Solutions News - IT spending up 27% on back of Chip & PIN implementation

The latest survey of British retailers by Retail Knowledge Bank reveals a sharp rise in spending on IT.

Part of the increase can be explained by increased expenditure on readying point-of-sale systems for the move to Chip and PIN.

On average, British retailers spend 1.4 per cent of total sales on technology - an increase of 27 per cent on last year's figure.

Spending ranges from 0.4 per cent to 4.7 per cent of sales. Comparable figures from the US show American retailers spend, on average, 2 per cent of turnover on technology.

PA Consulting head of e-retail Alastair Charatan said the figures were intriguing. He told Retail Week: 'I'm surprised at the increase in spending.

Chip and PIN expenditure should be partly covered by planned spending on EPoS and till systems, and not all retailers are moving to Chip and PIN anyway.

'It may be cyclical - there was a lot of spending in the run-up to the year 2000, followed by a quiet period, so maybe more projects are getting the green light now.'

In terms of applications, virtually all of the top 100 retailers now use financial, merchandise management, HR and EPoS software. Data warehousing is now used by 85 per cent of top players, up from 77 per cent last year.

Space management applications also saw a sharp rise, from 37 per cent last year to 54 per cent now.

Despite negative media coverage of Tesco's and Gillette's trial of Radio Frequency Identification (RFID) technology, retailers are still interested in its use.

Eight per cent of retailers are already trialling the technology, 5 per cent are planning to use it within the next year and 10 per cent are seriously investigating its use.

Although there is a wide variety of retail systems available, many companies still choose to develop systems internally. For instance, 39 per cent developed their own merchandise management systems compared with 29 per cent last year.

Outsourcing remains a popular way for IT departments to control costs, although most retailers prefer to keep their core services in-house.

Web site and e-commerce functions are the most likely to be outsourced, with 61 per cent of respondents trusting an external company to manage such systems.

The study - IT in Retail - researched the systems of 100 leading retailers in the UK, which account for£135 billion in annual sales - 66 per cent of the total retail sector.