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Retailers' IT spending stagnates in 2010

Rebecca Thomson

IT spending by the UK's top 100 retailers is stagnant this year, remaining at 2009's unusually low level of 1.1% of sales.

The level of spending was stable for four years before that at 1.3% of sales, before companies reduced spending in response to the recession.

Despite the economic outlook improving slightly since last year, analysts said chief information officers and their teams had learnt to do more with less in 2009 and were expected to continue to do so.

But experts warn that IT projects and infrastructure investment deferred in response to the cutbacks cannot be put off forever.

"It is definitely more challenging, but you can't put off major infrastructure improvements for long," said John Bovill, group IT director at Aurora Fashions.

Brian Hume, managing director of retail consulting firm Martec International, said those who do take the plunge now are likely to get bargains.

"Now is the time to buy - retailers are telling us suppliers have got more realistic with their pricing strategies," he said. "This year and next year are probably an optimum time to save money on investment costs."

The IT in Retail report, produced by Martec and sponsored by BT Expedite, found IT spending is lowest in the food sector, with grocers such as the Co-Operative spending an average of 0.7% of sales on IT.

At the other end of the scale, home shopping retailers - such as Asos.com, who don't have stores to maintain and whose businesses rely on web systems - spent 3.4% of sales on IT.

Store systems are high on the list of investment priorities for retailers planning to spend on IT, especially in the non-food retail sector. Transaction websites and e-commerce are not far behind, with continued growth in the area and the unstoppable march of well-known brands onto the internet.

Companies are also looking at how best to use their customer relationship management (CRM) systems, as the amount of data they hold on their customers starts to mushroom. Businesses with websites, stores and loyalty cards are now able to build a detailed picture of some of their customers, and work is beginning on how to best manage and use this data to suggest further products or services.

"When Tesco started its Clubcard scheme, it cost between 0.5% and 0.75% to run a scheme like this. You had to pay for the data it provided," said Brian Hume.

"With e-commerce, people voluntarily give their name, their address and other details, so companies now have detailed data on their customers for free."

This, he said, is turning people's attention to CRM and how to use the data to cross-sell through different channels.


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