China's retail industry will spend more than $1bn on IT annually by 2011, according to new forecasts.

However, foreign hardware and services firms bidding for a slice of the growing market are facing ever more experienced local competition, analysts from research firm IDC warn.

Rapid expansion in the retail industry, which increased sales by almost 14 per cent last year, is driving adoption of technology-based management methods.

China's retailers sold more than $1tn worth of consumer goods to the country's increasingly affluent populace in 2006.

"IDC has observed that retailers are increasingly looking for IT management solutions after building up their infrastructure," said Freda Tong, a senior analyst with IDC's China vertical research division.

"As a result, enterprise resource management, supply chain management and business intelligence tools have become the most sought-after solutions in the retail industry."

As retailers upgrade IT infrastructures they will increase spending at a compound rate averaging 13.3 per cent per year, from $551.6m in 2006 to $1.029bn in 2011, IDC forecasts predict.

"Over the past few years, retailers have placed more emphasis on IT systems and are upgrading existing systems to ensure optimum business operations despite limited funding," said Tong.

"This has paved the way for future large-scale IT projects and data analysis and mining.

"IDC advises IT vendors targeting the retail industry to pay more attention to IT management solutions, as these are increasingly crucial to improving retail operations and accelerating expansion strategies."

However, foreign vendors will find that their local rivals are not only better adapted to meeting some needs of local retailers, but are improving their project implementation ability, the analyst said.