Retail and the Software Industries: “Over-Stored” and “Over-Productized”

I had a great conversation this morning with a customer (whom for now will remain unnamed), which like many conversations I’ve had recently, got sidetracked by talk of the economy, how businesses are adjusting or recovering and how they’re playing the field.

This particular company operates as a B2B middleman in the retail space. A 20-year industry veteran, the CEO made a great point: over the next 6 – 12 months, Americans are going to see a fundamental shift in the retail landscape. Almost every chain would be financially healthier if they shed underperforming properties and brands. In short, we’re “over-stored and over-productized.”

There are a few brands I can think of that could stand to drop some of their outlets, but in many ways I think there are lots of parallels that can be drawn between the retail and software industry.

The continued emergence of SaaS and software applications acting as platforms on which businesses can extend the software into new capabilities is going to lead vendors to reevaluate their delivery models and the number and types of software products they offer. Sugar offers one, single type of application, yet we have customers leveraging it for manufacturing, PRM, and even in support of finance and billing.

We’ve seen this same trend in the software sector for years, with some of the larger, old-school vendors running large, inefficient business models that offer underperforming “add-on” products that customers should be able to bolt on if and when they choose to. I expect the economy and cost-cutting to only expedite the move towards more efficient, and more consolidated, software packages and offerings.