February 19, 2016, 4:13 PM

Retailers are divided about big investments in tech spending

Some retailers start to realize profit growth from their omnichannel strategy and plan to enhance those capabilities, while others wait and watch, Forrester says.

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A recent report from the U.S. Commerce Department shows that online sales are growing, but retailers are split on whether they want to invest significant resources online.

A report from Forrester Research that polled 163 online retailers found that 50% said they will invest less than $500,000 this year in e-commerce technology.

Yet a combined 49% say they will invest anywhere from $500,000 to more than $20 million, the survey shows. Of those:

  • 17% will invest $500,000-$1 million in commerce technology.
  • 19% will invest $1 million-$4.9 million.
  • 6% will plunk down $5 million-$9.9 million.
  • 4% will spend $10 million-$19.9 million.
  • 3% will invest more than $20 million.

Percentages don’t equal 100% due to rounding.

Many retailers remain on the sidelines because they’re concerned about the cost of omnichannel fulfillment in its early stages, says Forrester analyst Adam Silverman. They’re waiting for proof that they can grow profits, and not just incremental revenue, before they invest heavily. That’s because many omnichannel orders—which could be orders placed online by a consumer and picked up in-store, or a store employee ordering an out-of-stock item for a consumer from a mobile device and shipping it to a shopper’s home—aren’t yet being fulfilled profitably, he says. After all, it can add expenses if a retailer lets a customer order two items online and pick one up in-store while having the other delivered to the customer’s home, Silverman says.

Silverman says retailers will invest more as e-commerce platform builders enhance the platforms’ capabilities and as more customers expect to buy from anywhere and pick up their goods in the most convenient way.

Another key finding from Forrester’s data is that retailers want to more closely integrate the in-store experience with what shoppers see online.

Buy online, ship to store proved to be popular with respondents, with 10% of retailers saying they plan to implement that capability within the next 12 months and another 10% already starting such a project. 16% already have the capability, while 45% have no plans for doing it and 19% don’t know, the survey shows.

Meanwhile, 8% of 118 e-retailers who responded to the question about buy online, pick up in-store say they plan to make in-store inventory visible online within the next 12 months, and another 8% already have such a project underway. Not all respondents answered all the questions in the survey. The combined 16% is nearing parity with the existing 19% who say they already support the capability, Silverman points out. Among the remainder, 44% have no plans to implement the capability in the foreseeable future and 22% don’t know.

Such omnichannel fulfillment initiatives are on the rise because retailers are able to drive incremental revenue and meet rising customer expectations, Silverman says. “It’s rare that an initiative can satisfy both those needs right out of the gate. It’s been successful because it has addressed customer and retailers’ needs.”

Another popular tech spending category:  providing a single customer view with unified customer account and order history across multiple channels. 17% of the respondents plan to implement it within the next 12 months and another 14% have such an initiative underway, the survey shows. The combined 31% will roughly equal the 30% of retailers not planning to implement the single customer view any time soon. Among the rest, 19% already support that capability and 21% don’t know.

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