E-Commerce Is Riding-Out The Economic Storm, Says Forrester

Believe it or not, here's some good news: According to Forrester Research, nearly 20 percent of retailers surveyed said they were cutting or delaying investment in E-Commerce technology due to the recession.

In almost any other economic climate, word of IT cutbacks that extensive would definitely be seen as bad. However, given that we're suffering through the worst economic downswing in 40 years and venerable companies are dropping like flies, the figure should be seen as relatively good news, said Forrester Senior Analyst for E-Commerce Technology Brian Walker.

In December, Forrester conducted a survey of 60 E-Commerce and channel strategy managers. Walker asserts it would be wrong to put a negative spin on the fact that 19 percent of those interviewed said their companies were pulling back or postponing E-Commerce IT expenditure. "In the grand scheme of things, considering what's happened to the economy, 19 percent of retailers talking about delaying or putting off investment is a relatively small number," Walker said.

He said he didn't have past year figures with which to compare the numbers, but his experience as an E-Commerce analyst, and answers to other questions on the survey, has him convinced many major retailers are embracing E-Commerce as a solid source of revenue during a period when every dollar is precious. Walker also said that, although the survey was done in December, he's convinced its findings remain valid now that it's April.

The retail world has certainly seen its fair share recently of merchants either backing off existing E-Commerce operations—such as Canadian Tire--or deciding to suspend any additional investment, sort of a forced stagnation, as with Borders. But Walker said that it would be an error to conclude from those examples that the overall retail space is giving up on E-Commerce.

"The Borders business overall is really suffering, so launching a new Web site might not be the answer to their troubles," Walker said. "It doesn't reflect the fact that E-Commerce as whole, across the board, is weak. You cannot overcome core challenges to your business by adding this channel (E-Commerce). E-Commerce will be in support of your overall value proposition and overall brand if done effectively."

If Forrester's conclusions are true, it would be a reassuring sign that E-Commerce execs at retail are getting more CFO, COO and CEO support than many had feared. Slashing E-Commerce IT spending as a quick way to shore up an ugly balance sheet would not only be a foolish idea but also a downright dangerous one. The economy will improve, sooner or later, and the last thing a retailer needs, when it does, is a glitch-ridden, underperforming and outdated E-Commerce platform.Indeed, spending for E-Commerce IT projects is actually "picking-up steam" at some companies, Walker said, calling the survey's findings a "pretty significant trend in comparison with other IT investments and what's happening to retailers' investments overall."

The survey found that 72 percent of those queried said their companies were making no changes in E-Commerce technology spending despite the recession. The balance said they "were investigating alternative solutions or less-expensive alternatives" to their E-commerce IT spending plans but were still planning to invest, Walker said. Again, if these were "normal" economic times, a finding that 72 percent of retailers basically told their E-Commerce IT departments they weren't seeing one extra penny in their new budgets would be construed as meaning E-Commerce Is Dead. But Walker said the opposite is clearly true nowadays.

"We've noted the continued strength of the E-Commerce technology market and that's been backed up by lots of discussion with vendors who served that market," Walker said. "When we surveyed the marketplace, we were struck by the continuing strength of the E-commerce market and that's been backed-up by lots of discussion with vendors who served that market. What we are seeing overall is a continuing shift to E-Commerce and a commitment to the channel and that's reflected in the investment in technologies that make it happen. Also, it is not exclusive to retail. It also applies to wholesale brands and companies that rely on retail distribution who have not gone direct to consumer but who are now embracing it."

Forrester also asked retailer executives about the impact of the slowing economy and recession on their E-Commerce channel as a whole and about the investment in the channel.

Walker said 57 percent of those business leaders "talked about providing increased support for their channel" which could include capital expenditures (including IT), staffing and marketing budgets. "Only six percent talked about decreasing support for their channel," Walker said.

"When I am talking to enterprise-class, multi-channel retailers, they're not talking about a slowdown," he noted. He stressed that no major retail decision-maker with any common sense believe they can fix major problems with their companies by relying solely on E-Commerce.

Walker said he and other Forrester analysts are also noticing that, while executives in charge of running brick-and-mortar operations are seeing their budgets slashed, those in charge of E-Commerce are finally finding themselves "getting a seat at the table" and being treated better at high-level company strategy sessions."In large wholesale branded companies and multi-channel retailers, the E-Commerce leaders are being invited in to meetings. In the past, the online business was really a satellite to the main retail or wholesale business. Now the E-Commerce leader is bring brought in and being seen as more central to the business' goals and more central to the whole business," Walker said. "For some this brings channel conflict and technology challenges more into the forefront as well."