News Analysis

UK retail IT spending stagnates

Miya Knights

UK retail IT spending is stagnating at 1.3% of annual sales, remaining at the same level as last year, according to the latest figures complied by Martec International.

However, the industry is still willing to invest if it can deliver in two key areas: operational efficiencies and getting more of the right product, to the right customer, at the right time.

The Martec report questioned the top 100 UK retailers, and found that store operations remained their top priority for IT investment, cited by 24%. Merchandising systems in creased to 12% from 7% last year. And website or e-commerce operations came in at 9%.

The report said: "For most retailers the investment in store systems is due to an electronic point of sale (EPOS) replacement project, but others are adding mobile technology in-store or systems to better improve the customer experience with mobile tills and enhanced functionality."

High Street shops are looking for ways to maximise their investment. The Co-op is collecting customer feedback through chip and PIN terminals. When paying for goods by credit or debit cards, a sample of The Co-operative Group's customers are now presented with a multiple-choice question on the PIN pad asking for their views on the store, the retail experience or aspects of their lifestyles.

The Co-op has surveyed up to 300,000 customers across the country. Responses are returned to the group's data centre within 24 hours, where previously, the retailer would pay up to £100,000 for customers to be surveyed at 24 stores with responses received six weeks later. Lawrence Freeman, Co-operative Group development manager said: "Extending the functionality on our point of sale (POS) payment terminals to gather customer feedback has been an extremely successful and satisfying project. Low cost and high impact, we can reach more customers more quickly and remain in tune with their feelings."

Since July, British Red Cross has been updating its EPOS estate across 330 stores by taking on hosted, software-as-a-service (SaaS) retail management till systems from specialist provider, Cybertill. Paul Thompson, British Red Cross retail general manager said: "It is time to move to a system that will provide the accurate and in-depth information that will enable British Red Cross to monitor and analyse its business more thoroughly."

With system roll out expected to begin this autumn, the Cybertill system will become the core system of each shop, and will link to British Red Cross' finance system via a broadband connection to the provider Glasgow data centre.

Mark Croxton, director of retail systems provider Aldata, says that "pressure on the economy is actually good for end-to-end vendors like us. We've seen retailers wanting to run an awful lot of promotions recently, but the issue is how they manage the long tail of promotions." These requirements are also shaping the trend towards deploying merchandising and inventory management software, as well as an increasing number of mobile store systems.

"They're not only looking at mobile computing for stock and inventory management, product enquiries and item look-ups" Croxton said. "When it comes to things like customer ordering, they are looking to link up their web stores and shops to pool stock and offer more joined-up customer service across channels."

His comments have been endorsed by a recent slew of mobile store technology deals. FCUK has been rolling mobile handhelds out for stocktaking, Woolworths and Apple for queue-busting and even wireless broadband routers as network back-ups, in the case of homeware and furniture retailer, The Pier.

In support of store system projects, particularly those featuring mobile technologies, converged networking investment has continued to be a feature of those retailers updating core capabilities. But like Tesco's £100-million deal with Cable & Wireless, managed services are increasingly an option for the cost-conscious retailer.

When the deal was signed at the end of May, Nick Foulkes, Tesco UK infrastructure and operations IT director said even a retailer of its size couldn't match the capital investment in network capacity of a service provider. He added that the five-year contract would enable new in-store kiosks, 'telepresence' video-conferencing and fixed-mobile convergence (FMC), cutting call costs and allowing staff to keep in closer contact. "We couldn't have hoped to do telepresence or set up staff with FMC handsets, with all the different networks and tariffs we would have had to handle, on our own," he said.

Retailers seem more willing in tougher times to look at alternate IT delivery models to sweat their assets - whether it be part of core transactional or supply chain operations. A key area that links with integration and mobile trends in-store is compliance, or the Payment Card Industry Data Security Standard (PCI DSS).

The payment data standard has been in force for over two years but a survey conducted in June found that 88% of UK businesses were not compliant. Many retailers have followed the example set by JD Sports earlier this year, when it signed a wide-ranging managed service deal to support it on its journey towards PCI DSS compliance.

The five-year, £2-million deal with IT services provider, Pasporte includes the migration of JD's back-office applications and data into a hosted environment the implementation of a 24-hour disaster recovery programme and a managed wide area network (WAN) between the retailers' four warehouses and head office.

Harry Willoughby, JD Sports IT manager said: "With our PCI DSS compliance programme underway, the opportunity to achieve a better foundation for our IT systems and accelerate our governance strategy made for a very compelling business case." And increasingly more retailers are looking at the value of their payment data and weighing it against the operational risk of becoming the next TK Maxx or Cotton Traders customer credit card data breach headline.

Natasja Bolton, head of assurance services at dns, a specialist information security consultancy in the UK, says, "Almost every week a new story breaks of data loss from one organisation or another." She said the amount of data held by retailers makes them an especially high risk. And, with the introduction of customer loyalty cards, credit card details and other financial and personal data files, the amount of valuable data they hold means customers are at the mercy of the company's security policy.

"We are seeing an increase in the number of organisations requesting security advice and policy implementation which is encouraging," Bolton added. "Bringing in a consultancy of security experts is often the most successful and cost effective route, which not only secures the data, but ensures compliance with the increasing amount of regulation. "

Specialist vendors, including The Logic Group, Quova, CyberSource and The 3rd Man, have all launched managed or hosted fraud monitoring services to accompany those that promise to outsource the entire transaction lifecycle and remove the retailer from the compliance loop completely.

The launch in June of an online, social network driven bookstore by Borders UK says it all in terms of trends. Geoff O'Neil, Borders UK head of supply chain, said: "We've managed to develop a fully transactional, functionally rich e-commerce site for around £100,000 by outsourcing design, hosting, fulfilment and the contact centre, but in such a way as can scale because we've really no idea how big it might grow: although I know it's often the case that the web outperforms even the most successful retailer's flagship stores."

Even the ever-growing presence of e-commerce is evidence that retailers are embracing new technologies and delivery models to explore new opportunities.


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