with a little grey hair (or none at all) used to calculate OTB manually using paper, pencil, and an eraser with an electronic calculator (handhelds had not yet been invented). So after 44 months the vendor had delivered a system which is as old as the hills.
On the bright side, there were no integration issues.
The moral of the story is to tread carefully before signing anything. You have until June 2017 to make your claim.
Stuart Bennie is a retail consultant at Impact Retailing and can be contacted at stuart@impactretailing.com.au or 0414 631 702.
