Microsoft and Retail: Nearly Two Decades of Innovation

EDITORS’ UPDATE, May 25, 2005 —This article has been updated to provide additional background on Microsoft Business Solutions point-of-sale products.

REDMOND, Wash. — May 24, 2005 —In a year filled with technology milestones, Microsoft this week announced another one. Microsoft Windows Embedded for Point of Service made its official debut with support from more than 40 partners and several retail customers at the Retail Systems 2005 conference in Chicago, marking the first time a Windows XP Embedded operating system has been designed and optimized specifically for the retail technology environment.

Windows Embedded for Point of Service is Microsoft’s new retail optimized software platform that will enable retail and hospitality organizations to simplify the setup, use and management of their point of service (POS) systems.

Tom Litchford, Industry Manager, Microsoft Retail & Hospitality Industry Solutions Unit

The announcement comes on the heels of last week’s launch of the Microsoft Point of Sale product from Microsoft Business Solutions, giving the company’s retail portfolio a strong one-two punch to help small and mid-size retailers reap all of the technology benefits that larger retailers have been putting into action for more than a decade.

“It’s actually been more than 15 years since the days of DOS on point-of-sale terminals,” says Tom Litchford, industry manager for Microsoft’s Retail & Hospitality Industry Solutions Unit. “We’ve come a long way, and people don’t necessarily realize the impact Microsoft has had on the retail industry.”

According to Litchford, Microsoft’s focus on retail began to really take off in 1994, with the release of OPOS, a standard specification for peripheral connectivity on retail task-centric devices, such as Point of Sale. Developed in cooperation with leaders in the retail industry OPOS quickly became a de-facto standard for point-of-sale development in the retail environment.

“OPOS allowed retail peripherals to be mixed and matched for the first time,” says Litchford. “In 1994, when you purchased point of sale for your stores, including bar-code scanners, receipt printers, custom displays and devices like that, you had to buy the whole stack from the same vendor or incur significant integration effort and costs. OPOS changed all that.”

As such, OPOS opened up the retail technology market for competition, and was eventually adopted as a standard by the Association for Retail Technology Standards. (ARTS)

Microsoft followed up on the success of OPOS with the ActiveStore initiative and Windows CE in 1999, Windows XP Embedded in 2001, and a host of XML-based Web standards to help facilitate integration of retail technologies and to create applications and devices that support retailers. ActiveStore also played a pivotal role in the industry, laying the groundwork for the integration of retail applications we see today.

“ActiveStore helped us define early on some of the market requirements that we’re starting to see addressed with Windows Embedded for Point of Service,” says Litchford. “From the beginning, the strategy has always been about providing technology that gives customers freedom of choice while reducing the complexity of deployment, integration and management. Those early technologies were about providing a standards-based retail-hardened platform so that device makers and solution providers could focus on innovation and customers could choose what was right for them.”

Today, the company’s commitment to meeting retailers’ individual needs is apparent throughout Microsoft’s retail organization. In addition to recent XML standards work, the company offers a range of operating systems and development platforms for all types of devices and software.

Microsoft Point of Sale Offers Automation to Any Size Retailer

As part of that effort to provide customer choice, the Microsoft Business Solutions division develops an array of business software to help small and midsize businesses, large organizations, and divisions of global enterprises run their business more effectively. Microsoft Business Solutions entered the point-of-sale market through the May 2002 acquisition of Sales Management Systems Inc., a leading provider of POS technology, including the award-winning Quicksell product line. The product was introduced by Microsoft as Microsoft Business Solutions Retail Management System 1.0 in September 2002, and upgraded to Microsoft Retail Management System 1.2 in July 2003. Microsoft Retail Management System continues to provide small and medium-size retailers with an integrated POS solution to manage operations within stores and across the business.

The new application from Microsoft Business Solutions released last week, Microsoft Point of Sale, now brings even the smallest of retailers a way to confidently and cost-effectively do what their larger counterparts began doing years ago — pull the plug on inefficient electronic cash registers and manual business management methods. Microsoft Point of Sale automates sales, inventory and store management to help these small retailers survive and thrive in today’s competitive retail environment.

According to Mike Dickstein, director of Microsoft Point of Sale solutions at Microsoft Business Solutions, small retailers are a powerful but underserved market for retail software. These customers have traditionally had little to no choice at all. They could either acquire a sophisticated POS application designed for much larger retailers — which usually are too complicated, expensive to implement, and not the right functionality for a small retailer — or they could simply get a cash register. Some small retailers have even chosen to manage their business by manual methods or “cigar-box methods” — literally tracking sales and inventory by hand.

“If you look at the U.S. retail market in terms of the number of POS checkout lanes, our research shows that about 45 percent of them are in single store retailers,” says Dickstein. “That’s about 3.8 million checkout lanes that didn’t have a solution to serve them. Microsoft Point of Sale was designed with their unique needs in mind, and provides a simple and affordable way for these small, single store retailers to be more successful and efficient, so that they have more time for life outside the store.”

According to Dickstein, the Microsoft Point of Sale application is designed to replace the electronic cash register, and provides the additional functionality of integrated credit and debit card processing, the ability to track sales transactions and customer purchase history, and the ability to automate inventory management. The solution also integrates with popular accounting packages such as QuickBooks.

“That’s the key functionality provided by our POS applications — you’ve got the business intelligence built into your customer checkout process,” says Dickstein. “It provides everything the small to medium-sized retailer needs to operate his store, manage his inventory, improve customer service, and improve business management, all tying into the back-end accounting systems.”

According to Dickstein, since the application can run on a standard PC using Windows XP, retailers can build on their existing investment in technology to get the system up and running. And, much like large enterprise organizations, the efficiencies to be gained from the technology add up quickly for small shops. The cost for one Microsoft Point of Sale checkout terminal is estimated in the range of US$800, but according to Dickstein, the software begins returning value to the organization almost immediately. “The Bella Rose gift boutique in Seattle, one of our small retailers who have adopted the system, estimates that they’re going to save more than $4,000 annually on staffing costs — which more than pays for the system,” he says.

According to Tracy Hiemstra, owner and operator of Bella Rose, most of that savings comes from a reduction in outside bookkeeping help, and a drastic reduction in the time it takes her staff to account for inventory.

“My staff was overjoyed at being able to throw out the tracking sheet and clipboard,” says Hiemstra. “And our cost for bookkeeping has gone down 75-85 percent, which goes directly to the bottom line.”

While Hiemstra and her staff can now scan and track inventory and purchases automatically, she also found another, unusual benefit after the switch. “I wear a pedometer around the store, and I used to walk one-to-two miles more per day simply going upstairs to check inventory stock. Now we do that automatically on the PC.”

Windows Embedded for Point of Service

With Microsoft Point of Sale poised to bring more efficiencies to smaller retailers, the other retail product released by Microsoft this week, Windows Embedded for Point of Service, provides a number of benefits that can help larger organizations stitch things together, as well as providing a platform for developers of both software applications and hardware devices in the retail space. Windows Embedded for Point of Service is the first retail optimized software platform to offer plug and play, which helps retailers to quickly and easily install and manage retail peripherals.

One such retailer is Itasca, Ill.-based OfficeMax, a provider of office supplies and business solutions serving customers in the United States, Australia, New Zealand, Europe, Mexico and Canada. According to Frank Flanagan, director of store systems, one of the main benefits of Windows Embedded for Point of Service for larger organizations is that it builds on the “plug-n-play-ability” of the OPOS standard.

“We think the big advantage of Windows Embedded for Point of Service is that it takes retail point-of-sale to a plug-n-play mentality,” says Flanagan. “OPOS was a step in that direction, and we think Windows Embedded for Point of Service is finishing that out. One of the things we fight with right now is that we have three or four different operating systems in a single store. Windows Embedded for Point of Service is going to let us get back to one operating system to do what we want with all our devices.”

According to Flanagan, the devices that OfficeMax has in place today are running well on Windows XP Embedded. By rolling out Windows Embedded for Point of Service later this year, the company hopes to put itself in a position to take advantage of the next wave of retail peripherals.

“We want to eventually use biometrics for secure transactions, RFID for customer convenience, and some of the newer types of printers and things like that,” he says. “When the time comes, we want to be able to incorporate those things quickly, and we feel that Windows Embedded for Point of Service puts us in a position to do that.”

The ultimate motivation for the company’s move to Windows Embedded for Point of Service, according to Flanagan, is the same as Microsoft’s goal in all of its retail technologies — choice.

“Whether through our point of sale terminals, or customer kiosks or any of the other devices we deploy in our stores, the idea is the same,” says Flanagan. “We want to be able to give the customers what they want. After all, that’s what the retail industry is all about.”

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