Gap between spend on e-commerce and traditional store systems widens
London – January 30, 2013 – 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, Inc., questioned IT directors and senior IT managers from the UK’s leading 150 retailers regarding their IT strategies and spending to give an accurate and 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. Joint third in terms of investment priority was supply chain and systems integration, which was then followed by CRM systems.
However, the report also revealed that overall IT spending across the retail sector had fallen. IT spend as a percentage of sales was 0.9 percent in 2012, compared to 1.0 percent in 2011, representing a 10 percent fall in IT spending. Prior to 2011, IT spend had been on average 1.3 percent 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. 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 percent, because of the multiplier effect of a large number of stores,” said Brian Hume, Managing Director of Martec International. “However, with continuing reduced budgets and the rapid acceleration in online and mobile sales it is understandable that 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 that 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 percent saying they were planning to do so in the future. Seventeen percent 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 percent of respondents saying that they were using it.
Interestingly 23 percent 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 percent of total sales, which is an increase from 6.3 percent the previous year. In fact, the majority of retailers (43 percent) stated they were achieving more than 10 percent of their sales from non-store transactions. The report also revealed that m-commerce was also emerging as an area of increased focus for retailers. Forty-nine percent of retailers stated they were already using m-commerce, with a further 13 percent saying they were planning to do so. For those retailers, with m-commerce capabilities it was now accounting for on average 2.9 percent of sales. Small format speciality retailers were the biggest beneficiaries of m-commerce, with it accounting for 3.5 percent of sales.
When retailers were asked where they thought online sales would peak, department stores and mass merchandisers generally thought it would be 30-40 percent of total sales. Small format stores thought between 20-30 percent, while food and drug and large format speciality retailers generally thought it would be between 10-20 percent.
“This record investment in e-commerce spending, supports our view that the growth of online is proving to be a disruptive force to the traditional retail model,” commented Lee Gill, vice president, retail strategy, EMEA, JDA Software. “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 that 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 programs, more retailers are looking to offer free customer Wi-Fi in store. 23 percent of the retailers surveyed said they were already offering free Wi-Fi, while a further 12 percent said they were planning to provide such a service in the future.
To purchase the full ‘IT in Retail 2013’ report please visit www.martec-international.com
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About Martec International
Martec International is a leading consulting and training practice specializing in buying and merchandising, supply chain and store operations. We provide best practice business process development, project and change management services and we develop and deliver skills training using e-learning and instructor-led approaches.
About JDA Software Group, Inc.
JDA® Software Group, Inc., The Supply Chain Company®, offers the broadest portfolio of supply chain, retail merchandising, store operations and all-channel commerce solutions to help companies manage the flow of goods from raw materials to finished products and into the hands of consumers. JDA’s deep industry expertise and innovative cloud platform help companies optimize inventory, labor and customer service levels. As a result, JDA solutions have become the standard for the world’s leading retailers, manufacturers and distributors. To learn more, visit jda.com or email email@example.com.
“JDA” is a trademark or registered trademark of JDA Software Group, Inc. Any trade, product or service name referenced in this document using the name “JDA” is a trademark and/or property of JDA Software Group, Inc.
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