The 2025 RSPA Retail IT Channel KPI Study paints a picture of a resilient and evolving retail IT landscape. Despite a minor setback in growth in 2024, optimism reigns for 2025, with solution providers demonstrating adaptability and a strong focus on profitability.
One of the most compelling statistics from the study is the continued rise in revenue per employee. In 2024, 38.1% of solution providers achieved at least $200,000 in revenue per employee, a significant jump from 32.5% in 2023 and a remarkable improvement from 26.3% in 2022. This metric underscores the increasing efficiency and profitability of retail IT businesses. Even with the rise of large, direct-to-consumer POS providers, the study demonstrates that channel partners offering high-margin products and services, personalized customer care, and streamlined operations are thriving.
The study, based on data from 85 VARs, ISVs, and hybrid businesses, reveals a stable distribution of business models, with 62.4% identifying as reseller/VAR/MSP, 21.2% as ISV/software developer, and 16.5% as ISV/VAR hybrid. This consistency suggests the shift towards hybrid models, where VARs incorporate their own software solutions, has largely stabilized. The primary vertical markets served by these companies are hospitality (50.6% primary), retail (24.7% primary), and grocery (17.7% primary). Notably, the hospitality sector has seen a resurgence, while retail has experienced a decrease, and grocery has seen an increase in primary vertical focus.
Forecasting growth and adapting to change
While 2024 presented some challenges, with 15.3% of respondents reporting a decline in sales compared to just 5.6% in 2023, the outlook for 2025 is overwhelmingly positive. Only 8.1% of respondents project flat or declining sales for the coming year. This optimism is reflected in the projected revenue growth rates, with many companies anticipating double-digit growth. The study also revealed that a substantial portion of revenue comes from existing customers, with 33.7% of respondents reporting that 80% or more of their revenue is generated from repeat business.
A crucial aspect of the study focuses on revenue stream analysis, particularly the dependence on payment processing. While 37.9% of VAR respondents generate half or more of their revenue through payments, this figure decreased from 46.3% the previous year. This suggests a potential diversification of revenue streams, although payments remain a significant component. The study also explores revenue generated from hardware, software, and services, providing valuable insights into revenue composition for different business models.
Profitability and the recurring revenue revolution
Profit margins remain strong, with 45.3% of respondents achieving 20% or more margins in 2024. This highlights the industry’s focus on profitability and the effectiveness of strategies to maximize margins, especially given the thin margins often associated with hardware sales. Looking ahead, respondents anticipate further margin improvement in 2025.
Finally, the study underscores the continued transition to the as-a-service/recurring revenue model. A record 59.3% of solution providers are entirely or mostly transitioned, with projections indicating this number will rise to 69.8% in 2025. This reinforces the growing importance of recurring revenue streams in the retail IT sector.
The 2025 RSPA Retail IT Channel KPI Study offers a wealth of data and analysis for retail IT solution providers. By understanding the trends and challenges highlighted in the report, businesses can make informed decisions to optimize their strategies and capitalize on the opportunities that lie ahead. Download the full study at www.GoRSPA.org to better understand the retail IT landscape and position your business for success in 2025 and beyond.
