Retailers increase spend on web development
The latest ‘IT in Retail’ study by Martec International for Microsoft, predictably reveals the growing importance of online sales � but also highlights continuing low IT spend among leading retailers.
by Penelope Ody
Leading retailers are spending just 1.3% of tunover on IT compared with 2% or more among US store chains and they are delaying replacement of many core applications as budgets are spread ever more thinly. �Retail CIOs are having to do more with less,� says Dan Turner, retail lead at Microsoft UK. �The are faced with regulatory demands and pressure from the business to deliver benefits from limited budgets.� Last year�s IT in Retail study, for example, suggested that the average age of merchandising management systems among the top retailers, was 7.4 years. Now that figure is 9.4 years while merchandise planning systems have leapt from an average age of 5.0 years to 7.1 years. Year-on-year comparisons are slightly skewed as the same 100 retailers are not included in each of the annual surveys but the over-all trend is still valid: retailers are keeping core applications for longer and possibly missing out on leading edge IT developments that could deliver competitive advantage. �We are seeing more overlaps for existing systems adding increased functionality,� adds Turner, �but investment is still low.� Of the 100 retailers surveyed, 81 were willing to specify their top three investment priorities � the others deeming the question to commercially sensitive. Of the 81, 25% listed investment in store systems as a key area well ahead of ERP (10% and systems integration (10%). Multi-channel integration was cited by just 7% of the retailers answering this question. This year�s study also looked in detail at new IT investment areas � including product information management and content management � as well as focusing on trends in mobile technology. In 2004 two-thirds of those surveyed did not use mobile systems of any sort. Today, that figure is down to under a quarter with 47% using mobile systems in store and 47% using such systems in the supply chain. A major growth area here, according to Dan Turner, has been in mobile store management technology� such as manager�s PDAs � for exception reporting and alerts. It�s an area of Microsoft focus with its widely shown �retail future� video showing staff and customers using mobiles for predictive analytics to reduce stockouts and respond to customer needs. ��The technology seen in the video is probably all available now,� adds Turner, �but it may be some time before we see these scenarios in store.� Of the other new study areas in this year�s report 20% of retailers questioned have some sort of content management system � almost all in-house developments � while 33% also have some sort of PIM. SAP has a marginal lead here with a 3% share although 19% of retailers questioned had in-house systems. Surprisingly 44% of the �leading 100 retailers� questioned for the study do not have transactional websites. 4% plan to implement such sites this year and 2% had a transactional site elsewhere in the group, but given the rapid increase in online sales � and customer expectation of an on-line presence � this figure is somewhat surprising. In total those retailers with transactional websites gave online sales as 4.4% in total � worth around �5.2billion in all. As Martec points out, for most retailers online and other non-store channels now contributes �in excess of the flagship store�. Retailers achieving above average non-store sales were large format specialty retailers such as electricals, DIY and furniture which made around 8.3% of sales from non-store sources. Some 88% of those surveyed expected non-store sales to increase next year: add to this the 7% who planned transactional sites and thus expected to grow sales through non-store channels and it adds up to 95% of major retailers expecting their non-store business to grow in 2007/8. It is not a trend which seems to worry those questioned: 72% said they had no concerns about expanding Internet sales. Of those worries which were cited, integration (10%) was top of the list followed by security (8%) and the difficulties involved in creating a consistent experience across all channels (4%).
