Australian retail shops plan IT overhaul

Retail enterprises in Australia will spend US$1.35 billion by the end of this year with the market continuing to grow at a cumulative growth rate of nine percent per annum through to 2010.

Springboard Research A/NZ country manager, Phil Hassey, said the market will reach A$1.96 billion by 2010.

Hassey said that after focusing on driving customer satisfaction, increasing retention, and expanding business, IT is the highest investment area for most large and medium-sized retailers. “Our data also shows that one in five Australian retail companies are on the verge of an IT infrastructure overhaul, and are in the process of replacing legacy systems with more modern and cutting-edge technology,” he said.

“This will create many short-term opportunities for IT vendors that are able to effectively communicate the benefits of their solutions.” Hassey said a saturated local market has forced Australian retail companies to look at investing in new markets, including geographic expansion and new formats, to boost their business.

He said these retailers consider expansion as key to continued growth and profitability.

This focus on new market opportunities, and the pivotal role technology plays in these strategies, will prove to be one of the key drivers for IT revenue growth in the Australian retail industry.

The survey covered 48 CIOs and IT decision makers and according to Springboard Research senior analyst for vertical industries, Nilotpal Chakravarti, a quarter of respondents have invested heavily in ERP solutions. Chakravarti said this underscores the industry’s need for streamlining back-end operations affected by the dynamic changes retailers face due to expanding markets, developing technologies and evolving business strategies.

“We have also seen retail companies across all sectors invest in supply chain management (SCM) to streamline business operations,” he said. “Retail investment in this area of IT is viewed as fundamental to industry growth and profitability.

“A further 26 percent of retail respondents have said that SCM has been their main IT focus area of the past 24 months.” While online retailing in Australia is at a nascent stage, it is on the agenda of a significant number of retailers, especially the larger ones.

“These retailers see digital storefronts as a complement to their offline business with 23 percent identifying e-commerce as their major category for investment over the past 24 months,” Chakravarti said.

From a competitive standpoint, no clear leading IT vendor emerged from respondent feedback. As a result up to 60 percent of respondents had implemented in-house IT solutions.

Fenmore Designs, IT manager, Sylvana Vittora, said outside of Point of Sale systems, many retailers hold off on implementing new technology because of high costs and the extensive manpower required for installation.

Fenmore relies on heavily customized applications and Vittora agrees many retailers will be looking to overhaul IT operations in the next 18 months.

“There are a lot of retailers out there handling credit card information and other data that is stored on legacy systems no longer supported by software vendors,” she said.

“In the last 12 months spending on IT has become more of a priority as company’s realize they need to spend on technology to move forward.”

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