Microsoft’s Retail Innovation Outlook

NEW YORK, Jan. 15, 2007 – From as far back as the introduction of a bell on the cash register, technology has impacted the retail industry. Sometimes it takes considerable time for retailers to implement new innovations – for example, radio frequency identification (RFID) was invented more than 60 years ago and is just now starting to become mainstream. But the goal of innovation has always been to help retailers survive and thrive, and help create new business opportunities. And in today’s highly competitive marketplace, innovation is more important than ever. Those who embrace innovation flourish; many who don’t become obsolete.

As more than 15,000 people within the retail industry convene in New York for this year’s National Retail Federation’s BIG Show 2007: Setting Retail in Motion — a showcase of new business equipment and technology products and services for retail — anticipation is high around that all-important question: What will be the latest in technology innovations this year?

PressPass spoke with David Gruehn, U.S. industry solutions director, Microsoft Retail & Hospitality Group, for Microsoft’s view of the industry and the role that innovation plays in the success of retail. Gruehn leads Microsoft’s sales and services efforts for the specialty retail and mass merchandise segments with the goal of delivering optimal value for customers and strong business results for Microsoft and industry partners.

PressPass: How is the retail industry changing?

Gruehn: To understand the role that innovation can play in retail, it’s important to first look at how the industry is evolving. For today’s retail organizations, increasing competition and market pressures are driving the need for better operational efficiencies and a more customer centric approach throughout the value chain. While competition is nothing new, changes in customer expectations, regulatory pressures for accurate data and the business demands of “more for less” are all compounding the need to deliver increased business performance and customer service.

Customers are more empowered than ever before through access to information. They expect the same seamless experience in a store as they have at home. There isn’t necessarily a desire for loyalty anymore, and many consumers have taken a “What have you done for me lately?” attitude. For employees, demands are more stringent than ever – the need to be more productive, more knowledgeable about a broader set of products, anticipate customer needs and more effectively react to unexpected situations. There are also greater demands on a retailer’s enterprise/headquarters. The enterprise is integrated from the customer through its extended supply chain and is now global. To streamline operations and better utilize valuable data, its systems need to be integrated and there are critical demands for greater interoperability with heterogeneous systems.

PressPass: Amid all this change, what is the role of technology innovation?

Gruehn: We see three key ways where technology can drive innovation to enhance retail: strengthening customer relationships, continuing to improve operations and building high-value business connections. Innovation can drive customer satisfaction and loyalty through improved customer service. Through the use of technology, retailers can take loyalty to a new level by understanding identity and presence, and understanding customer preferences and buying habits whenever and wherever they shop. Technology can help improve operations by better integrating — and unlocking insight into — business data and give employees the tools and information they need, when they need it, to better help customers and be more productive. These same tools combined with technologies that enable better collaboration and sharing of information also can help build high value business connections with partners and suppliers.

PressPass: What should retailers currently be doing to take advantage of innovations now and in the future?

Gruehn: Get back to the basics, such as integration and data management. A flexible technology infrastructure is absolutely key. Smart technology can and will continue to play a significant role in helping retail leaders gain a competitive edge in the market. However, with all these technology solutions, retailers are increasingly reliant on interconnected applications to realize increased operational efficiency and improved productivity. Advanced IT infrastructure flexibility and integrated systems become even more important to ease the adoption of new and future technologies that will bring key business benefits, not to mention integrating with and getting the most out of what you already have.

To make sure IT can play a longer term strategic role in addressing retailer’s business needs and overall business strategy, it’s important to ensure the basic technology foundation is where it needs to be. It is essential to make a retailer’s current system function better today, and also allow for innovation in the future. This includes simplifying, standardizing and modernizing their IT infrastructures, and specifically using open XML standards and Web services to more easily connect isolated data sources and deliver information to everyone who needs it.

PressPass: Many in the retail industry think that the smart technologyspend in 2007 will be around predictive analytics and in areas that improve the customer experience. What does Microsoft think and where is it focused?

Gruehn: We definitely agree. Our focus with our partners is around the customer experience, tools to empower people, advanced analytics in real time, integration, communication and collaboration, and better store management and operations. Through a flexible, integrated and optimized infrastructure, information can flow throughout the retail organization and give a retailer’s biggest asset – its people – the right information at the right time, and in ways that are familiar and easy to use.

PressPass: How is Microsoft committed to innovation?

Gruehn: Microsoft invests broadly in research and development from the consumer to the enterprise, and these investments directly benefit retail, including our efforts with consumer devices, security, speech technologies, collaboration and business intelligence. In fact, groups ranging from Dynamics to Windows Mobile are participating in this year’s NRF show.

Microsoft’s focus is to provide software that is designed to better connect information, systems, processes and people. We are committed to industry standards and use Web services to enable retailers to connect isolated data sources and deliver information to everyone who needs it. Software from Microsoft and a worldwide network of partners is designed to provide a flexible business platform to harness change in a way that supports today’s needs and meets tomorrow’s opportunities.

PressPass: How is Microsoft committed to retail?

Gruehn: Microsoft has been focused on the retail industry for more than five years, growing from a team of five to a worldwide team of nearly 500. Our team includes veteran retail executives with decades of experience solving real-world industry-related problems across all major retail sectors.

Microsoft’s number one priority for retail is customer satisfaction and a large part of this is about choice. We are focused on giving any size of retailer, from the small independent retailer with just one store to a large big box enterprise retailer, the ability to make choices based on their individual business needs and technology requirements. From Windows Embedded for Point of Service, a retail-optimized operating system specific to point of service, to Microsoft Dynamics – Point of Sale & Dynamics Retail Management System for small retailers and midsized retailers, to innovative solutions from more than 300 of our retail-oriented partners, we provide integrated and interoperable applications on a common platform. This ultimately helps retailers more easily integrate new and existing technologies, driving retail innovations and ultimately leading to business success.