Retailers rethink online platforms

Following Christmas' online sales boom, clothing retailers have woken up to the web and are revamping e-commerce systems to seize competitive advantage

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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