Rise in Multichannel Retailing Drives Growth

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<p><strong>London &mdash; May 24</strong><br />Retailers face increasing pressure to offer customers a fully integrated, multichannel experience in which products can be bought online and collected in store, for example. </p><p>Traditional IT integration can provide this service, but the evolution of service-oriented architecture (SOA) offers retailers an approach whereby they can achieve competitive advantage. </p><p>This is according to a new report by independent market analyst Datamonitor, &ldquo;Multichannel Retailing in a Service-Oriented Future.&rdquo; </p><p>It predicts global spend by the retail sector on SOA will reach $9.5 billion by 2012. The report, which investigates the technological benefits of SOA in a multichannel retail environment, also reveals the importance of small- and medium-sized retailers in the SOA market and how vendors can help improve uptake in the retail sector in general.<br /><br />Although there has been a slowdown in the growth of the global retail industry as a whole, the unprecedented growth rates in e-retailing have encouraged stores to refine their multichannel strategies. </p><p>&ldquo;Multichannel retailing is not a new concept &mdash; virtually all leading retailers have responded to the demand for e-retailing by offering online purchasing,&rdquo; said James Kenworthy, Datamonitor retail technology analyst and author of the study. &ldquo;However, where the battle is now being fought is over the customer experience while online &mdash; retailers wanting to gain competitive advantage must offer an experience and service that meets customers&rsquo; increasingly high expectations. Key to this is having a fully integrated IT architecture supporting the different channels.&rdquo;<br /><br />Despite accounting for only 8.6 percent of global retail spend in 2006, Datamonitor forecasts e-retailing will reach 12.9 percent by 2012. </p><p>As well as driving sales, however, the importance of the online channel is vital for pushing online browsers to the store, with 46 percent of browsers going on to make a purchase in the store.<br /><br />Today, retail customers want the ability to order online and either collect in-store or have goods delivered to a specified location. Returns also must be possible at the closest store. </p><p>Such services depend on effective integration between channels, and retailers adopting these strategies are setting the bar increasingly higher for competitors.<br /><br />Multiple channels bring with them increased complexity to IT infrastructure, and retailers using traditional integration architecture are quickly running into problems in fulfilling demand, gaining cross-channel visibility and retaining the necessary flexibility for growth. </p><p>The latest evolution in integration, however &mdash; SOA &mdash; offers an IT framework where the demands of multichannel retailing can be met.<br /><br />&ldquo;The highly competitive retail industry tends to suffer from thin margins and, in turn, a certain degree of IT inertia,&rdquo; Kenworthy said. &ldquo;Legacy retail systems are often integrated via a point-to-point or hub-and-spoke approach, which struggles to cope with the increased requirements placed on it when the retailer adopts a multichannel approach. </p><p>&quot;SOA, however, has allowed multichannel retailers to meet these requirements by enabling applications to act as shared services that can comprise given business processes. The use of open standards also gives SOA a cost advantage over other enterprise application integration (EAI) approaches.&rdquo;<br /><br />The adoption levels of SOA vary significantly between industries. Although the retail industry is more or less on par with SOA uptake (with 11 percent having deployed and 16 percent trialling SOA in 2006), there are large regional variations, with Western countries being the primary adopters.<br /><br />SOA adoption is the domain of larger retailers. Globally, they accounted for 86 percent of the $1.2 billion SOA market in retail in 2006. </p><p>Although Datamonitor expects the majority of large retailers worldwide to have moved to an SOA approach to integration by 2012, the uptake among small- and medium-sized businesses will be more modest &mdash; they are expected to rise to 18 percent by 2012, assuming vendors give suitable attention to the small- to medium-sized business retail market.<br /><br />Nevertheless, according to Datamonitor, the steady growth in SOA penetration among small- and medium-sized businesses means that by 2012, SMBs will contribute to roughly half the SOA market size in retail. </p><p>&ldquo;Despite deploying cheaper, more off-the-shelf SOA solutions, the industry-specific phenomenon that retail is comprised mainly of SMBs means that small increases in penetration among SMBs translates to large increases in the SOA market size,&quot; Kenworthy said. &ldquo;The growth of multichannel retailing is providing retailers with the necessary impetus to review their integration architecture, and many have learned the lessons from their peers that SOA offers the most effective approach to meet their needs. </p><p>&quot;However, vendors banking on SOA growth in retail will be disappointed unless they can better position SOA to meet the needs of the SMB market.&rdquo;</p>

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