Microsoft’s Retail Outlook: Winning Over the Digital Consumer in a Multichannel Environment

NEW YORK, Jan. 14, 2008 – As retailers gather this week for the National Retail Federation’s (NRF) 97th Annual Convention & Expo, many will be comparing notes on the past holiday shopping season. While sales were regarded as weaker than previous years’, the 2007 season identified an important trend: the emergence of digital consumers who are more knowledgeable about what they want to buy and where they want to buy it. Year 2007 saw multichannel sales – the purchase of products through channels in addition to traditional stores – continue to grow. Almost two-thirds of consumers surveyed for Deloitte’s 2007 Annual Holiday Survey of retail spending and trends made at least one multichannel purchase over the past year; most frequently purchasing in the store after viewing the product on the retailer’s Web site or catalog, or purchasing on the Web site after seeing it in the retailer’s store(1).

PressPass spoke with Geoff Thomas, general manager of Microsoft’s U.S. Retail and Hospitality Group, for his view on how the retail industry can meet the increasing demands of today’s digital consumers in a multichannel environment. Thomas leads Microsoft’s strategy, sales and services efforts across the company’s U.S. retail organization, with the goal of helping to solve customers’ business problems through industry-relevant solutions and technology.

PressPass: As we turn over a new year, what are some of the current issues retailers are facing today?

Thomas: We saw two significant issues – consumerism and social responsibility – impact retailers in 2007, and we expect that they will continue to intensify in 2008. Today’s consumers have greater control of their interactions and experiences with retailers. The Web has turned customers into digital shoppers, and that was particularly evident this past holiday season — before they make a purchase decision, consumers are reading online reviews and collecting knowledge about products, brands, features, pricing and even inventory availability.

The Internet has also spiked consumer awareness of a retailer’s involvement in larger global topics, such as citizenship, sourcing and environmental sustainability. How retailers manage these areas is impacting consumer buying decisions as recent studies show that consumers are increasingly looking to purchase more “eco-friendly” products and shop at “green” retailers(2).

PressPass: How can technology play a role in addressing consumer expectations?

Thomas: Retailers need to respond to consumers’ heightened expectations and do so in a manner that delivers on the promise of multichannel retailing. With consumers shopping from every channel, they expect a seamless experience whether they buy from the Web, their mobile device, a catalog, a kiosk or in store.

Technology can directly change the way that retailers operate and the experience that they deliver. It starts by empowering a retailer’s greatest assets – its people. If a store manager can use business intelligence to get real-time data, he or she can react more quickly to what customers demand. If a merchandiser can draw from multiple data sources and find new ways to reveal sales patterns, he or she can customize events and assortments geared toward local consumer trends.

PressPass: Retailers are notoriously competitive and often believe differentiation is the way to win. What are some of the top store technologies that will support a differentiated experience for customers?

Thomas: Technologies that enable retailers and their employees to streamline processes and improve interactions during the customer experience are critical. And, of course, if retailers can use technologies to provide a fun and interactive shopping environment, all the better. At this year’s NRF conference we’ll be showcasing a collection of new and innovative technologies and product categories that can help retailers to transform and differentiate the customer experience with very distinct, easy and more natural ways to interact and access digital content. Leading the pack of new product categories will be Microsoft Surface, the first commercially available surface computer from Microsoft, which turns an ordinary surface into a vibrant, interactive surface. We consider it to be game-changing technology for retailers.

On one hand, it’s an input device similar to what we have achieved with technologies like tablet computing. On the other hand, it transforms the way people interact with computers. Imagine being able to enable people to explore products, categories and brands in a very rich interface with a touch of their finger. Imagine changing the entire purchase experience, from product research to how payment is made all through touch. We are currently working with many of our partners on creative and innovative ways to deliver this type of experience to the retail market.

Other interactive technologies such as digital signage and kiosks plus applications that deliver real-time information on consumers’ mobile phones can also make a big impact on sales and the consumer experience.

PressPass: You talked about the importance of employees to a retailer’s success; how are retailers using technology innovations to empower their own staff?

Thomas: Whether the retail employee works at corporate, the store or the warehouse, they have a direct impact on the consumer buying experience and, ultimately, on the organization’s revenue and operations. Employees are the ultimate drivers of the company’s overall success.

We believe that employee success is reliant on being better connected to real-time information and systems – day in and day out. By gaining a deeper understanding of their processes and their customers, they can adopt innovative solutions to turn their insights into action – this has a direct impact on operational efficiencies and customer service.

For example, real-time alerting enables retailers to monitor business activity views from multiple application systems and provide alerts at the store, warehouse or corporate level via dashboards and mobile devices. In addition, business intelligence solutions based on Microsoft Office PerformancePoint Server 2007 are giving retailers a single integrated application to monitor, analyze and plan their business. By collaborating on performance and operational data in real-time, retailers can improve efficiency and lower costs. These solutions are designed to address a variety of industry issues from labor utilization to inventory.

PressPass: How is Microsoft committed to the retail industry and helping retailers adapt to changing trends?

Thomas: Microsoft has been focused on the retail industry for more than six years, growing from a team of five to a worldwide team of more than 500. Our team includes veteran retail executives with decades of experience solving real-world industry-related problems across all major retail sectors. For example, Bill Gonzalez, our worldwide retail general manager, recently joined us from Wal-Mart.

Microsoft invests broadly in research and development from the consumer to the enterprise. Our investments directly benefit retail, including our efforts with consumer devices, security, speech technologies, unified communication and collaboration, performance management and business intelligence. In fact, groups such as Dynamics, Windows Mobile, Virtual Earth, Microsoft Surface and Microsoft Unified Communications are participating in this year’s NRF show. We will be showcasing innovations for the store, across the enterprise, and those that touch the lives of consumers across multiple channels whether they are at home or on the go via mobile devices.

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 and solutions from Microsoft and a worldwide network of more than 300 retail-oriented partners are designed to provide a flexible business platform to harness change in a way that supports today’s needs and meets tomorrow’s opportunities.

PressPass: What should retailers do now to begin embracing these new technologies?

Thomas: We’re encouraging our retail customers to imagine the possibilities of better connecting with digital consumers in this demanding, multichannel environment. Visit us at the NRF convention & expo in booth no. 818. Tell us your long-term strategic view and we’ll help you to put in place the right IT infrastructure to make that vision a reality. Along with a whole cadre of certified Microsoft business partners dedicated to the retail industry, we can help guide retailers through the maze of technology opportunities from what’s available now to what’s emerging. Microsoft is here to help retailers rise above competitive pressures and industry regulations to create a consumer-driven operation — one that consistently delivers a differentiated customer experience across every channel while empowering employees to make every square foot of retail space as profitable and productive as possible.

(1) (2) Deloitte 2007 Annual Holiday Survey of retail spending and trends.

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