Online investment could protect against downturn

Retail spending is down, but online is still growing

Retail sector CIOs will need to invest in online shopping services throughout the current slowdown to meet the demands of consumers both now and in the future, experts have signalled.

The UK's e-Retail Sales Index recently reported that online sales in the first six months of this year were far healthier than high street sales.

"We predict between 30 and 50% of all retail will be online in the next five years," says Mike Petevinos, head of retail consulting at CapGemini UK, which produces the e-Retail Sales Index with electronic retail group IMRG."

Marks & Spencer (M&S) reiterated its intentions to invest in online retail and technology, despite admitting to its shareholders that it faces two years of difficulties.

"We've invested behind the scenes in our IT and logistics infrastructure in order to maintain service efficiency," Sir Stuart Rose, the M&S chief executive wrote in the organisation's annual report. "We are introducing new point-of-sale systems, including more than 2000 new tills and 258 new hand-held terminals to make stock checking easier and more efficient."

M&S says that over the next three years the company will invest between £150 (NZ$395) and £250 million per annum in technology. Ian Dyson, group finance and operations director at M&S said,

"In IT we will implement new store systems, new trading systems and new support systems. We now have an integrated company-wide IT plan; a three year road map that sets out how our systems will deliver every aspect of our business plan, both within the UK and internationally."

He also revealed the IT strategy for the M&S expansion into the world's most important emerging market, China, is in place. New financial and back office systems are also being implemented by Darrell Stein, director of IT and logistics.

The e-Retail Sales Index revealed that customers are moving online because of rising fuel costs, falling disposable income and because they believe online retailing is more sustainable. Online sales are expected to remain strong throughout 2008, despite the economy being predicted to slow.

"The ability to research and make more informed choices in a time of heightened price sensitivity is a key advantage of the online channel," Petevinos at CapGemini says.

James Roper, IMRG chief executive said his organisation had found that 56% of online shoppers believe e-commerce was more environmentally sustainable than visiting the high street. These trends are putting pressure on retail CIOs to continue investments in systems that will meet consumer demand.

"Retailers will increasingly look at business models that allow them to retain the maximum proportion of the consumer spend," says Ravi Pandey, VP of NIIT Technologies, which supplies services to M&S.

British shoppers spent £26.5 billion online in the first six months of 2008, which is 17p in every pound, the e-Retail Index reports. This is a rise of 38% from the same period in 2007. Petevinos says online sales are proving resilient to tough trading conditions.

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