Huw Thomas talks about the economic and what impact this will have on the retail industry's investment in technology.
The International Monetary Fund expects that the UK economy will be the fastest growing in the G7 this year. It predicts that the UK will grow 2.9% in 2014, up from a January estimate of 2.4%, and will see growth of 2.5% in 2015. This is a continued improvement from the overall figure of 1.7% in 2013 and is particularly great news for retail which in general is significantly impacted by overall growth results.
From a personal business perspective we saw the improvements in the economy last year directly relate to the early stages of capital release in high street retailing. Our System Selection proposition which helps retailers select new IT systems saw a 100% growth for us in 2013 compared to the previous year and the trend continues in to 2014.
As the economy improves retailers aspirations increase. Many retailer's have been hampered by capex freezes over the past five years and consequently their core systems are aging and are now restricting their opportunity to grow. At the same time many more retailers are coming to the market to generate funds to support more investment.
There are many examples of rapidly growing business with big growth ambitions that are in the early stages of massive business transformation programmes aimed at getting them in the position to capitalise on the improving economic situation.
Online continues to be a massive driver with an estimated one pound in five now spent online in the UK. The highest ever recorded. Retailers desperate to differentiate themselves in the omni-channel world are kicking off initiatives which exploit the use of customers smartphones, make their own store systems mobile, driving towards providing a personalised service and investing in big data to analyse how to get the best results from their capital investments.
However, even with this great growth retailers must not lose site of the fact that for most of them the store estate is still the biggest generator of revenue and profit - about 20% of retail sales take place on the web. The unification of ‘bricks and clicks’ is a great way of capitalising on web traffic to drive customers into stores but there is still a significant IT investment to be made in the store estate to distinguish their offer.
The other key challenge that retailers are starting to address in the omni-channel space is the one of payment unification. Many retailers have invested in different payment providers in differing channels and territories and now these need to be unified to allow a consistent and complete shopping experience across all channels.
The next few years should see a big change in the retail technology landscape in the UK. A pent up demand from stifled activity over the past few years is starting to release and the desire to differentiate will drive much more technology innovation than we have seen for many years.
Retail still operates in a difficult market. The economy is improving but shopping behaviour has changed over the recession. Customers are fickle and the level of choice and ability to research and compare before buying makes it more difficult for retailers to drive loyalty. Price is key but so is a compelling customer proposition that makes it easy and a strong brand image that makes the customer proud about buying from them. Retailers that deliver a uniquely personalised service will win. Astute investment in retail IT will help to drive this differentiation and most savvy retailers get this. It’s going to be an exciting 2014!