27 January 2000 | Elizabeth Bellamy
Firms on the brink of investing in e-commerce systems may now think twice after retail group Kingfisher's shares tumbled following an announcement that it was doubling its spend in e-commerce.
Unveiling the company's Christmas trading figures earlier this month, chief executive Sir Geoffrey Mulcahy was upbeat. He said a 33 per cent growth in sales across the group justified the £21 million investment.
But the figure suprised the stock market and analysts blamed the announcement for a slump in Kingfisher's share price, by more than 14 per cent, from 673.5p to 577p.
Allan Waller, partner at PricewaterhouseCoopers and chairman of the European Council on Supply Chain and Logistics, described the market's reaction as strange and the result of a "short-term view".
"Situations like these create a conflict for companies. On the one hand, they feel a need to invest in e-commerce, but, on the other, they can't afford to be seen doing so," Waller said.
A Kingfisher spokeswoman dismissed the idea that the group's share slump was caused by the size of its investment in e-commerce.
"We've got a lot of overall investment going on in the group," she said, "and the majority of retailers' share prices have been dropping."
The company was already using e-commerce applications for supplier sourcing and supply chain management, she added.
While this was primarily focused in Kingfisher's electrical sector, the firm was planning to expand it to its DIY and general merchandise stores. The group's outlets includes retailers B&Q, Woolworths, Comet and Superdrug.
Kingfisher's business-to-consumer e-commerce operations include Screwfix, an online DIY supplier, Woolworths internet catalogues and Entertainment Express, a home entertainment products shopping website.
Damon Jones, e-commerce consultant at UK consultancy Origin, said the stock market's reaction would give the industry a wake-up call.
"The reasons companies were investing in e-commerce last year were that everyone else was doing it and it would bolster their share prices. Kingfisher's share slump will put a damper on the market," he said.
But Jones added that e-commerce had got "slightly out of hand". "A lot of companies have been struggling to make the link between introducing e-commerce and how it will help them achieve their objectives."