Recession hits retailers’ IT, but some bright spots

Proof that the recession has hit retailers hard is clear from the list of top 100 companies surveyed by Martec International for the IT in Retail report, sponsored by BT Expedite.

This report shows that the highest number of companies in seven years has dropped out of the list due to liquidation, including MFI, Woolworths and Zavvi.

However, despite this reflection of the current economic market, it is far from doom and gloom for all retailers, with the shift to multi-channel retailing and the growth of mobile internet access and m-commerce continuing to shine through.

Retailers’ IT budgets have been slashed by about 20 per cent over the past year, down from 1.3 per cent to 1.1 per cent as a percentage of sales. The previous trend towards an increase in outsourcing has been reversed this year.

Brian Hume, managing director, Martec, said: “Many retailers have cut their IT budgets, with 15 per cent making large changes to bring their costs down, some by as much as 50 per cent. There’s also a clear trend to bring things back in-house to minimise redundancies.”

One area that has enjoyed a steady growth over the last five years is mobile technology. In 2005, 70 per cent of retailers did not use it in-store, now the majority (57 per cent) use it or plan to use it to increase productivity. The main uses are for stock management, price checking and delivery scanning. Mobile technology is also increasing in the supply chain, with use rising from 53 to 62 per cent.

Five points down on last year, store systems remain the highest IT priority for investment for 19 per cent of companies and almost a quarter of retailers are planning to replace their systems.

One area for optimism was non-stores sales, a resounding result, where no-one felt that non-store sales as a percentage of total sales would decrease next year and a staggering 85 per cent felt they would increase.

This increasing focus for retailers is reflected in the report, which shows e-commerce and web sites to be the second most important area for investment. Non-store sales are one area of retail that is showing growth and that has not been adversely affected by the recession, showing a significant increase over last year, now accounting for 4.8 per cent of sales, up from 4.4 per cent. The majority of retailers now also have a transactional web site, and this has increased from 68 to 74 per cent.

Richard Lowe, CEO, BT Expedite, said: “Despite the obvious cutbacks, there are some bright spots for retail investment in IT, particularly in e-commerce, multi-channel and PCI compliance.

“We’re also seeing retailers looking to sweat their existing assets as far as possible and this is sparking plenty of demand for small IT projects with quick payback. Where bottom line improvement can be demonstrated, retailers are more than willing to embrace new technology.”