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February 1, 2013

Ecommerce will be biggest IT investment for UK retailers over the next three years

Online growth is disrupting the traditional retail model.

By Tineka Smith

A study by Martec International and sponsored by JDA Software, found that retail technology priorities are gradually changing.

The report questioned IT directors and senior IT managers from 150 UK leading retailers about their IT strategies and spending.

Store systems had traditionally accounted for the largest part of the IT budget. However retailers were found to be spending less on IT systems and more on e-commerce in order to strengthen Omni-channel capabilities.

Brian Hume, managing director of Martec International explained at the IT in retail event in London that IT spending has fallen 10% since 2003 as more retailers look to invest in online.

"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 Hume. "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."

Retailers are also moving towards CRM, mobile and cloud-based applications.

35% of retailers said they were using currently using cloud-based applications with another 28% stating they planned to do so in the future.

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Ecommerce was found to be the most commonly used cloud-based retail application with 9% of respondents saying they were using it.

CRM systems were also found to be a top priority among retailers.

"We have seen a growth in CRM over the last 12 months as the rise in internet retailing as they capitalise on the growth in online and more importantly make it profitable," said Hume. "So for the majority there is simply more to be gained from implementing consumer-faced solutions that enable a consistent Omni-channel experience for customers, rather than routine upgrades to EPOS systems."
M-commerce is also an emerging as an important are for retailers. Nearly 50% of respondents said they were already using m-commerce, with another 13% saying they planned to in the near future."

Retailers currently using m-commerce said it accounted for 3.5% of sales.

When it came to transactional websites, over 20% surprisingly said they did not have one. However, retailers with a transactional website saw online sales represent 7.3% of total sales.

Respondents also said they thought online sales would eventually peak at 30-40% of total sales.

"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, 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 fulfilment capability. This will transition to a focus around the consumer experience, namely providing a seamless shopping journey that is both tailored and personalised."



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