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Preparing for the Next Generation of Shoppers in the Store
Industry Point of View
INTRODUCTION
The vision of a seamless shopper experience in brick and mortar stores where both digital and physical combine for one view of in-ventory or buying history is far from reality for the majority of retail-ers. In addition, as retailers strive towards what they believe is the desired shopper experience, it is likely to change. Therefore, the real dilemma for retailers is how to prepare for the continuous change in shopping habits, affinities and even types of shoppers in the race for remaining relevant to the customer.
Store operations, IT, digital and marketing teams are fully aware that stores are not operating seamlessly across all customer touchpoints. This fact, however, cannot be put on retailers as a failure as integrating store systems and digital processes is extremely difficult. The number of processes and technological systems as well as the amount of cross-functional collaboration required to deliver the perfect customer experience cannot be underestimated.
This doesn’t mean brick & mortar retailers aren’t still striving for improvement, as they know optimizing the digital experience in stores can be their differentiator. Improving customer satisfaction, shopping experience and om-nichannel capabilities in stores are the top three business priorities for retailers in 20161. But is this list of priorities sufficient for meeting customer expectations or is a more robust roadmap for the future of stores an absolute necessity?
In today’s stores, digital channels directly influence almost a third of sales2 and this number is likely to continue to grow further. In-store and online shopping experiences are converging and a blended and seam-less “digital” shopping experience that combines the best of both worlds is one of leading reasons for the brick and mortar store’s digital transformation.
Developing and maintaining a true modern store is not an end state for retailers but a journey. By putting the evolving shoppers and their growing expectations first, retailers can embrace this journey by focusing on a personalized store experience and a pathway for future store improvements. This is perhaps the most challeng-ing as also the most financially rewarding aspect of the retail business that keeps retailers on the pathway for customer experience innovation.
Like any other channel, physical stores can fulfill the customer need for a deeper engagement culture by incorporating personalized as-sociate help, product information, recommendations, and shipping options to name a few. Such a store culture is based on personal-ized customer engagement, robust loyalty elements, on-time and flexible omnichannel order options and fulfillment, in-store digital services, and payments.
In this report, EKN Research outlines a four-pillar strategy that can help a retailer achieve an in-store next genera-tion shopper experience that comes closer to the desired end-state. By empowering the customer and store as-sociate with unified commerce (stores, digital/omnichannel) capabilities within a modern point-of-service (POS) environment, the needs of the current and future shopper and employee/associate are kept in mind at all times.
EKN 2
retailers are limited by Omnichannel software capabilities at POS
1 in 3Source: EKN 3rd Annual Future of Stores Benchmark, 2015
1 EKN 3rd Annual Future of Stores Benchmark, 20152 EKN Omnichannel Benchmarking Survey, 2014
Source: EKN Customer Engagement Study, 2015
retailers say they are limited by current software/solutions toolset to develop & execute personalization
1 in 2Almost
ADDRESS THE NOT SO SEAMLESS STORE JOURNEY
Currently, 1 in 2 retailers state one of the main roadblocks in managing stores is dealing with increasing levels of merchandise and assortments that have made their way into stores over the last two years3. This inventory proliferation trend leads to greater complexities such as keeping more new and old stores ready for aggressive seasonal and non-seasonal selling. Within these plans however, there are several competing needs in the store. For instance, infus-ing higher capital investments into improving associate or workforce pools & training, product information, promotions, inventory management, selling tools and other technologies, are among the store improvements being con-sidered by retailers.
These store improvement plans mean greater need for balancing of store and digital/omnichannel customer ser-vice, sales and operations through a unified store experience strategy. Such a strategy looks at current and future customer and employee or associate needs and expectations. Retailers who aim at providing seamless omnichan-nel and digital experience in the stores require anytime-anywhere checkout, product information, customer order and loyalty history and an effective record of inventory to help guide shoppers in their buying journey.
This is best achieved when retailers adopt both fixed (retailer PC-based) and non-fixed or portable (retailer and consumer mobile) customer experience touchpoints. These touchpoints are equally relevant from the moment a customer enters the store to when they find a product, pay for merchandise and exit the store. However, it is the customer-facing and operational flexibility of portable interaction points that guides and shapes dynamic customer-associate interaction, buying and selling behavior. Since digital channel buying behavior has penetrated the stores, dynamic store interaction between customers, channels and employees is quite relevant.
To address dynamic store interactions, stores need to equip and train associates on all systems but especially on unified store experience using a variety of customer and employee preferred form factors. Such form factors in-clude but are not limited to small ordering devices, self-service devices, mobile POS, and consumer mobile devices that run in-store mobile apps.
Today more than ever, inventory management, anytime anywhere checkout, assisted or guided selling, endless aisle, digital coupons, mobile payments, customer order and loyalty history are not limited to the store but goes across all geographic locations, channels, brands and franchises. The ultimate goal for any retailer is to minimize loss of revenue due to lack of not having a single view of inventory, order and customer data across channels for customers.
EKN 3
Source: EKN Future of Retail IT, 2015
3 EKN 3rd Annual Future of Stores Benchmark, 2015; EKN 2nd Annual Future of Stores Benchmark, 2014
Source: EKN Retail Labor Benchmark Study, 2015
retailers say the top challenge in technology department is
‘managing legacy’
6 in 10
retailers say adding assisted customer selling tools or guided selling tools to help service
customer to be a leading initiative for employee management improvement in 2015
40%
currently have integrated assisted selling tools into store or channel sales, customer service
and operational processes
50%
EKN 4
4, 5 EKN 2015 Retail Point-of-Sale Blueprint Study
IS A MODERN POS PLATFORM THE PANACEA TO THE IN-STORE CUSTOMER EXPERIENCE?
There is little doubt that retail stores require a more integrated and omnichannel/digital retail-ready modern POS to address dynamic store interaction between customers, merchandise, channels and associates. To this end, re-tailers need an associate/customer friendly platform that enables store, back office and omnichannel commerce transactions seamlessly.
Such a platform is not easily found out-of-the-box or implemented quickly, as more often than not retailers need custom system integrations. Moreover, the legacy nature of POS is still major drawback in creating a seamless hub of personalized customer experience, omnichannel transactions and store operations. The average age of a retail POS solution is 6.9 years4.
To put the aging store infrastructure into perspective, since 2007-2008, the retail industry as a whole and custom-ers in general have come a long way in terms of acclimatizing with faster computing, mobile network bandwidth speeds, data security standards and smart device adoption. And while all these advancements came about in rapid succession, POS upgrades lost out to other organizational and technology priorities such as enterprise retail data, eCommerce and revenue/margin optimization.
As a result, POS and the store experience need to play catch up as evidenced in the fact that 6 in 10 retailers have plans to upgrade or replace their POS systems in 2 years5. Three-quarters of the retailers polled lament that their POS systems are not in line with future retail needs and growing customer dependence on eCommerce and mo-bile devices.
Top 5 Point-of-Sale Related Business Challenges
In fact, as commonly thought the top 5 drivers for upgrading to a unified store experience platform or POS are not merely related to the need for integrated eCommerce transactions, unified pricing, promotions, loyalty and common web/store basket or payments related features. Today, the POS upgrade plans of retailers are geared towards reducing operational costs and adding new features such as mobility, order visibility, and data security related capabilities such as PCIDSS 2.0, 3.0 & beyond, as well as EMV payments compliance.
Undoubtedly, the move towards a unified omnichannel store experience and a modern store is not just about a POS system replacement. For instance, retailers should consider a uniform upgrade of store IT infrastructure including but not limited to network bandwidth and capacity, Wi-Fi, Beacons, data standards, data security, and advanced digital payment related areas.
POS not alignedwith futureretail needs
40 36 35 34 31Need for faster
and easiercustomer service
Rising influenceof online
channel onretail sales
Growing customerdependence onmobile devices
Pressure toincrease sales/
volume
1 2 3 4 5
% % % % %
Source: EKN 2015 Retail Point-of-Sale Blueprint Study
EKN 5
Top Business Drivers for Upgrading Point-of-Sale
38%
41%
42%
43% Reducing operational costs
Reducing customer checkout time
Adding mobile POS
Improving Omnichannel order visibility 31%
31%
35%
37% Enhancing employee productivity/task management
Making systems PCI compliant
Preparing for EMV
Enabling eCommerce transactions at POS
Source: EKN Omnichannel Benchmarking Survey, 2014
Source: EKN 2015 Retail Point-of-Sale Blueprint Study
WHY MODERN POS FOR UNIFIED STORE EXPERIENCE?
In the previous section, we briefly discussed the fact that a leading factor in upgrading towards a unified store experience strategy and a modern POS platform is reduction in store operational costs. Our analysis shows that decreased operational costs can be seen via greater task efficiencies, check out time reduction and other time savings attributed to a more agile omnichannel order return and exchange process. Additionally, several modern POS platform capabilities can also positively impact revenue generation in the store.
For instance, EKN data shows that by implementing capabilities such as ability to conduct omnichannel com-merce, assisted selling, real-time access to inventory and orders tracking across all channels, retailers have been outperforming in three key store performance areas, namely:
These are some of the most succinct operational and revenue-related store metrics that can start to justify capital and technology-related store investments such as in the case of a unified store experience or POS platform.
increase in salesattachment rates for in-store
online order pick-ups
Average year-on-year increase in cost-related KPIs
9.2 %
improvement incheckout time forcomplex orders
9.1%
improvement incustomer conversion
in the store
8.9%
EKN 6
WHERE DO RETAILERS START?
There are several areas within the in-store experience where a scalable and extensible modern POS platforms or systems can help retailers. The areas include:
Operations Customer Relationship Management Omnichannel/Digital Payments
• Inventory Management
• Task Management
• Alert Management
• Labor Management
• Customer Database Management
• Loyalty Management
• Single View of Order
• Digital coupons
• eCommerce Transactions
• Mobile POS & App Enablement
• Social Media Integration
• Mobile Payments
• EMV-Ready Multiple Payment Methods
The areas described above are the key features when making a switch to a modern POS platform. Such a platform or system must incorporate the following store strategic elements:
Common brand messaging across all channels includ-ing stores and increasing in-store sales: A common brand messaging strategy across all channels is needed to run uni-form offers and promotions in the stores and digital channels simultaneously. As stated earlier while a third of store sales are impacted by other channels, stores in turn impact a much smaller proportion of digital channel sales. Even though 8 in 10 millennial consumers still shop in stores, in order to reduce the impact of digital showrooming in the stores, it is impor-tant that retailers adopt a common tool for communicating price changes, loyalty programs, competitive price compari-sons and integrated omnichannel promotions to customers.
while customers are browsing in the aisles is a clear winner for most retailers. When evaluating a POS upgrade, 6 in 10 re-tailers consider mobile or tablet POS feature to be important and 75% retailers consider increasing investment in mobile POS.
Clienteling and Endless Aisle scenarios on the associate mobile POS device: While 6 in 10 retailers indicate using assisted or assisted selling tools, the day to day adoption of such tools in fixed PC based environments is a problem among associates and customers as they are unable to make portable use out of such tools while shopping. This is especially true since clienteling and endless aisle (never out of stock by leveraging inventory of another channel) is a shopping activity that needs to be activated during or before point-of-purchase between the associate and customers. Adding mobile POS as one of the systems to display clienteling and assisted selling data
retailers consider mobile or tablet POS feature to be important
6 in 10
of store salesinfluenced by
online channels
of store salesinfluenced by
mobile channels
10%20 %
Shop
Source: EKN Omnichannel Benchmarking Survey, 2014
Source: EKN 2015 Retail Point-of-Sale Blueprint Study
EKN 7
Creating a personalized shopping experience: The opportunity for improving in-store customer experience personalization down to an individual customer-level in retail is quite high. 1 in 2 retailers are unable to uniquely identify in-store customers in terms of demographics and psychographics6. Moreover, 62% of retailers are only moderately or slightly satisfied with their ability to send personalized promotions to customers at a store location level. In such a scenario, the ability to personalize the customer experience on a name, wish-list or past purchasing experience basis is difficult. Within a unified POS upgrade strategy retailers can invest more towards upgrading their customer rewards or loyalty programs and introducing in-store mobile apps for personalization experience leading to better financial gains.
Access to secure and real-time customer data, online/mobile wish-lists and purchase history to provide product and service recom-mendations: Half of retailers say customer profile information look-up and assisted sales tasks on store mobile devices will have the maximum/significant impact on personalizing the customer experience7. Historically, due to data security and customer privacy reasons, corporate did not pro-vide store managers with access to any form of customer data except access to limited loyalty membership information. Currently, customers expect stores to have access to their basic profile, buying history, receipts, access to digital wish-lists, offers and loyalty data. When retailers provide digital access to such information as part of the buying process in the shopping aisles, it only enhances the opportunity to provide a more ho-listic shopping experience. Mobile access to customer information also creates customer satisfaction, cross-sell and up-sell opportunities.
Common view of customer across channels: The importance of creating and sharing a common view of a cus-tomer’s activity and behavior across channels has amplified due to device and channel proliferation. Every retailer wants to serve customers the same way across all channels, giving stress on a seamless journey for customers irrespective of where the journey starts (Store/Online/Mobile App) and where it ends. For instance, besides using stores and online, 55% of shoppers say they will use retailer’s app while shopping in the stores. Additionally, 80 out of the top 100 retailers offer in-store mobile apps that are used within and outside the store for product look-up, digital coupons, order ahead, and other benefits8.
EKN has defined a four-pillar approach to creating a real modern POS strategy for the stores.
These pillars include:
Half of retailers say customer profile
information look-up and assisted
sales tasks on store mobile devices will
have the maximum/significant impact
on personalizing the customer experience
6 EKN Customer Context Power - A Success Imperative For Every Retailer, 20157 EKN 3rd Annual Future of Stores Benchmark, 20158 EKN Research Desk
A FOUR PILLAR STRATEGY TO ACHIEVE UNIFIED STORE EXPERIENCE
Unified Mobility
Omnichannel POS Platform
New Payment Methods
Big EMV Migration
EKN 8
Unified Mobility:
As stated in EKN’s 2015 POS Blueprint report, retailer-owned and operated mobile POS is at a tipping point in terms of adoption. The success of store-based consumer mobility depends on loyalty tools, near field commu-nications (NFC) based mobile payments and mobile wallet. Besides factoring in for retailer-owned and operated mobile POS, consumer mobile phone-based retailers’ apps are becoming pivotal to in-store mobility for check-in, pre-order, store navigation, creating wish-lists, among other functions.
Omnichannel POS Platform:
In today’s dynamic retail environment, retailers want their POS systems to enable their sales associates to manage all omnichannel transactions seamlessly including integrated transactions such as buy or reserve on-line pick-up in-store, ship online orders from store to customers and use mobile coupons, gift cards or payments in-store. The top 5 most impor-tant features in a POS system9, retailers selected operational activities such as inventory management, promotion management, omnichannel order management and returns management as features that are im-portant along with regular transactions.
New Payment Methods:
Future growth is expected with 1 in 2 retailers planning to increase spending on broadening payment options accepted at POS over the next 12 months10. Retailers’ own mobile app (using 3rd party debit payments), Apple Pay, PayPal, other Mobile NFC payments, emerged as the mobile payment methods retailers are most likely to adopt over the next 24 months11. In the coming months and years, retailers and the entire pay-ment ecosystem has to work very hard to convince customers that they have an adequate and fool-proof data security infrastructure so that mo-bile payment innovations can prosper in the wake of higher customer adoption.
9, 10, 11 EKN 2015 Retail Point-of-Sale Blueprint Study
retailers will replace existing POS with tablet or mobile or hybird of fixed/mobile
POS over the next 24 months
retailers will increase spending on in-store mobile solutions over the next
12 months
3 in 44 in 10
38 Improving Omni-channel order visibility
Enabling eCommercetransactions at POS
Adding ship from storecapabilities at POS
%
31%
20%
Features important for POS upgrade
surveyed retailers will deploy mobile NFC over the next 24 months
1 in 2
Source: EKN 2015 Retail Point-of-Sale Blueprint Study
Source: EKN 2015 Retail Point-of-Sale Blueprint Study
Source: EKN 2015 Retail Point-of-Sale Blueprint Study
EKN 9
CONCLUSION
As stated earlier in this report, creating a real modern store is a journey and not an end state. Not only do high costs and inconsistent operations negatively impact store performance, most store retailers find they are ill-equipped to handle dynamic, personalized and digital customer experience expectations of today and anticipated evolutionary customer needs of tomorrow. Retail store growth plans mean greater need for balancing of store and digital/omnichannel customer service, sales and operations through a unified store experience strategy. A unified omnichannel/digital store experience is possible to execute via a modern POS platform that improves on-line order visibility, loyalty redemption, mobile app integration, throughput rates, and new forms of payment and check-out time for complex omnichannel orders. The difficult choices for the retailer lies in selecting a compre-hensive and flexible system that addresses both the current and future digital, physical and omnichannel nature of transactions and next wave of customer relationships.
Big EMV Migration:
The need for a secure platform, integration and key POS hardware factors are important to consider in deploying an EMV compatible payment termi-nal strategy. The October deadline for the EMV liability shift has passed and EKN data shows that 8 in 10 US retailers are not compliant and will need more time to make the migration12. Whether data is held in the cloud, virtu-alized or held in a store server, tokenization of customer information, data security protocols and different levels of personal pin security in the secure authentication process is needed for fewer data breaches. EMV’s at POS adoption can aid in this endeavor.
In order to overcome infrastructure and data service challenges related to store data ownership, data polling and frequency of updates (inventory, pricing, promotions etc.), a small proportion of retailers, close to 2 in 10 surveyed have embraced hybrid cloud models. Within hybrid cloud, some of the business critical data feeding the POS application is still managed within the four walls or residing in the on-premise servers at HQ or in-store servers.
12 EKN 2015 Retail Point-of-Sale Blueprint Study13 EKN Retail Cloud Strategies Global Study, 2014
According to EKN’s analysis, when it comes to POS, omnichannel and other store solutions, 4 in 10 retailers13 in-dicate speed to market to address customer demand for a seamless and updated experience. Keeping this need in mind, when done right cloud deployment models can aid in faster time to deployment compared to most on-premise solutions.
DEPLOYMENT OF POS: IS CLOUD FOR RETAILERS?
38 Improving Omni-channel order visibility
Enabling eCommercetransactions at POS
Adding ship from storecapabilities at POS
%
31%
20%
Ease ofintegration
PCIcompliance
POSequipment
Security/encryption
2 in 10retailersembraced hybrid cloud models.
Source: EKN 2015 Retail Point-of-Sale Blueprint Study
Source: EKN Retail Cloud Strategies Global Study, 2014
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About EKN
About Microsoft
Microsoft’s Retail Industry Group provides software that helps retail organizations thrive in today’s competitive global marketplace by making better decisions at every stage of the value chain. Microsoft software helps retailers strengthen customer relationships, build high value business connections and improve operations — empower-ing retail employees in areas such as store systems, real-time analytics and supply chain management. Through a combination of Microsoft- and partner-based solutions, retail customers can turn data into insight, ideas into action and change into opportunity.
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Retail Insights 1
Retail Insights Harnessing the
Power of Data
Retail Insights 2
ith global revenue of $22 trillion in 2014,1 the retail industry
contributes a significant portion to the GDP of many countries,
employs tens of millions of people and touches nearly everyone.
Whether family-owned-and-operated shops, multinational chains, or
e-commerce sites, retail businesses must compete aggressively for
every consumer dollar—and not all retail organizations are
succeeding. Headlines tout grim news of long-established brick-
and-mortar stores closing: “Walgreens shutters 200 stores” (CNN
Money, 4/9/2015); “J.C. Penney…to shut stores, lay off scores” (USA
Today, 1/9/2015); “RadioShack files for bankruptcy, announces plan
to sell stores” (Los Angeles Times, 2/8/2015).
In order to gain insight at a particularly volatile time for the industry,
Microsoft recently conducted a survey with 100 retail executives to
gain insight into their business challenges and learn about how they
are currently using, or plan to use, analytics and the cloud to stay
relevant with today’s consumers.
73% of executives surveyed said that the retail marketplace is changing, and 40% said
that the change is rapid.
W
Executive Summary
Retail Insights 3
When asked about their organization’s current business
environment, 73% of those surveyed acknowledged that the retail
marketplace is changing. For 33%, the business environment change
is happening slowly; and 40% are seeing their businesses change
rapidly.
Retailers who continue to do business as they always have without
evolving their business practices may soon find themselves
outpaced and outmatched in a ruthlessly competitive marketplace.
New technologies promise better customer shopping experiences,
nimbler inventory management, and expanded access to diverse
data that provide retailers with critical real-time insights into their
business. To harness these innovations, management must take a
proactive approach in close collaboration with diverse teams within
their organization.
Microsoft created this white paper, which includes insights gleaned
from our survey of retail business executives, to provide guidance on
evolving retail data business practices and challenges. It discusses
two of the most prevalent business opportunities—personalization
and demand forecasting—and explains how current technology
innovations in the retail marketplace, combined with cloud- and
hybrid-cloud–based solutions, as well as advanced data analytics,
can help retailers meet today’s business needs and prepare to thrive
in tomorrow’s competitive environment.
Retail Insights 4
oday’s retail executives are facing mounting pressure to evolve
business models that make sense in a global marketplace
characterized by disruptive technological innovations and fierce
competition for consumer dollars.
What once worked to entice consumers, such as loyalty programs,
no longer guarantees a sale. Not only do they have endless choices
at their fingertips, they have a voice. They can post a review—and
one in five consumers do. This means there’s data out there that can
help you build, monitor and improve your brand. Microsoft Social
Engagement enables you to “listen” to what your customers are
saying, learn from it and take action.
Yet another challenge lies with our globally connected, 24/7 mobile
economy. How can today’s retail executives successfully compete in
this dynamic marketplace? By differentiating the shopping
experience through the meaningful use of technology,
personalizing promotions and experiences for customers, and
effectively predicting and prescribing what will sell, when, where,
and to whom.
Retailers who use their own vast array of sales, inventory, and
customer data to help shape their retail strategy are seeing gains in
their KPIs, including increases in:
Year-over-year sales per square foot
Store profitability
Overall revenue
In addition, they’re seeing decreases in the percent of inventory
markdowns and inventory churn that take a bite out of overall profit.
Macy’s, for example, increased profits through an omni-channel
strategy that improved efficiencies in inventory management and
increased sales when customers went to stores to pick up their
online orders. According to Stores, the National Retail Federation
magazine, “Macy’s fourth-quarter sales increased to $9.4 billion, up
1.8 percent from the prior year,” even though the sales didn’t come
from their highest-profit departments.
T
Retail Trends
Retail Insights 5
When asked what role big data or advanced analytics plays in their competitiveness,
64% of executives surveyed said that analytical capabilities give them a competitive
advantage.
According to a recent IDC report, by 2017, retail companies that take
advantage of their data can potentially realize an additional
$94 billion in revenue over companies that don’t. Key opportunity
areas include employee productivity ($41B), operational
improvement ($29B), product innovation ($15B), and customer-
facing experiences ($9B).2
Retailers who don’t keep up with innovations in commerce,
technology and business practices will find it increasingly difficult to
attract and retain customers. With industry competitors expanding
sales by devising new ways to market and bundle merchandise,
retailers can also find that suppliers are making exclusive deals with
competitors who are able to predict inventory needs with greater
efficiency and accuracy.
Although retail executives understand that data flowing through
their companies daily represents an asset they can use to solve
pressing business problems, making sense of how to use it can be a
challenge. Add to that emerging technologies such as beacons and
sensors, as well as exponentially increasing web traffic on social
media sites, the promise of real-time data analysis is a tantalizing
proposition.
Retail Insights 6
New data sources lead to better solutions to challenging business questions.
Areas of opportunity Forward-thinking retailers are focusing on four key areas of
opportunity:
Commerce “anywhere, anytime”
Personalized promotions and experiences
Situational awareness
Diverse Data + New Analytics + Expanded information
access
Retail Insights 7
Commerce “anywhere, anytime” means customers are making
their purchases online, in traditional brick-and-mortar stores, from
“pop-up” stores and other sources. These can range from stores
within a store, like Olivia Kim’s curated collection of changing “pop-
in” stores for Nordstrom, to co-branded shopping experiences like
Wired Magazine’s holiday pop-up store in New York City. Customers
might shop downtown with friends on Saturday; online at midnight
on Wednesday; or while working out, using a mobile device to
purchase an item they just saw on TV. Cable companies are even
placing “Shop Now” buttons within some television shows, enabling
viewers to make an immediate purchase.
Personalized promotions and experiences provide customers with
tailored purchasing opportunities based on an analysis of their real-
time and historical purchasing data. For example, when customers
sign in to JJ Food Service, a large food and beverage provider in the
U.K., they get predictive shopping lists for their restaurants or
businesses based on both current order information and historical
customer data, such as previous orders and calendar data.3
Marston’s, a 200-year-old UK pub, uses Microsoft Dynamics to get a
single view of a customer’s activity across digital signage, social,
websites and email. This enables them to deliver the kind of
neighborhood pub experience customers love. For example, they’ve
got a digital message board where customers can post that a friend
of the group is running late for his birthday party, then when he
walks through the door the system alerts a server who hands him his
favorite drink as his favorite song plays on the jukebox. With the rate
of British pub closures accelerating to 31 per week, Marston’s is
combining data analytics and CRM to reinvent the pub business.4
Other personalized shopping experiences include dynamic discounts
and options to purchase online and pick-up in-store or purchase in-
store and ship anywhere. Brick-and-mortar stores are also using
analytics to offer real-time “recommended for you” suggestions in-
store, duplicating the familiar online recommendation experience.
Sales associates are armed with customer and product information
at their fingertips, enabling them to interact with customers in much
the same way “live chat” and call center operators interact with
customers online. Some online-only retailers are opening retail
storefronts, curating exclusive collections of items from their
websites and enabling customers to “touch, feel, and try” the
products before they buy.
Retail Insights 8
Situational awareness provides retailers with real-time information
through the use of QR codes, RFID tags, NFC (e.g., Apple Pay, iPay,
“Tap to Pay”), beacons, and other sensors that gather other helpful
data, enabling them to deliver real-time coupons, product
information, and even games and promotions to customers. For
example, using the Wi-Fi signals on a customer’s smartphone, it’s
possible to track them through the store and send them
personalized coupons and product information as they shop. QR
codes and RFID tags enable customers to scan items or displays and
get more information or see similar items the retailer might have
available in the warehouse. Situational awareness also provides
retailers with information about the flow of customers through a
store, including where and in what order they browse. This
information can provide insights into how to better organize
merchandise to drive purchases—for example, by grouping items
that customers typically look for during the same store visit.
Diverse Data + New Analytics + Expanded information access =
More revenue by enabling executives to make decisions about
promotions, pricing, inventory, and bundling that are predictive and
prescriptive instead of reactive and disconnected.
Sales associates can access real-time information about products
and customers to help drive sales. TREK Bicycles, for example, uses
Microsoft Office 365, Azure on CRM OL + Yammer and SharePoint
to better manage customer service requests.5 With the ability to
store customer, inventory and sales data inexpensively, everyone
from executives to individual employees in retail locations can
review historical data, as well as use real-time sales figures and
inventory to make fast, well-informed decisions that can enable
them to do their jobs better and increase sales.
Retail Insights 9
loud-based technology is used by a wide range of retailers for an
enormous array of functions. From small businesses that utilize
cloud-based infrastructure services to multinational companies that
use cloud services to enable powerful omni-channel solutions, the
business applications are as broad as the retail field itself.
Research in IT trends by Microsoft and other organizations confirms
the importance of cloud-based solutions for businesses. According
to Microsoft CEO Satya Nadella, 80% of the Fortune 500 companies
are on the Microsoft Cloud6,7, and according to Business Insider, IDC
predicts businesses will spend $118 billion on cloud technologies in
2015.8
More than 70% of the retail executives recently surveyed identified
themselves as technically savvy and capable of discussing the use of
the cloud in their organizations. However, 44% of those surveyed are
using the cloud only for low-risk business needs. Another 13% have
adopted a “wait and see” approach to cloud solutions.
Retail executives in the Microsoft survey were asked about their companies’ cloud
strategy; 84% indicated their companies are already using cloud-based solutions to
address business needs.
C
The Cloud: Delivering
Competitive Advantage
Retail Insights 10
The retail industry is evolving fast as new technologies are
introduced, new competitors enter the marketplace, and consumer
demand for goods and services evolves.
Retail Insights 11
One way retailers are differentiating themselves in a crowded
marketplace is through the use of cloud-based solutions. Of those
surveyed, 84% report that cloud-based solutions provide better data
integration; 81% see cost savings; 72% say cloud-based solutions
lead to faster deployment of new business applications; and 53%
identify better security as another benefit of the cloud. Clearly, these
executives see a competitive advantage in adopting the cloud.
When retail executives were asked how the cloud is creating a competitive advantage for
their business environment, over 80% said better data integration and reduced cost.
Even with these benefits, 16% of retail businesses are still not taking
advantage of the benefits of the cloud and another 44% are using
the cloud for only low-risk solutions. What’s holding back those 60%
of executives from fully embracing the cloud?
Dispelling the myths Unfortunately, there are still many myths about cloud technology
that might make organizations hesitant about embracing the cloud
as part of their data solution. Survey respondents who aren’t
currently embracing the cloud identified security concerns, lack of
control, and expense as barriers to cloud adoption for their
organizations.
Even though 80% of non-cloud adopters identify security concerns as a major barrier,
cloud security fears are often baseless.
One persistent myth deserves mention: that of data being less
secure in the cloud.
Retail Insights 12
A recent article on cio.com discussed the realities of cloud security
with experts in the field and found security fears are often baseless.
Tim McKellips, manager of technical services for SoftChoice stated in
the article that he believes cloud providers like Microsoft are “taking
Herculean efforts to secure their environments in a way the average
client could never do.”9
Although the news of data breaches in retail businesses is an almost
daily occurrence, the Verizon 2015 Data Breach Investigations
Report10 identifies the top causes of those breaches:
Point of Sale (POS) Intrusions. For example, payment card
skimmers, intrusion through secondary systems (Target’s
recent data breach is a prime example of this) or, in the case
of smaller businesses, sometimes even repetitive guessing of
passwords until the right one is discovered.
Miscellaneous errors. For example, sending documents or
email to the wrong person.
Insider misuse. For example, stolen equipment or employees
with a grudge.
Non-compliance with the Payment Card Industry Data
Security Standard (PCI-DSS). Non-compliance to PCI-DSS
regulations are a problem. Retailers who are slow to comply
with upgrading POS terminals to the new chip-and-pin
technology (mandatory from October 2015 in the U.S.) will
remain vulnerable.
Hybrid cloud: A first step For retailers who are hesitant or simply not ready to move to a full
cloud solution, a hybrid cloud solution provides a best first step in
migrating and extending current systems. The hybrid cloud offers
the benefits of both the control and flexibility of on-premises
solutions and the elasticity and redundancy of the cloud. Data that
has low sensitivity is stored in the cloud to take advantage of
improved integration and the lower cost structure. Data that’s
considered too sensitive for the cloud is stored on-premises and
managed by the retailer’s IT department.
The hybrid cloud also creates a wealth of cloud computing and
advanced analytics opportunities. Using the cloud offers some cost
savings and control of sensitive data, but analytics must be done on-
premises and can’t take advantage of the power of cloud-based
services.
The hybrid cloud strategy is a logical entry point for retailers
interested in evaluating emerging technologies. Although it can be
the fastest path to a more powerful, full-cloud foundation, a hybrid
cloud solution is only a transitional strategy and won’t be sufficient
in the long term for retailers who want to stay ahead of their
Retail Insights 13
competitors. Furthermore, it might not afford the same level of
security possible in an all-cloud of their competitors.
n the past, data flowed into corporate servers in a structured format
from limited sources. Today a flood of data pours in from many
sources and can be structured, semi-structured, or unstructured. In
addition to handling these different types of data, retailers must
manage data that can reside in multiple places, including on-
premises, in the cloud, and on mobile devices. They must also be
able to access both historical data and real-time data. The efficient
capture and processing of data is the first step in transforming
information into business insight.
It’s not enough to just capture the data; it’s also important to
understand what business questions the data will be used to answer.
Machine learning (learning and making predictive analyses from
data) provides the engine behind advanced analytics, which can help
companies answer business questions and assist in combining and
visualizing data for further analysis.
The majority of retailers surveyed said that they’re currently investing in analytics
capabilities or will be in the next year.
I
Big Data Retail
Retail Insights 14
Useful at all levels After data models have been built, tested and deployed,
transformative retail business insights can be made available to
anyone in the organization.
Sales associates can use customized apps on mobile devices
in stores to assist customers with product information and
personalized recommendations.
Logistics managers can arrange the movement of stock from
warehouse to stores to customers, and can predict inventory
needs through visualization apps.
Finance officers can generate reports and projections on
sales and salaries. The marketing team can create
customized marketing campaigns by using a combination of
real-time apps and reports to model campaigns and predict
resulting sales.
And managers all the way up the chain can glean insights
about sales, employees and inventory—anywhere and
anytime.
The power of data: retail scenarios Given the enormous amount of data available, the almost endless
variety of retail goods for sale, and the myriad business problems
retail executives are trying to solve, there are many potential
scenarios for illustrating an effective data + analytics solution.
Retail Insights 15
Demand and sales forecasting plus customer insights and personalization were the
biggest concerns of the retailers surveyed.
Two scenarios, personalized promotions and experiences and
demand forecasting, show the power and versatility of using
advanced analytics in retail businesses particularly when combined
with existing CRM solutions.
Scenario 1:
Personalized engagement A multitude of online studies explore the shopping habits of
different generations, with much of the current research effort
focusing on “millennial shopping trends.” Across the research, one
trend emerges repeatedly from those surveyed: Consumers want
more personalized offers and experiences when shopping either in-
store or online.11
What’s surprising is that only 12% of retail executives in the
Microsoft survey said their companies are extremely effective at
using analytics to personalize promotions for specific customers.
With less than half of the executives surveyed using analytics effectively for
personalization scenarios, there’s huge potential being missed.
This gap in effectiveness represents an opportunity to improve the
use of analytics in response to customer desire for more
personalized shopping experiences. It also provides an opportunity
for showcasing the benefits of advanced analytics to solve a current
business challenge.
Retail Insights 16
Customer shopping behavior is often a moving target. In 2012,
retailers were challenged by customers using brick-and-mortar
stores to “showroom”—or try out items in the store and then
compare prices with online offers—often with the undesirable (at
least from the brick and mortar store’s point of view) outcome of
buying the item online—sometimes while standing right in front of
the item in the store.
In 2015, “webrooming”—the opposite of “showrooming”—is
becoming more prevalent, and several recent studies have shown
that consumers are now doing research online before eventually
going to a brick and mortar store to make their purchase. According
to an article in the Washington Post, based on a survey by Nielsen,
“…while 51 percent of respondents said they browse products in
stores before ultimately buying them on the web, an even larger
number said they do the opposite.”12
Shrewd retail executives see opportunity in their customers’
browsing behaviors through omni-channel integration for their
business. An omni-channel approach takes advantage of consumers’
tendency to browse—whether online, in-store, on mobile devices, or
through social media—to provide the “best” possible shopping
experience for them.
Pier 1 Imports is one example of a company embracing an omni-
channel strategy. In an analyst call in September 2014, CEO Alex
Smith said, “Our omni-channel strategy is being embraced by our
customers. We're giving them multiple ways to shop, and they love
it.... Like other omni-channel retailers, our stores are becoming sales
and customer experience centers.”13
Technology innovations such as QR codes, NFC tags, RFID tags,
beacons (e.g., Bluetooth Smart) can also help deliver “customized”
retail experiences by offering real-time promotions in the store as
customers browse product shelves. For example, when customers
use a store’s mobile device app, approaching a display can trigger a
coupon for items on display to be sent directly to the device.
Customers can also obtain product information, find out about the
availability of other colors, styles, sizes, and so on.
To present these customized promotions, retailers must be able to
analyze sales data in real time so they can quickly offer coupons that
can motivate customers to buy something they weren’t planning on.
It also requires that they have up-to-the-minute information about
stock availability and location to ensure that customers can purchase
and receive items in a timely way. Failing to deliver can drive
customers to other retail sources and lead to lost sales of that item
and potentially other items as well.
Yet another approach is to offer customers “personalized” shopping
experiences based on their desires, previous shopping habits and/or
propensity to spend in a given category or price range. This could be
an app experience or part of a loyalty scheme in which the power of
Retail Insights 17
advanced analytics has been combined with CRM to create an
intelligent customer engagement program. Given that the average
loyalty customer spends 20% more than traditional shoppers, such a
program could also be more profitable for retail organizations.
Analyzing both real-time data (for example, what’s currently in a
customer’s online shopping cart) and historical data (such as that
customer’s past purchase patterns) also provides a way to
personalize the customer experience. JJ Food Services, the U.K.-
based food delivery service mentioned earlier, used machine
learning to develop a predictive shopping list for its online orders
that recommends other items based not only on what’s in the
customer’s shopping cart, but also on their previous purchasing
patterns. If a customer orders greens once a week, flour every
couple of weeks, and cooking oil once a month, the predictive
shopping list recommends purchases based on that data as well. The
JJ Food Services solution improved their cross-selling capabilities,
enhanced their new customers’ experience, and sped up ordering for
their existing customer base.14
Some promotions can include dynamic pricing targeted for regular
customers whose purchases are tracked by the retailer. For example,
Safeway created the “Just for U” program for their customers a few
years ago. Registered customers log in to their personalized “Just
for U” account either online or via a mobile device app to view and
add personalized offers and create their weekly shopping list. The
app also enables customers to organize their shopping list by aisle
for the store where they’re planning to shop.
By using the “Just for U” app, customers provide Safeway with
copious data about their buying habits. Safeway can then use this
data to better tailor promotions just for the customer. This creates a
positive feedback loop that benefits customers, who receive more
personalized offers for grocery coupons; given that the average
grocery store stocks 50 to 60 thousand items and the average
consumer’s purchases are limited to around 300, this is a
tremendous convenience for the consumer. It also benefits Safeway
by potentially drawing customers into the store when they might
not have otherwise been planning to shop.15
Technology innovations also deliver real-time information that can
be processed immediately or logged and analyzed later for patterns.
For example, the Chili’s restaurant chain uses Ziosk tablets powered
by Microsoft Azure—which offers cloud-based, real-time
information and ordering capabilities—to provide diners with menu
information and the option to pay their bill directly through the
device. As part of the bill payment process, diners are also asked to
fill out a survey about their dining experience.
With over 70% of their customers opting to fill out the survey when
they pay, Chili’s has almost immediate access to information about
individual restaurants—the quality of the food, the cleanliness of the
restaurant, the attentiveness of the server, and so on. With the ability
Retail Insights 18
to analyze this data rapidly, Chili’s can quickly discover and solve
problems to improve the dining experience.16
What these types of innovations mean in real terms is terabytes of
additional data streaming into businesses in real time, often 24/7,
365 days a year. Mining the data for insights requires close
collaboration between IT and business decision-makers to be sure
the right nuggets of information are being found.
Success in implementing data analytics solutions for personalized
promotions and experiences can be measured through retail KPIs,
such as sales per square foot, retail price, net sales, margin
percentage, and maintained markup. Retailers can get rapid
feedback about the effectiveness and overall value of their
personalized promotions. If one thing is clear, the process of
engaging customers can't be one-size-fits-all. It needs to be
adaptive across all touch points and within the context of the
customer. Retailers can use data analytics to personalize customer
experiences and create end-to-end, outcome-focused journeys that
engage the consumer at the right time and place, AND on their
terms.
Scenario 2:
Demand forecasting Numerous market forces put stress on retail executives when it
comes to inventory management. With the supply chain embracing
“just-in-time” manufacturing, demand sometimes outstrips supply
and can lead to longer waiting times until merchandise is delivered.
Because of their sheer dollar purchasing power, big retailers can
often jump to the head of the line, making it harder for smaller
retailers to compete effectively.
Another inventory management nightmare can occur when external
events, such as weather patterns, disasters, or especially the viral
nature of social media, affect demand. And retailers who sell
products nationally, or even globally, can all relate stories of items
that sold big in Kalamazoo and not at all in Kamchatka, leaving
groaning warehouses and deep markdowns taking a big bite out of
profits.
The goal of demand forecasting is to ensure that the right items are
stocked in the right quantities at the right time in the right location
to avoid overstocks and stock-outs. Accurately predicting demand
makes it possible for retailers to optimize inventory and use the
supply chain effectively. They can track the success of using analytics
for demand forecasting through KPIs such as average inventory,
ending inventory, inventory turnover, stock turnover in days, and
total turnover.
With more consumers expecting a fully integrated shopping
experience—from e-commerce to bricks and mortar and across
Retail Insights 19
devices—developing omni-channel strategies has become a
business imperative for retailers. To deliver a better omni-channel
customer experience, it’s important that brick and mortar stores are
stocked with enough inventory to successfully use them as mini-
distribution centers. Conversely, when customers are in the store
and decide to have an item shipped directly to them, it’s important
to ensure that it’s possible to deliver the items in a timely way.
Omni-channel strategies require real-time demand forecasting and
analysis to realize enhanced revenue.
Real-time analysis of data sources from event schedules to weather, combined with
historical data such as store sales and order history, makes it possible to increase
revenue by proactively moving inventory.
Enabling customers to purchase online and return in-store also
generates increased revenue as customers come into the store to
make a return and end up browsing for (and buying) new items.
Fortune magazine reports that Nordstrom realized benefits from
this strategy when it enabled customers to return items purchased
at nordstromrack.com and HauteLook at its Rack stores.17
Demand forecasting provides another retail opportunity for
moving inventory—product bundling. Bundling can take the form
of grouping like items together for specific times of year—for
example, back to school, Cinco de Mayo, or 4th of July—and
offering items at a discount. Or it can mean putting products
together as a package, such as a television and a Blu-Ray player,
and selling them as a unit instead of individually. It’s important in
Retail Insights 20
these scenarios that all items are in stock; if not, the entire bundle
might not sell.
With real-time data available for analysis, it’s also possible to
predict upticks in inventory demand—for example, driven by
weather predictions or a celebrity tweeting love of a certain
product.
Combining this information with historical data, such as which
stores sell more products on hot days or what geographic location
has more affluent trend-following customers, makes it possible to
proactively move inventory around and ensure the right quantities
are available in the right places at the right time to maximize the
number of units sold.
Conversely, using the same data sources and predictive analytics
makes it possible to forecast a reduction in demand for inventory,
giving retailers the opportunity to create promotions and cross-
sell to increase sales even when the trend is toward a slow-down.
Analysis can identify slow-moving inventory and help retailers
create promotions targeted at specific customers based on their
purchasing patterns, and sales associates can get real-time
updates on which products to up-sell or cross-sell from day to
day.
Retail Insights 21
Making sense of how to process, predict and visualize the data
that streams into a retail business 24/7, 365 days a year helps
differentiate companies in a crowded marketplace. With the ever-
increasing pace of technological innovation and customers who
want more personalized shopping experiences across devices,
both online and in-store, retail business executives need the right
data platform analytics solution to help them:
Provide a rich, personalized, seamless shopping experience
across multiple channels
Tailor customer experiences and recommendations
Forecast demand to manage inventory more effectively across
multiple retail channels
Improve efficiency throughout their organization
Maximize profitability of the goods they sell
With a complete advanced analytics solution that securely spans
on-premises computers and servers, cloud-based storage and
tools, mobile device applications and customer engagement, retail
businesses can solve the business problems of today as they
anticipate and prepare for the innovations of tomorrow.
Microsoft cloud-based solutions Creating a cloud-based advanced analytics solution using
Microsoft products such as Cortana Analytics offers many benefits
for retail businesses of any size, including:
Scalability. Quickly scale up or down on demand, and pay
only for what you use, gaining processing power to fuel
advanced data analytics capabilities.
Cost. With a payment model of paying only for the services
you use, Cortana Analytics is an economical way for even the
smallest retailer to benefit from cloud solutions.
Familiarity. The tools provided for building a cloud-based
data processing and analytics solution with Cortana Analytics
are the same ones that millions of businesses trust today. And
Microsoft solutions integrate with a broad range of devices to
help make Bring Your Own Device (BYOD) a reality.
Security. Microsoft delivers cloud services with enhanced
security, management, and threat-mitigation practices to
many of the world’s leading enterprises and government
agencies. Every day, Microsoft delivers services that achieve
Conclusion
Retail Insights 22
higher levels of security, privacy, and compliance than most
users can achieve on their own.
Cloud-based solutions offer many benefits, but there may be
reasons that a retail business might not be ready to move to a full
cloud solution. For these retailers, Microsoft offers the hybrid
cloud, which enables businesses to move part of their data and
computing needs to the cloud while maintaining on-premises
data as well. The hybrid cloud provides the benefits of cloud
computing: scalability, elasticity, cost benefits, familiar tools and
apps, and enhanced security.
With the wealth of data available to mine for business insights, it’s
also important for retailers to have tools available to make it easy
for the right users to get access to the right data at the right time.
Microsoft provides business intelligence (BI) solutions for
predicting and visualizing information, making the power of
advanced analytics available throughout an organization.
Microsoft BI solutions also integrate with existing tools and apps
to make it easier for companies to deploy new apps and services
based on insights gleaned through advanced analytics.
Retail business executives who take the opportunity now to evolve
their business practices by bringing the power of the cloud and
advanced analytics to their companies will find themselves
uniquely situated for a competitive advantage in an ever-
tightening retail marketplace.
Retail Insights 23
Notes 1 eMarketer Retail Sales Worldwide Will Top $22 Trillion This Year.
2 IDC and Microsoft Corporation, The Data Dividend.
3 Microsoft.com, Machine learning helps food service supplier predict what customers want before they
order.
4 Microsoft.com, Marston's Delivers Personalized Service in Real-Time with Dynamics
5 Microsoft.com, Integrated CRM Solution Helps TREK Support Local Sales Reps 6 Eugene Kim, Business Insider, Microsoft CEO Satya Nadella Shows Why Azure Is A Serious Threat To
Amazon And Google.
7 Microsoft.com, Microsoft by the Numbers, the Enterprise Cloud.
8 Julie Bort, Business Insider, 14 Tech Trends That Will Make Someone Billions Of Dollars Next Year.
9 David Spark, cio.com, 20 of the Greatest Myths of Cloud Security.
10 Verizon, 2015 Data Investigations Breach Report.
11 Fiona Soltes, Stores Magazine, Downright Personal.
12 Sarah Halzak, The Washington Post, One way online shopping is actually helping brick-and-mortar
retailers.
13 Larry Dignan, zdnet.com, Pier 1 Imports aims to transform via e-commerce, IT.
14 Microsoft.com, Food Delivery Service Uses Machine Learning to Revolutionize Customer Service.
15 Olga Kharf, Bloomberg Business, Supermarkets offer personalized pricing.
16 Microsoft.com, Tabletop tablets provide a better experience for diners and valuable data for restaurants.
17 Phil Wahba, Fortune, February 20, 2015, Nordstrom’s Multi-billion Dollar Plan for e-Commerce
Domination.
The information contained in this document represents the current view of Microsoft Corporation on the issues discussed as of the date
of publication. Because Microsoft must respond to changing market conditions, it should not be interpreted to be a commitment on the
part of Microsoft, and Microsoft cannot guarantee the accuracy of any information presented after the date of publication.
This white paper is for informational purposes only. Microsoft makes no warranties, express or implied, in this document.
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© 2015 Microsoft Corporation. All rights reserved.
Microsoft and Azure are registered trademarks or trademarks of Microsoft Corporation in the United States and/or other countries.
Retail Insights 24
The names of actual companies and products mentioned herein may be the trademarks of their respective owners.