E-commerce growth threatened by legacy systems, study finds

Retailers are worried that aging systems lack the flexibility to adapt to new demands

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Retailers fear that their legacy information systems are the biggest barriers to improving the cross-channel shopping experience for their customers, according to a new study.

The survey, "Finding the Integrated Multi-Channel Retailer: Benchmark Study 2008," was released yesterday by Retail Systems Research LLC (RSR) in Miami and was commissioned by IBM and SAP AG. RSR surveyed CIOs, IT managers and others at 103 retail companies worldwide during the month of February. Twenty-eight percent of the companies surveyed had revenues of $50 million or less, 8% had revenues of $51 million to $249 million, and 9% had revenues of $250 million and $499 million. In addition, 10% of the companies surveyed had revenues between $500 million and $999 million, 27% had revenues of $1 billion to $5 billion, and 18% had revenues of more than $5 billion.

The study found that retailers have made progress in aligning online and in-store customer processes, but most have yet to make progress in aligning those processes across all channels, including stores, call centers, the Internet and mobile devices.

"Despite gaining process efficiencies that have improved the profitability of nonstore consumer purchases, retailers struggle to service cross-channel shoppers," according to the survey. "Progress made in creating cross-channel experiences will run afoul of the disparate information systems used to cobble together cross-channel shopping, threatening even the meteoric growth of the online channel."

What that means is that many retailers fear that their aging information systems are the biggest barriers to future improvements, said Brian Kilcourse, the report's author and managing partner at RSR.

As retailers attempt to build up up their multichannel capabilities, they still must come to grips with the lack of integration among their channel-specific systems, Kilcourse said.

"This relates to three capabilities," he said. "One is the ability to have one view of the customer across all the channels. The second is the ability to have consistent product and price information across the channels, and -- this is the real biggie -- the ability to be able to view store-level inventory across all channels."

Kilcourse said most retailers don't have these three capabilities, but they recognize that these processes are high priorities that they need to have for their customers.

"The point we're making is that the customer is already there," he said. "Customers already want to do cross-channel behavior, and retailers are doing this more or less manually ... and that just isn't a scalable model. So the retailers realize they're at this crossroads."

According to the survey, consumers want all channels to work together to deliver a seamless shopping experience, and they're not satisfied when that doesn't occur.

However, the retailers surveyed are worried that their legacy systems lack the flexibility to adapt to these new demands. They're also concerned that their inventory and order management systems are inconsistent across the channels and that they won't have the money in their budgets to address these issues, Kilcourse said.

According to RSR, most of the companies said they need to invest in technology that will enable them to perform real-time inventory and customer updates and make that information available across all channels. The retail winners also placed a great deal of importance on having a central customer-facing order management system across all channels as well as on content management and product information systems.

However, in general, the retailers were not focused on technology that would better enable mobile commerce, RSR noted.

The company recommended that large and small retailers invest in technology that would enable them to speed up and scale up their multichannel operations, which would eventually save them money.

"A key component of that is to move toward technologies that have a single point of control ... for product and customer information," RSR said. "As investments are being made to modernize the technologies that enable efficient and scalable multichannel operations, retailers need to pay attention to a new emerging channel, the mobile channel, or m-commerce."

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