Confidence is rising among UK retail IT departments, with
spending in 2004 expected to grow from last year's £4.15bn to more
than £4.5bn, according to the Computer Weekly IT Expenditure
Report, produced by Kew Associates.
The focus of spending is set to change significantly in coming
years, moving towards improving customer service rather than
squeezing savings from back-office systems, according to industry
experts.
Many retailers have been spending in an attempt to emulate Tesco
and Wal-Mart, which have the best supply chain operations in the
world, said Tom Friedman, chief executive of retail IT consultancy
Retail Systems Alert.
However, he said, retailers will catch up - especially when radio
frequency identification (RFID) standards are ratified.
"The supply chain is essentially a network and there is not much
money to be saved anymore," Friedman said. "The real money can be
made in merchandising and forecasting.
"IT suppliers have been talking about innovative front-end systems
for some time, but not many retailers have done anything. However,
this will be the focus over the next five years."
The aim of companies in the ultra-competitive retail market will be
to more closely tie the store to the needs of the customers.
"The high street in the UK is pretty unique, based as it is on
chain stores, rather than independents, and chains generally have
no idea what the customer wants," Friedman said.
"Technology can help, although it has to be opt-in and based on a
value proposition."
Discussions about "customer intimacy" have been going along for
some time, but retailers need to improve their management of
product catalogues before it can be achieved, said Richard Hull,
retail IT consultant at Cap Gemini Ernst & Young.
"How retailers are going to manage information is a big issue,
given their struggles with reporting data efficiently - there are
always different versions of the truth," he said. "There is going
to be more outsourcing of data to third parties such as Dunhumby
[which works with Tesco on its Clubcard scheme]."
IT outsourcing is likely to grow, according to Friedman. "The
outsourcing debate has moved on to what people are calling
'smart-sourcing'."
"It is no longer about cost, but about focusing on core activities.
In some cases it may even be more slightly expensive to outsource,
but it will make more sense to have it done by experts."