Is American Retail IT The Hare To Asia’s Tortoise?

Written by Evan Schuman
August 21st, 2008

While North American retail execs are planning for trivial—if any—IT investment increases this year, with "more than one-quarter of retailers expecting lower IT spending," more than half of their Asia Pacific counterparts are preparing for significantly higher IT spending, according to new Forrester numbers released this week. A bit of the Tortoise and the Hare perhaps?

In North America, "the mean estimate for share of IT budget devoted to innovation in 2007 was 35 percent," the Forrester report said. "But a lower median at 30 percent and mode at 20 percent suggest that a few retailers planned heavy funding of innovation, while most planned much less investment."

But in terms of the percentage of retail execs who simply said their IT budget would increase—regardless of the size of that increase—North American retailers fall right in the middle globally, at 42 percent, significantly above their European counterparts at 34 percent and right below Asia Pacific at 52 percent, according to the Forrester figures.

The report also noted North American apathy surrounding IT architecture redesign. "Despite the opportunities offered by centralization, North American retailers are handicapped by poor availability of broadband. This explains their relatively low level of interest in redesign of IT architecture, with more than 70 percent of them declaring this a low priority or not on their 2008 IT investment agenda," wrote Forrester analyst George Lawrie. "European and Asia Pacific retailers are a bit more open to new IT architectures, with approximately 40 percent and 33 percent respectively including IT architecture redesign or redeployment in their agenda for 2008."

Another unpopular technology among those surveyed—worldwide—was mobile. "Retailers are no more optimistic than other industries when it comes to budget for mobile solutions. More than seven out of 10 North American retailers consider mobility initiatives to be a low priority or not on the 2008 agenda, compared with 69 percent of non-retailers," the report said. "Similarly, only 32 percent of European retailers and 27 percent of Asia Pacific retailers have mobility initiatives on their 2008 agenda."

Security fared somewhat better, with 40 percent of North American retailers and 51 percent of Asia Pacific retailers planning to spend "slightly more or much more on IT security in 2008. An even higher proportion of Asia Pacific non-retailers plan increased security investments," the report said. "But European retailers, lulled into a sense of security by their investment in chip and pin, are less enthusiastic, with only 22 percent planning slightly more or much more security spend, as opposed to 35 percent of European non-retailers."

The Forrester folk also compared the rise or fall of retail revenue in a region and mapped it against the number of stores. "In most of the countries of the world, between 2002 and 2007, the rate of increase of retail revenues was greater than the rate of increase in number of retailer outlets. Italy was a fascinating exception, with the number of retail outlets increasing by almost 13 percent, while retail revenues actually decreased," the report said. "China provided the most extreme example of the trend, with retail revenues rising by almost 56 percent, while the number of retail outlets declined by almost 18 percent. But the most interesting trend of all is that grocery is growing worldwide at the expense of non-grocery retailers, reflecting a trend toward one-stop shopping."

Although E-Commerce fared well globally, other aspects of non-store retail—including vending machines, home shopping and even door-to-door direct sales—fared quite well. Such non-store retail "increased between 2002 and 2007 by more than 30 percent in Mexico and the U.S. and by more than 60 percent in the U.K., France, South Korea, and China. The most significant category of non-store sales is Internet retailing in most European and North American countries," the report said. "In China and India, direct selling was by far the most important category of non-store retail. In South Korea, home shopping was also the most important, at more than two-fifths of non-store sales, narrowly exceeding Internet shopping."


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