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E-commerce is top priority for retail sector investment, report claims

Online sales expected to reach maximum of 40 percent of total sales, raising concerns for high street retailers

E-commerce tops the list of priorities for retail IT investment over the next three years, a retail sector report has indicated, with expectations that up to 40 percent of sales could be transacted online in future.

According to a survey of 150 leading UK retailers from retail consulting company Martec, online sales are forecast to account for between 30 and 40 percent of total sales for many mass market and department stores in future, creating further doubts for the future of bricks and mortar retailers.

Currently the average proportion of online sales is 7.3 percent of total sales, up from 6.3 percent during the previous year.

According to Martec managing director, Brian Hume, speaking at the launch of the report, the expected growth in online sales will lead to further "cannibalisation" of high street retailers' sales, threatening to add to the 40-50 store closures currently occuring each week.

For those that don't have a strong online presence "life is going to get awfully painful awfully fast", Hume pointed out. Various high street retailers have faced administration in the past twelve months following criticism over their lack of strong multi-channel strategy, including electronics retail chain Comet.

Lee Gill, JDA VP for retail strategy in EMEA, also highlighted that the growth in e-commerce investment shows the "disruptive force" that online spending will have on the traditional retail model.

The report also revealed that mobile commerce has become more prevalent for many retailers, with 49 percent stating they were already supporting transactions made via smartphones and tablets, with a further 13 percent indicating that plan to do so in the future. The proportion of sales through m-commerce grew during 2012, accounting for 2.9 percent of sales.

The survey, sponsored by JDA Software, also showed that senior IT staff will continue to spend on developing a multi-channel, online commerce strategy as their top priority. Investment in store systems was next in line, followed by development of CRM systems and supply chain management in joint third place.

Overall IT investment spending in the retail sector appeared to have fallen however, dropping to 0.9 percent of sales in 2012, compared with 1.0 percent in 2011. Prior to this, IT spend had been at a 1.3 percent average for four years.

However Brian Hume, managing director of Martec, suggested at the report launch that the drop in budget could be attributed to a number of factors, such as trends towards allocating funds for IT systems to senior staff responsible for non-traditional IT areas, such as marketing or HR for certain applications.

Further trends in the retail sector showed that cloud-based applications are becoming increasingly favoured, with 35 percent of retailers claiming to have a current cloud strategy, while a further 28 percent were looking to do so in future.

E-commerce was the most popular single application to be hosted in the cloud, accounting for 9 percent of retailers, with 17 percent having some sort of minor cloud applications such as expenses or project management in place.

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