Penny wise, pound foolish. Failing to invest in technology is a common problem among retailers. But the consequences, as Longs Drug Stores has learned, can be devastating:

Richard Hastings, an analyst at New York-based retail credit advisory firm Bernard Sands, said Longs did not invest enough to modernize operations through the 1990s, exacerbating its current problems.



"Because Longs did not spend enough on the business, they now have to spend a fortune to sort out operational problems that are destabilizing their business," said Hastings.

The problem is that the need to invest in information technology is not immediately apparent to retailers because, paradoxically, they lack the tools to really understand all of the ways they could be saving money by holding less inventory and boosting sales by having the right inventory. So it's easy to keep selling day to day, using today's sales to pay off last months receivables, and think everything is okay. Until you wake up one day and realize there's a competitor out there who is faster at restocking than you and squeezing out higher profit margins because they had the foresight to invest in their business. It's the difference between the retailer who sees technology as a cost and one who sees it as an investment.