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August 6, 2009

Retail IT spending marked down for price cuts

Sector spending slumps by 20% to about 1% of sales

By CBR Staff Writer

Retailers have slashed their IT budgets by as much as 20% as a result of economies being forced on businesses in the sector through recession and the sudden fall off in consumer spending.

As a proportion of sales, IT spend across the UK retail sector is running at around 1.1% which is down from a level of 1.3% some 12 months earlier. 

The estimates have come out of a survey by Martec for BT Expedite, the multi-channel retail solutions arm of the telecommunications giant. 

Based on interviews with IT directors at 100 leading retailers, the study revealed that 15% of retail operations had cut costs, with some reporting their IT budget was down by 50%.

Retailers do appear to be investing selectively, especially in e-commerce and web site enhancements, with almost three-quarters of retailers now said to have some form of transactional online presence. 

Analysts at Datamonitor said that focus on the customer experience has become another top priority for retailers. 

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“Maintaining consistent customer service levels is made all the more complex as consumers are now shopping across many channels. Whether the customer shops through a bricks and mortar store, a transactional website or by mail order, the consumer expects consistent service.”

The obligations of PCI compliance is also steering IT budget towards transactional security initiatives.

The cost of becoming PCI compliant depends on a number of factors including the business type, number of transactions processed and current credit/debit card processing and storage practices. But it can run into many hundreds of thousands, and in many cases can cost up to 40% more than estimated,

Even the smaller so-called Level 3 merchants, processing between 20,000 and 1,000,000 e-commerce transactions a year, are expected to spend $44,000 assessing their PCI status and another $81,000 on compliance, Gartner has said.


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