2023 State of Observability for Retail

Today, the retail industry faces new macroeconomic challenges, with the rapid increase in energy costs, high inflation, and supply chain disruptions. As the threat of shrinking margins looms, retailers are focusing on cost reduction and strategic investments to ensure the best possible business value without sacrificing the customer experience.

While omnichannel is essential, retailers don’t have an easy way to gain visibility into their data across different sources, making it harder to observe the customer, product, or order journey across all touchpoints. They often depend on third-party tools and services that they have little or no access to—including onsite or in-store (such as POS systems, kiosks, and video cameras), online (such as web and mobile apps like payment processing services), and on-route (such as external distribution logistics and fulfillment service APIs)—which inhibits them from easily implementing telemetry in their retail strategy. These blind spots make it difficult for organizations to make data-based decisions that could impact the bottom line.

For retailers to keep digital storefronts open and customers engaged, they are investing in observability tools that give them complete visibility into their software across complicated technology stacks. Observability tools proactively collect and visualize data, then apply intelligence so organizations not only understand the behavior of their IT ecosystems but can also detect issues immediately and quickly solve them.

This report focuses on the adoption and business value of observability across the retail/consumer-focused sector. It is based on insights derived from 173 respondents surveyed in association with the 2023 Observability Forecast.

Retail/consumer organizations experienced high-business-impact outages at a higher frequency, with 37% reporting these outages at least once a week, compared to the average of 32% among all respondents. This finding means that retail/consumer organizations had the third highest outage frequency across industries.

Many retailers only receive log data of their interactions, leading to errors being discovered after an issue has happened. This leads to longer timelines for resolving downtime from website or mobile application crashes.

Total downtime is calculated by adding the mean time to detect (MTTD) and mean time to resolve (MTTR) outages. More than half (55%) of retail/consumer respondents said it takes at least 30 minutes to detect high-business-impact outages, and 21% said it takes at least an hour. About three in five (61%) also indicated that it takes at least 30 minutes to resolve them, and 28% said it takes at least an hour. Given the relative frequency of outages noted above, this adds up to considerable downtime for retail/consumer organizations.

However, 43% said their MTTR has improved to some extent since adopting an observability solution.

Nearly a third (31%) of retail/consumer respondents said critical business app outages cost more than $500,000 per hour. Almost a quarter (23%) estimated they cost their organizations more than $1 million an hour.

Retail/consumer organizations also reported a median annual outage cost of $9.95 million, which is notably higher than the $7.75 million annual outage cost across all industries and fifth highest overall compared to other industries.

The stakes are high. If a retailer’s website goes down for 30 minutes on a high-traffic day like Cyber Monday, it could cost them millions of dollars, not to mention negatively influence a customer’s brand perception. But observability can help.

The top technology strategies and trends driving the need for observability among retail/consumer organizations were an increased focus on security, governance, risk, and compliance (43%) and integration of business applications into workflows such as ERP or CRM systems (38%). Two trends tied for third place: an increased focus on customer experience management and the adoption of the Internet of Things (IoT) technologies (both 36%).

The retail/consumer industry put a greater emphasis on IoT technologies driving observability than among all respondents, where it ranked seventh at 33%. IoT can take on multiple forms for retailers, including inventory tracking and tracking salespeople in the store. They were also more likely to say the containerization of applications and workloads (34% compared to 28% for all respondents) and adoption of serverless computing (29% compared to 27% for all respondents) are driving the need for observability.

With billions of dollars of consumer spending being driven via digital, it’s more critical than ever for retailers to improve their uptime and reliability, double down on their digital customer experience (DCX) strategies, and focus on creating a seamless, omnichannel customer journey.

Digital experience monitoring (DEM) is the way to stay on top of DCX and is, therefore, an important focus for the retail/consumer industry. It involves the tracking and optimization of performance and reliability to deliver flawless customer experiences online. DEM is a combination of real user monitoring (RUM)—which includes browser monitoring and mobile monitoring—as well as synthetic monitoring.

Respondents from retail/consumer organizations reported slightly higher levels of deployment for mobile monitoring (43% compared to 41% overall) and synthetic monitoring (25% compared to 23% overall). However, they reported slightly lower levels of deployment for browser monitoring (51% compared to 55% overall).

As far as other key capabilities retail/consumer organizations are deploying, two-thirds (66%) had deployed network monitoring, the most widely deployed capability for this industry vertical. Alerts were the second most widely deployed (62%), followed by security monitoring (59%) and dashboards (58%). Each of these capabilities was generally more widely deployed by retail/consumer organizations than across all sectors, with the exception of security monitoring.

Retailers typically use a variety of third-party services, which often leads to a dependence on specialized tools. In fact, retail/consumer organizations were more likely than average to use multiple monitoring tools for the 17 observability capabilities included in this study. More than two-thirds (69%) used four or more tools for observability compared to 63% overall. And 23% used eight or more tools.

The proportion of retail/consumer respondents using a single tool has decreased slightly since last year, dropping from 4% to 3%. However, the average number of tools has gone down by almost one tool, from an average of six tools in 2022 to five tools in 2023.

The data indicate that retail/consumer organizations are spending more time and money tool-hopping to try to understand the different aspects of their business and to avoid costly outages.

When asked how unified their organization’s telemetry data (metrics, events, logs, traces) is, 31% of retail/consumer respondents said it’s more unified, 32% said it’s more siloed, and 35% said it’s roughly equally unified and siloed (more than any other industry).

Moreover, IT teams in retail/consumer organizations detected software and system interruptions primarily from one or more monitoring tools (73%), though more than a quarter (27%) said they detect outages through manual checks or tests, complaints, or incident tickets.

That said, the prevailing preference among retail/consumer respondents was for a single, consolidated platform (46%). And 42% said their organization is likely to consolidate tools in the next year to get the most value out of their observability spend.

Retail/consumer organizations tended to spend more on observability than most other industries—almost half (49%) said they spend $500,000 or more, and 31% said they spend $1 million or more per year on observability. Just 8% said they spend less than $100,000 per year on observability.

We also asked retail/consumer respondents what ways observability helps improve their life the most. The top two answers for IT decision makers (ITDMs) were that it helps drive business strategy (39%) and achieve technical KPIs (37%). The top two answers for practitioners were that it increases productivity so they can find and resolve issues faster (50%) and enables less guesswork when managing complicated and distributed tech stacks (36%).

As far as business outcomes enabled by observability, nearly half (47%) of retail/consumer respondents said observability improves revenue retention by deepening understanding of customer behaviors—which was considerably more than all other industries and 38% more overall. In addition, more than a third said observability shifts developer time from incident response towards higher-value work (41% compared to 35% overall), improves collaboration across teams to make decisions related to the software stack (40% compared to 46% overall), creates revenue-generating use cases (36% compared to 26% overall), and mitigates service disruptions and business risk (34% compared to 33% overall).

Retail/consumer respondents also indicated that the primary benefits enabled by observability were increased operational efficiency (40%), improved system uptime and reliability (34%), security vulnerability management (30%), and an improved real-user experience (26%).

When we asked them how much total value their organization receives from its observability investment per year, 57% said more than $500,000, with 43% saying the total annual value is $1 million or more. A fifth (21%) estimated they receive $5 million or more per year in total value. Retail/consumer organizations reported a somewhat higher total annual value received from observability than average and more than all other industries except energy/utilities.

Based on annual spend and annual value received estimates, retail/consumer organizations receive a 2x median annual return on investment (ROI).

Several factors had an even more positive impact on ROI. Respondents whose organizations had:

• Achieved full-stack observability (by the report’s definition) had a higher median annual ROI (114%) than those who hadn’t (100%).
• A mature observability practice (by the report’s definition) had a higher median annual ROI (250%) than those with less mature practices (100%).
• Five or more capabilities currently deployed had a higher median annual ROI (114%) than those with 1–4 deployed (0%).
• Five or more observability practice characteristics currently employed had a higher median annual ROI (114%) than those with 1–4 employed (100%).

These findings strongly suggest that retail/consumer organizations receive a minimum 2x ROI and that the ROI is even higher for organizations that monitor more of their tech stack or have a more mature observability practice.

The top challenge preventing retail/consumer organizations from achieving full-stack observability was that it’s too expensive (28%). Too many monitoring tools (25%) was the second most-cited challenge.

When asked what would be the most significant business outcome if their organization did not have an observability solution, 34% said higher operation costs due to increased operational effort, 22% said revenue loss due to increased downtime, and 16% said reputation loss due to a worsened customer experience.

In addition, the top three pricing- or billing-related issues experienced by retail/consumer organizations with their observability vendor(s) in the past year were paying for the whole month or year at the peak usage level (39%), rapid data growth significantly impacting their bill (35%), and frequent re-forecasting and re-contracting for multiple SKUs (33%).

Retail/consumer organizations had ambitious observability deployment plans for the next one to three years. For example, by mid-2026, most (98%) expected to have deployed alerts, followed by network monitoring and security monitoring (both 97%).

DEM is also an important focus. More than half (53%) expected to deploy synthetic monitoring in the next one to three years, 42% expected to deploy mobile monitoring, and 39% expected to deploy browser monitoring. These findings indicate that by mid-2026, 90% expected to have deployed browser monitoring, 85% expected to have deployed mobile monitoring, and 79% expected to have deployed synthetic monitoring.

To get the most value out of their observability spend in the next year, 49% planned to train staff on how to best use their observability tools and 42% planned to consolidate tools.

Retailers often face challenges like adapting to changing consumer expectations and customer retention, remaining competitive from a digital transformation perspective (especially during Black Friday, Cyber Week, and the holiday shopping season), responding to economic and geopolitical circumstances, and staying resilient.

Insights from the State of Observability for Retail show that the ecommerce industry is experiencing a high number of outages. Engineering teams are spending significant time and money tool-hopping to try to understand the different aspects of their business and to resolve issues that lead to costly outages and poor customer experiences. The data also indicate that retail/consumer organizations are starting to consolidate monitoring tools. Given their strong interest in deploying more capabilities in the next few years, signs point to these organizations moving from point solutions to more robust platforms that provide end-to-end visibility.

New Relic is uniquely positioned to help retailers improve their DCX and achieve omnichannel observability amidst these challenging macroeconomic headwinds.

Retailers can use the New Relic core web vitals quickstart (a pre-built, open-source integration that includes dashboards and alerts) to monitor their site’s core web vitals with New Relic browser monitoring agent data and then take action on low scores.

Consolidating monitoring tools on the New Relic observability platform enables retail organizations to achieve greater visibility into their tech stack and every stage of the shopping experience. Retailers can also use New Relic Pathpoint—the industry’s only business observability app—to merge customer, product, and services paths into a single business journey and quantify the financial impact of business metrics. For example, if their website went down, Pathpoint could show not only that the outage occurred, but also how much potential revenue was being lost for every minute of downtime.

With New Relic capabilities like service level management and DEM (browser monitoring, mobile monitoring, and synthetic monitoring), retailers and their IT teams can detect and resolve issues proactively before customers check out and ultimately deliver an optimal user experience across all retail channels. It enables retailers to easily scale for Black Friday, Cyber Week, holiday shopping, and beyond—and keep customers buying.

Learn more about New Relic for retail and request an in-depth, customized demo to find answers to your tough technical questions and get competitive pricing information.

All data in this report are derived from a survey, which was in the field from March to April 2023 as part of our work in publishing the 2023 Observability Forecast report. It’s the only study of its kind to open-source its raw data. View the 2023 Observability Forecast survey results.

Retail/consumer respondents comprised 173 of the total respondents surveyed in the 2023 Observability Forecast report, or 10%.

ETR qualified survey respondents based on relevant expertise. ETR performed a non-probability sampling type called quota sampling to target sample sizes of respondents based on their country of residence and role type in their organizations (in other words, practitioners and ITDMs). Geographic representation quotas targeted 15 key countries.

All dollar amounts in this report are in USD.

View the definitions used in this report.

About New Relic

As a leader in observability, New Relic empowers engineers with a data-driven approach to planning, building, deploying, and running great software. New Relic delivers the only unified data platform with all telemetry—metrics, events, logs, and traces—paired with powerful full-stack analysis tools to help engineers do their best work with data, not opinion.

Delivered through the industry’s first usage-based pricing that’s intuitive and predictable, New Relic gives engineers more value for their money by helping improve planning cycle times, change failure rates, release frequency, and MTTR. This helps the world’s leading brands and hyper-growth startups to improve uptime, reliability, and operational efficiency and deliver exceptional customer experiences that fuel innovation and growth.

About ETR

Enterprise Technology Research (ETR) is a technology market research firm that leverages proprietary data from its targeted ITDM community to deliver actionable insights about spending intentions and industry trends. Since 2010, ETR has worked diligently at achieving one goal: eliminating the need for opinions in enterprise research, which are typically formed from incomplete, biased, and statistically insignificant data.

The ETR community of ITDMs is uniquely positioned to provide best-in-class customer/evaluator perspectives. Its proprietary data and insights from this community empower institutional investors, technology companies, and ITDMs to navigate the complex enterprise technology landscape amid an expanding marketplace.