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How is 2022 Shaping Up for UK Online Retailers?

The UK has one of the world’s strongest ecommerce markets, accounting for 14% of overall global retail sales and it’s a sector that saw unprecedented demand spikes throughout the pandemic.

The UK has one of the world’s strongest ecommerce markets and accounts for 14% of overall global retail sales. The sector witnessed unprecedented demand spikes throughout the pandemic. For example, during 2020, online sales revenues from electrical items increased by 90.8%, and gardening items by an incredible 222.5%. More broadly, in the same year, 87% of people in the UK with internet access made online purchases — up from 78% in 2018. 

But how is 2022 shaping up for this crucial economic sector? How far advanced are online retailers on their digital transformation journey? What do they see as barriers to future tech adoption? And what are their IT objectives for the remainder of the year? Our Mid-Market IT Priorities report 2022, which examined this sector in depth, offers some answers.

IT budget concerns in 2021 and 2022 

The sector’s IT decision-makers were more pessimistic about their 2021 IT budgets than their healthcare, insurance, and transport logistics peers. Indeed, 55% said last year’s IT budgets were insufficient to meet their objectives or achieve their goals. This is compared with 45% in healthcare, 48% in insurance, and 42% in transport logistics. 

Our research also suggests the sector’s IT decision-makers are equally pessimistic about getting an IT budget increase this year — only 11% said they expected one. That’s lower than in any other industry covered in our report. 

Online retailers and their cloud transformation journeys

Our research reveals that in 2021 opinion was almost equally split across the sector on which cloud adoption route to take — but hybrid cloud was just out in front: 

  • 29% predominantly hybrid cloud
  • 25% predominantly public cloud
  • 21% predominantly private cloud

However, it’s interesting to note around a quarter of the UK’s online retailers were still using a predominantly on-premises IT infrastructure. That’s higher than in the insurance sector (16%) and the transport logistics sector (20%). 

The sector’s most significant and most recent surge in cloud adoption occurred during the first two waves of the pandemic (51% invested in hybrid cloud, 53% in public cloud and 60% in private cloud). That was common across all the sectors covered in this report, suggesting online retailers, like most businesses, had to pivot quickly to cope with new COVID regulations — either by creating a work-from-home strategy or providing socially distanced facilities. 

Data from another section of our report appears to support this claim. It reveals online retailers were the biggest adopters of Backup as a Service (BUaaS), Storage as a Service (STaaS) and Database Management as a Service (DBaaS) during the first two waves of COVID. 

Looking at plans for this year, 44% of the sector’s IT decision-makers said they would continue to increase private cloud investment — more than in any other cloud infrastructure. This suggests private cloud might well be the sector’s preferred longer-term digital transformation route. 

40% of the sector’s IT decision-makers plan to increase on-premises spend too, suggesting that the technology will continue to play a significant role. But perhaps this shouldn’t be seen in isolation, as 11% of online retailers also intend to increase spending on collocation facilities. This could point to a greater reliance on hybrid environments in the future.

IT infrastructure investment: The barriers and drivers

Online retailers told us that reducing operational costs was the principal driver for IT investment. And that, in common with the entire data sample, data accessibility was the biggest investment barrier. 

But drilling down further into this question, we found the sector faced unique challenges, including the need to deal with multiple vendors and the ability to scale.  

Top four drivers for IT infrastructure investment plans: 

  • 29% Reduced operational costs 
  • 26% Data mobility  
  • 24% Security  
  • 23% Agility  

Top four barriers to IT infrastructure investment plans:  

  • 27% Data accessibility  
  • 24% The need to deal with multiple vendors 
  • 23% Maintaining compliance  
  • 20% The ability to scale   

It’s also worth noting here that online retailers had the most difficulty rolling out Office365 when compared with the healthcare, insurance and transport logistics sectors — and may need more guidance and assistance in this particular area this year (47% online retailers, 44% healthcare, 37% insurance and 28% transport logistics). 

On the to-do list: Improving security and tackling cyberattacks 

31% of online retailers told us the increase in cyberattacks was their biggest challenge in 2021 — and the picture remains the same for 2022, with 29% reporting it would continue to impact them.  

So, perhaps it’s no surprise the sector’s IT decision-makers told us increasing and strengthening security is their top IT objective for this year. Specifically, almost three quarters agreed their organisation needs to improve security across collaboration tools. 

Interestingly, the second most important IT objective for online retailers is mobile/endpoint management — 23% vs the sample average of 13%. Not surprising, however, when you consider that mobile transactions currently account for a third of the UK’s online shopping sales and are projected to pass the £100 billion mark by 2024. 

Compliance and COVID

Mid-market online retailers are the most pessimistic about meeting compliance challenges this year, with 35% saying it will be much more complicated. This is almost twice as high as any other sector we spoke to. 

Online retailers told us that GDPR would present the most significant compliance challenge this year (24%). Managing multiple compliance regimes, data loss prevention, and data security were tied in a very close second place (23%). 

Unlike IT decision-makers in the healthcare, insurance, and transport logistics sectors, those in online retail expect COVID to continue to present the most significant overall challenge for their organisation this year. 

Conclusion 

Although 2020 and 2021 saw incredible COVID-driven growth for the country’s online retailers, there’s emerging evidence of a return to pre-pandemic customer spending norms. Figures from the Office of National Statistics highlight that online retailers witnessed the smallest share of spending since the pandemic in January of this year. It suggests January’s internet purchases accounted for a quarter of all retail transactions — down from a peak of more than 36% around the same time last year. Perhaps, therefore, online retailers may be justified in worrying about how the pandemic (or at least its aftermath) will continue to impact them throughout the remainder of the year.  

This constantly changing landscape — alongside concerns about budget allocation and compliance challenges — points to the need for a flexible, cost-effective approach to IT investment and a requirement for closer partnerships with IT service providers. The ideal IT partner for online retailers is one that can share some of the day-to-day responsibilities for scaling infrastructure on demand, as well as managing their data backups and databases.  

All statistics for this article were taken from our Mid-Market IT Priorities Report 2022. To download your free copy, please visit: https://info.node4.co.uk/mid-market-report-2022

Methodology and Report Download Link

All statistics for this article were taken from our Mid-Market IT Priorities Report 2022. To download your free copy, please visit: https://info.node4.co.uk/mid-market-report-2022