Retail IT systems straining to keep pace with heightened demand

12% of retailers have not increased their IT budget since the pandemic

After the UK’s top 100 retailers experienced a rapid increase in online traffic due to the pandemic (by up to 130%), an overwhelming majority (89%) admit their digital and e-commerce capabilities have failed to keep pace with the surge in demand.

More than half (53%) specifically say their e-commerce platform was not designed for the recent increase in online sales (25% strongly agree). As a result, a third of retailers are looking at launching or improving their website (33%), social media sales (32%) or an e-commerce app (31%).

Retailers are also looking to enhance the functionality of their platforms to increase sales, with customer reviews (88%), cookies (85%), customer journey tracking (69%) and AI solutions like chatbots (40%) proving the most popular.

Given the commensurate impact on fulfilment, “warehousing, distribution and logistics” is the IT system most in need of improvement, recognised by 38% of retailers.

A quarter (23%) of retailers also say they are operating legacy or out-of-support systems, leaving them open to cyber and data security risks and potentially breaching UK data protection regulations. Retailers admit their IT systems are on average 3 years behind where they need to be to cope with current demand.

The need for harmonisation

A lack of harmonisation between IT systems is also highlighted in the research report, The Digital Imperative: Bridging the IT and data gap in post-pandemic retail, by UK law firm TLT.

At least a third (32%) of retailers are using systems to support their e-commerce activities that don’t interact with any of their other core systems. Of those, at least 31% currently have no plans to integrate these important systems with their core infrastructure.

Yet more than half (56%) of retailers agree that harmonisation is becoming increasingly important. The biggest drivers for this include making online sales more profitable (65%), the growth of online retail (47%) and the quest for a single view of the customer (46%) and stock (42%). 38% of retailers also say this is necessary to enable them to use their physical stores for online fulfilment.

Budgetary constraints

Despite this urgent need for digital transformation, 70% of retailers say a lack of budget is the biggest barrier to integration, followed by a lack of time (49%) and the complexity of the task (42%).

12% of UK retailers have not increased their IT budget at all since the start of the pandemic, and the average uplift was just 6% – lower than TLT’s experts predicted.

Perran Jervis, partner and head of retail and consumers goods at TLT, says: “As well as worrying about the future of the physical high street, we need to start worrying about the future of the virtual high street. What improvements and investment are needed to ensure a seamless omnichannel experience for customers with a resilient, efficient and secure online market that allows digital interaction and easy fulfilment?”

Dan Read, technology and IP partner at TLT, adds: “Retailers are in a race to improve their digital capabilities following the growth of online sales caused by the pandemic. While stores have now reopened, the level of online activity will remain elevated and this creates a much hotter market for digital engagement and conversion. Retailers cannot afford to rest on their laurels when it comes to digital customer journeys and the skills and infrastructure that support this.

“A conversation needs to be had between boards and IT departments about what’s needed to ‘level up’ in response to the pandemic. Boards need to recognise the investment need, and IT directors need to demonstrate the necessity of certain improvements and clear ROI, supported by data.”