Retail in a rut: IT to the rescue?

As the Christmas sales figures proved, retailers looking for any significant growth this year will have to look online. But what impact will that have on retail IT investment in 2008, asks Penelope Ody.

With high street sales struggling to keep pace with inflation and online trade increasing by 54 per cent from 2006 to 2007 - according to the latest IMRG Capgemini Index - any retail CEO looking for growth in 2008 will be taking a long hard look at ecommerce and multi-channel operations.

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With consumers now spending 15p in every retail £1 online, even the most Luddite shopkeeper has to admit that online sales are becoming a very significant part of the market.

Even more important is changing consumer behaviour. Today's shoppers are tech-savvy and are increasingly surprised they cannot order online and collect in-store or even track or add to a web-based order by using an in-store kiosk when they visit the shop a few hours later.

The reason they cannot do any of these seemingly commonsense multichannel activities is poor systems infrastructure. Legacy systems have been stitched together with point solutions with varying degrees of success.

There are still some major chains out there that cannot cope with three-for-the-price-of-two offers automatically at the till, let alone manage all their channels from unified product or customer databases.

Also, in many cases web channels have developed as standalone operations, often instigated by marketing rather than IT. The result is that it is generally impossible to gain a single view of the customer or to achieve the 100 per cent stock visibility in real-time needed for efficient click-and-collect services.

Building the infrastructure for fully integrated multichannel operations is usually time-consuming and expensive. Upmarket store Harrods spent five years putting in SAP and Sun systems before it finally achieved that single view of the customer across all channels in 2007.

Most retailers only bite the bullet of infrastructure-change reluctantly. But it is a change that will have to be on the IT investment list for many companies in 2008 if they are to meet customer expectations.

Investment in web tools and extended functionality must also be on the shopping list. Some retailers - such as figleaves.com which has implemented Bazaarvoice social commerce services - are already allowing customers to post reviews or exchange recommendations on purchases with fellow shoppers.

Others retailers are improving search techniques or personalising pages in response to click patterns or preferences in an attempt to enhance stickiness and retain customers.

Typically retailers have invested the bulk of their IT budgets in store-related activities with minimal amounts spent on web operations.

Store systems have headed the list of investment priorities in Martec International's annual IT in Retail survey since it started asking the question in 2005. Currently store systems are the top priority for one in four of the leading retailers questioned for the latest report.

In 2007 ERP and systems integration were joint second, cited by 10 per cent of those questioned, while multichannel integration was in joint fifth place as an investment priority for just seven per cent.

In the light of last Christmas' sales we can certainly expect some changes here, although with retailers still wedded to bricks and mortar it is unlikely that store systems will be toppled from pole position quite yet.

Additional investment in stores is certainly needed but that investment needs to be made with multichannel operations in mind.

Many store layouts, practices and processes have not changed in decades. Many retailers will recall failed multimedia kiosk experiments from the 1980s and 1990s and will have long dismissed the concept as wasted effort.

They need to be reminded about changing consumer behaviour and that four million people shopped online on Christmas Day. The so-called Generation Y - especially the 15- to 25-year-olds - have never known a world without the mobile phone or internet. YouTube, Facebook and the Nintendo Wii are as familiar to them as Instamatics and the television test card were to their elders.

If this generation is to continue shopping in stores, they'll expect web access at the shelf edge, the ability to pay via a mobile phone, or that clever mirror - launched at last year's Retail Solutions exhibition - that transmitted a digital image of Miss Customer trying on a new outfit to the mobile phone of her nearest and dearest for instant feedback on whether or not her bum looked too big.

Delivering the customer experience that tomorrow's shoppers expect will take investment and imagination - as well as the realisation that internet shopping has come of age. Some 60 per cent of the UK population has already bought online. Not only will they continue do so but so will many of the remaining 40 per cent.

Reports from the National Retail Federation show in New York in January showed that - contrary to exhibitor expectation - US retailers were thronging the aisles and investing in the latest IT tools to improve performance and combat rising costs.

If UK retailers want to stay in business, they'll have to overcome their reluctance to invest in technology and follow suit - fast.