The UK's largest clothing retailers are racing to
improve the functionality of their websites as the growth of online
business continues to outpace that of high street
sales.
While food retailers have been fighting for online customers for
years, leading clothing retailers have only become serious about
their online operations in the past 12 months.
Christmas 2006 marked a turning point for online retail, with
every type of retail market seeing a large increase in online sales
compared with the previous year.
According to trade body the Interactive Media in Retail Group (IMRG),
overall online retail sales in December 2006 were 36.5% higher than
in December 2005. But web sales of clothing, footwear and
accessories were up by 64% year-on-year.
The largest clothing retailers have responded to this dramatic
shift in consumer buying habits by installing new e-commerce
systems or overhauling existing offerings.
Within the next few weeks, Marks & Spencer, the UK's largest
clothing retailer, is expected to launch an e-commerce platform
that it has spent the past two years developing in partnership with
Amazon.
When Marks & Spencer's interim results were announced last
November, chief executive Stuart Rose emphasised the growing
strategic importance of online business.
"Online retailing is growing at about 70% a year and attracts
30,000 customers per week, but it has to do better," he said.
Marks & Spencer has set up a new business unit for its
soon-to-launch e-commerce platform. Its first target is to double
sales from £125m to £250m a year.
But Marks & Spencer is not alone in looking to transform
itself online. Many other major clothing retailers are upgrading
their e-commerce platforms.
Arcadia, the group that owns Burton, Dorothy Perkins, Miss
Selfridge, Topman, Topshop and Wallis, relaunched all six of its
websites last autumn, underpinned by IBM's Websphere
technology.
Debenhams is also revamping its own platform to cope with high
spikes in demand similar to those during Christmas 2005.
House of Fraser is going to move to a new platform following its
acquisition by Icelandic retail investor Baugur in November. Baugur
is expected to use its planned platform for all the retail
investments in which it holds a majority stake. These include
Hamleys, Iceland, Jane Norman and Mosaic Fashions.
IMRG CEO James Roper said the moves by the major retailers were
notable for all making use of existing retail platform
technology.
"You would be mad to build your own platform now because it
would never catch up with the platforms that are already on the
market," he said.
"Big retailers buy platforms because everyone else uses them,
but in many cases they are inadequate and non-progressive
platforms. If you look at the US market, it is already much more
advanced than ours because it has had so much time and resource
thrown at it."
The use of existing technology may be a theme, but the IT
operations of clothing retailers have taken several different
approaches to deploying platforms for their businesses.
According to analyst firm Forrester Research, retailers are
currently choosing from three broad types of software packages:
specialised e-commerce applications, IT infrastructure that
includes e-commerce functionality, and enterprise resource planning
(ERP) systems. However, none of the options provides out-of-the-box
integration between e-commerce platforms and retailers' other
systems.
Forrester senior analyst Tamara Mendelsohn said, "There are no
multi-channel platforms that will provide seamless integration
between the web, contact centres and stores. Retailers still have
to build out the customisations between the different systems."
And Forrester's latest analysis of e-commerce platforms found
only a few specialised applications survived the dotcom crash, with
ATG and Comergent providing some of the most "highly refined
products".
The second choice is to use suppliers such as IBM and Microsoft,
which have adapted underlying platforms to provide retailers with
complete views of their customers.
The third option is for retailers to buy additional
functionality from the suppliers of their ERP systems.
Oracle and SAP, as well as smaller US supplier Escalate Retail,
offer e-commerce platforms as bolt-ons to their main ERP
systems.
So far no single approach has gained favour among UK retailers,
though a frontrunner seems likely to emerge over the next year.
e-commerce platforms - what are the retailers
buying?
According to a Microsoft survey of 100 of the UK's largest
retailers, the most successful supplier of e-commerce platforms,
Venda, is being used in just seven companies. Its market share has
improved from 2006 when its platform was used by three big
retailers.
Behind Venda, IBM and Microsoft are used by just six retailers
each, while Escalate Retail is in use in two companies. ATG's only
high profile UK retail customer is Woolworths, although it won 65
other customers worldwide during 2006.
The research also shows that not all UK retailers have embraced
e-commerce. Although 95 of the 100 companies surveyed by Microsoft
had a website, only 56 had a transactional website, with a further
four retailers planning to introduce transactional features during
2007.
But some approaches to e-commerce have been adopted by most
retailers. Some 79 companies in the Microsoft survey outsourced the
operation of their websites. E-commerce platforms were outsourced
by more retailers than any other type of technology.
Retailers also had a clear favourite outsourcing partner for
their e-commerce platforms. Venda was the outsourcer for 63
retailers, including specialist toy store Hamleys and record store
chain Virgin Retail.
Management of e-commerce operations could be bundled into larger
outsourcing contracts. Eight retailers surveyed had outsourced all
their IT. They included Matalan, which outsourced to Capgemini
Somerfield, which signed a deal with Tata last December and DSG -
the owner of Currys - which uses HCL.
Baugur web plan for high street brands
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