E-commerce will be UK retailers’ biggest IT investment priority, finds Martec report

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E-commerce will be UK retailers’ biggest IT investment priority over the next three years as they look to capitalise on the rapid growth in online commerce, according to new figures from Martec’s IT in Retail 2013 Report.

The report, sponsored by JDA Software Group, questioned IT directors and senior IT managers from the UK’s leading 150 retailers regarding their IT strategies and spending to give an up-to-date picture of how retail technology priorities are changing.

Store systems were retailers’ second biggest investment priority, yet the gap between these and e-commerce had widened significantly over the last year, as retailers have looked to further strengthen their omni-channel capabilities, researchers founds. Joint third in terms of investment priority was supply chain and systems integration; followed by CRM systems.

However, the report also revealed overall IT spending across the retail sector has fallen. IT spend as a percentage of sales was 0.9% in 2012, compared to 1.0% in 2011, representing a 10% fall in IT spending.

Prior to 2011, IT spend had been on average 1.3% of sales for a period of four years. This drop is bigger than it seems at first glance because retail sales have not kept pace with inflation, said Martec. What is apparent is retailers are looking to invest in online, supply chain and customer systems as they seek the best returns on their investment.

“Traditionally, store systems have consumed the largest part of the IT budget, often as much as 80%, because of the multiplier effect of a large number of stores,” said Brian Hume, managing sirector of Martec International.

“However, with continuing reduced budgets and the rapid acceleration in online and mobile sales it is understandable the focus has very much changed in recent years. Furthermore, we have seen a growth in CRM over the last 12 months as the rise in internet retailing has led to retailers needing to manage and make use of a lot of customer data.

“For retailers it is paramount they capitalise on the growth in online and more importantly make it profitable. So for the majority there is simply more to be gained from implementing consumer-focused solutions that enable a consistent omni-channel experience for customers, rather than routine upgrades to EPOS systems.”

When it comes to the deployment of IT systems, the report revealed there is a growing trend towards using cloud-based applications. Thirty-five percent of the retailers surveyed said they were currently using them, with a further 28% saying they were planning to do so in the future. Seventeen perc ent of the retailers surveyed said they run a variety of minor cloud-based applications, such as expenses, project management, and office applications. E-commerce was the single most commonly used cloud-based retail application, with 9% of respondents saying they were using it.

Twenty three per cent of the top 150 retailers said they don’t have a transactional website. However, those retailers with a transactional website saw online sales represent 7.3% of total sales, which is an increase from 6.3% the previous year. In fact, 43% stated they were achieving more than 10% of their sales from non-store transactions. The report also revealed m-commerce was also emerging as an area of increased focus for retailers. Forty nine per cent of retailers stated they were already using m-commerce, with a further 13% saying they were planning to do so. For those retailers, with m-commerce capabilities it was now accounting for on average 2.9% of sales. Small format speciality retailers were the biggest beneficiaries of m-commerce, with it accounting for 3.5% of sales, researchers found.

When retailers were asked where they thought online sales would peak, department stores and mass merchandisers generally thought it would be 30-40 % of total sales. Small format stores thought between 20-30%, while food and drug and large format speciality retailers generally thought it would be between 10-20%.

“This record investment in e-commerce spending, supports our view the growth of online is proving to be a disruptive force to the traditional retail model,” said Lee Gill, vp retail strategy, EMEA at JDA.

“There will be winners and losers determined by the approach they take in creating an omni-channel business. We believe we will see three key stages of evolution, the first being the present sales-led focus around transactional websites and fulfillment capability. This will transition to a focus around the consumer experience, namely providing a seamless shopping journey that is both tailored and personalised. Here retail associates will be knowledgeable and empowered, enabling real customer engagement. We believe the sales and customer focus will transition to profitability and the most obvious area to address is the end-to-end supply chain. JDA’s proven expertise in supply chain management and execution, combined with our recent release of Customer Engagement Cloud will help retailers take this journey.”

Finally, the survey revealed if retailers want to offer customers a joined up shopping experience across all channels, they need to know when customers are in store and shopping. So in addition to customer loyalty programmes, more retailers are looking to offer free customer Wi-Fi in store. Twenty three per cent of the retailers surveyed said they were already offering free Wi-Fi, while a further 12% said they were planning to provide such a service in the future.