The retail industry is facing an annual tech investment gap that could top £ 22 billion, “creating an innovation vacuum which not only threatens retail performance, but also risks long-term sector health and business survival”, says the KPMG/RetailNext Think Tank (RTT).
According to its whitepaper, multichannel retailers should allocate 4-8 per cent of their annual revenue towards technology. The paper is titled Change Or Fail: Why Innovation Is The Business Survival Issue Retailers Can’t Ignore. The majority of retailers, it says, only spend 1.5–3 per cent at the moment, “leaving an estimated best-case of a 5 per cent investment gap based on annual turnover.”
RTT forecasts say, that with retail industry revenues reaching £ 441 billion in 2022, there might be a potential annual IT investment shortfall above £ 22 billion. Retailers are now “much underinvested in the innovation they need to secure long-term prosperity and health” as a result of this.
The RTT also cautions that the continued underfunding of technology occurs at a time when the viability of the retail sector is being questioned. Q3 foot traffic, a crucial measure of the health of the High Street, remained strong, increasing by +0.7 per cent year over year, according to data from RetailNext.
But according to the most recent RTT Retail Health Index, the state of the industry will deteriorate for a seventh straight quarter. In Q4, the index fell -1 point to 68 points, a -7 point
decline from Q2 2020, when the UK was placed under lockdown and non-essential retail was forced to close.
It suggests the market is now in a more or less permanent state of flux and retailers unable to adapt “in terms of their culture, staff roles and contracts and investment in technology, will go out of business”.
