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

The report, performed by Martec International and 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 eCommerce 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 spending 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.”

Hume continued, “For retailers it is paramount they capitalize 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. Apparently, 35 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. A significant number of the retailers surveyed, 17 percent, said they run a variety of minor cloud-based applications, such as expenses, project management, and office applications.

eCommerce 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 mobile commerce (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 specialty retailers were the biggest beneficiaries of m-commerce, 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 specialty retailers generally thought it would be between 10-20 percent.

“This record investment in eCommerce 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.”

Gill continued, “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 click here.