ADVERTORIAL: Retailers struggle to ‘keep pace’ with online shopping surge

The coronavirus pandemic quickly forced retailers in all sectors to change the way they operate.

During the height of the pandemic, non-essential retailers were forced to close and people were instructed to stay at home.

As people had no choice but to shop online for anything other than their essential goods, this caused a significant surge in online shopping.

Despite the reopening of retail stores in April, allowing customers to make a physical return to their favourite shops, there is still a high number of people choosing and preferring to shop online today.

It is now predicted that online sales will remain high even after the pandemic, as people have become more accustomed to online shopping – causing a bigger demand for retailers to cope with.

TLT spoke to the UK’s top 100 retailers about the gap between this demand and their IT capabilities, as part of the law firm’s latest Retail Agility research. The report details the impact of the pandemic on retailers’ IT priorities, budgets, risks and opportunities.

From IT and digital platforms failing to keep pace with demand to considering whether the current infrastructure and investment strategies are solid enough for an increasingly busy “virtual high street” – we look into the findings from TLT’s extensive report.

89% of retailers say their digital and e-commerce platforms need improvement

With a rapid increase in online shopping, the UK’s top 100 retailers said, on average, their online traffic increased by 52% during the pandemic.

The retail sector has invested heavily in IT to support the growth of online shopping in recent years, however, a staggering 89% of retailers say their digital and e-commerce capabilities have failed to keep pace with the recent surge following the pandemic.

More than half of retailers have specifically said that their e-commerce platform was not built for the recent rise in online sales.

This means that creating a stronger digital sales platform has become a key priority, with a third of retailers now looking to drastically improve their e-commerce website.

Due to this recent rise in online shopping, 32% of retailers are also looking to launch or improve their social media sales, and 31% want to better their e-commerce apps to deliver a more seamless, omnichannel experience for customers.

Retailers are also looking to enhance the functionality of their platforms to increase sales, with 88% using or looking to use customer reviews, 85% cookies, 69% customer journey tracking and 40% artificial intelligence solutions, such as chatbots.

Online food shopping has increased by 94% since the pandemic began

Amongst the types of goods that people have been purchasing online, there has been a huge increase in online traffic in the food and grocery sector – up by 94% since the pandemic began.

Online purchasing of homeware has also increased by 65%, which corresponds with UK homeowners’ efforts to redecorate and revamp their homes during lockdown.

Further sectors that have witnessed an increase in online traffic include lifestyle and leisure, with a rise of 47% – whilst fashion and beauty has increased by 32%.

These levels are expected to remain elevated even when normal life resumes.

Research suggests people have become more accustomed to digital shopping, and major retailers such as IKEA have reported higher proportions of online sales, even after stores reopened.

Warehousing, distribution and logistics systems are in most need of improvement

When purchasing online, customers expect to be able to navigate the platform easily in order to buy good quality products that are delivered quickly to their door.

This means that retailers’ IT systems need to work effectively and be able to cope with the increase in demand.

Beyond customer-facing platforms, 38% of retailers say they are dissatisfied with their warehousing, distribution and logistics systems – more than any other IT system.

This is closely followed by IT infrastructure at 34%, other inventory management at 30% and CRM at 28%.

Perran Jervis, head of retail and consumer goods at TLT, says: “Customers increasingly expect products to be delivered quickly, and this is becoming one of the most important factors in the buying decision.

“They expect websites to perform at high speed, depleted stock to be replaced, easy access to customer service and a personalised retail experience.

“Being able to deliver high performance, responsiveness and omnichannel personalisation consistently and reliably will require continued investment in IT, and more retailers will be looking for technologies like AI and automation to support this.”

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

As digital platforms struggle to keep up with demand, further investment in the right kinds of technologies is vital.

Despite a drastic need and recognition for digital improvements, 12% of retailers admit that they 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.

70% of retailers say that a lack of budget is the biggest barrier to systems integration for their business, followed by a lack of time (49%) and the complexity of the task (42%).

David Gardner, technology and IP partner at TLT, said: “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.

David added: “There are many competing priorities in retail, but the evidence suggests there is a growing and urgent need to invest in IT.

“If boards can understand the requirement and IT directors can justify the spend – using data to demonstrate ROI, for example – then there are significant gains to be had from harmonising and modernising your IT platforms.

“In the long run, this will save cost and provide the business with a strong and resilient basis for future growth.”

Retailers admit their IT systems are almost three years behind what they need to be

Legacy IT is a prominent concern for retailers post-pandemic, given their increasing reliance on digital infrastructure and optimal digital performance.

A quarter of retailers admit they are currently operating legacy or out-of-support systems, while retailers say their IT systems are, on average, three years behind where they need to be to cope with the current level of demand.

32% of retailers also said they are using systems to support their e-commerce activities that don’t interact or integrate with any of their other core systems.

This represents a significant problem, as without the ability to share data efficiently between e-commerce platforms and other business systems, retailers will find creating effective omnichannel experiences a greater challenge.

Grace Roddie, data, privacy and cybersecurity associate at TLT explains: “Many businesses continue to take a gamble on operating legacy systems that have fallen out of support and are no longer being patched or updated.

“This makes them a prime target for cyberattacks, increases the possibility of data breaches or losses, and will be treated as an aggravating factor in regulatory investigations.”

Contact TLT

TLT supports large corporates, public institutions and high growth businesses on their strategic and day-to-day legal needs.

The firm’s offering includes market-leading legal expertise, near-legal consultancy services and a suite of solutions developed under its FutureLaw innovation programme.

TLT has six UK offices located in Bristol, London, Manchester, Glasgow, Edinburgh and Belfast.

Contact TLT’s specialist retail and consumer goods team for expert advice or download the full report.