Retail: Store SystemsAchieve competitive advantage through an enhanced shopping experience, improved employee productivity and efficient store operations by better connecting information, systems and people

Microsoft Point of ViewJanuary 2007

Overview

Sustainable success in retail has always required a double vision. The first is focused on efficiently running stores that carry the products people want today, with all the up-to-the-minute attributes of pricing, merchandising and management supporting the process. The other is focused on the longer view of, “How can I keep attracting customers to my stores in the future?”

Every retailer’s outlook may be slightly different, based on varying business requirements, competitive pressures and overall market conditions. But there are generally two areas of agreement for most retailers. The first is that in order to create an experience that will continue to attract customers, retailers will need to continually enhance the store environ-ment. The second is that technology that enables many of a store’s functions today, will only become more important in the future as the marketplace becomes increasingly com-petitive and customers, who themselves are becoming more technologically astute, will become even more demanding.

Optimizing the store experienceCompanies that create an ongoing “optimized” experience are not only more likely to attract new customers and retain their existing customers, but also have the opportunity to garner a larger “share of wallet” from them. And increased sales can equate to higher profits and long-term growth.

Microsoft is keenly aware of retailer needs to create the optimal experience for each customer, which can be broadly defined as:

Creating positive shopping experiences

Creating a perception of value in the customer’s mind

Offering the products that customers need, at the right prices and through the sales channels the customer wants to use

Continuously improving the products, services and envi-ronment that customers shop in

However, while the vision of a sustainable optimized store is a compelling one, the retail stores of today often face a variety of potential roadblocks ranging from complex information technology infrastructures to high staff turnover, which can prove especially challenging.

That’s why Microsoft and its global network of independent software vendors and systems integrators are working to-gether to provide cost-effective, easy-to-implement, reliable, technology solutions that will enhance retailers’ interactions with customers, and provide them with reliable software and tools that will enable them to optimize every aspect of their business operations.

Enabling a People-Ready BusinessWhile technology provides the world of business with a tech-nical framework for success, retailers have long known that it is people — employees, suppliers, consultants, partners and customers — who enable them to succeed.

It’s the ability of people who recognize technology’s potential to enhance every aspect of retail operations and connect them with customers, which leads to innovation and defines the way retailers conduct business. And it’s the combined knowledge, capabilities and ideas of people, along with technology solu-tions, that help retailers to build, grow and operate their busi-nesses more efficiently and profitably.

A “people-ready business” is one that recognizes the role peo-ple can play in literally making the difference between merely existing and thriving in the increasingly competitive global mar-ketplace. It’s a business that does everything it can to enhance people’s ability to make the best decisions and produce the best results they can at every stage of the retail value chain.

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What This Means For YouWhen Microsoft looks toward the future, it envisions retail store operations where people and technology work together to increase productivity and deliver operational efficiencies:

Drive Retail InnovationIn the consumer-driven economy, customers are ready for the ability to transact business without boundaries. They want location-based awareness, enhanced mobility and RFID capa-bilities. For retailers and the consumer product industry, this means real-time integration around the supply chain. To drive the future of retailing, Microsoft and its industry partners are innovating at the point where manufacturers, distribu-tors, retailers and consumers interact. In the area of advertis-ing, more companies are bypassing traditional channels and marketing directly to their customers through cell phones, text messaging, instant messaging, online click-throughs, and one-to-one personalization. The supply chain as we know it will be more consumer-focused, and collaboration will sup-port the customer experience rather than cost reduction.

Build High-Value Business ConnectionsThere are many touch points in the retail environment. Inte-gration and collaboration aren’t just essential to the customer experience in a multichannel world, they’re critical to people in every role of the enterprise. These affect retailers on two fronts: employees and suppliers. For employees, the future will be about getting more technology into their hands to improve productivity, provide supply chain visibility, and create a better work experience. For suppliers, it will be about real-time access

to demand data. Both, ultimately, will improve the customer experience, build loyalty and generate repeat business.

Strengthen Customer RelationshipsWhen all is said and done, the key to retail success is finding ways to attract and build profitable relationships with cus-tomers. Technology solutions from Microsoft and its industry partners helps retailers better understand customer needs and trends in the marketplace while simultaneously enabling employees to improve customer interactions at every stage of a transaction. In the best-case scenario, they enable retailers to deliver shopping experiences that delight customers, cre-ate loyalty and help ensure repeat business.

Improve OperationsTo respond to consumer needs as well as market and industry changes, retailers must be agile to take advantage of technolo-gies that enable a seamless workflow driven by demand. This implies a technology infrastructure that is based on true data management. In the future, technology will enable a single view of the customer across all channels, and retailers will need to stop looking at the data and instead focus on the architec-ture that houses it. The supply chain as we know it will be more consumer-focused, and collaboration will support the customer experience rather than just cost reduction. Both will be accom-plished through the integration of disparate systems embed-ded throughout business operations. When RFID technology comes of age in the next decade, retailer-supplier collaboration will become a catalyst for operational innovation that enables seamless workflow at the business process and human levels.

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According to several studies, as much as 70 percent of a retailer’s information technology resources are devoted to sustaining and running existing capability, with the balance available for exploring and implementing new technologies. IT executives seeking to shift those ratios so that more invest-ment can be applied toward emerging technologies and new capabilities are adopting technology solutions that drive economies of scale, improve cost efficiencies, and reduce total cost of infrastructure ownership.

One way to do this is to create a “connected” IT environment, which seamlessly integrates store-level systems with a retail-er’s corporate headquarters systems, enabling the sharing of data and services throughout the enterprise. Microsoft’s technology solutions are designed to co-exist with a retailer’s existing technology and give retailers the ability to make choices based on their individual business needs and technol-ogy requirements rather than legacy systems.

These tailored, value-added solutions can empower associ-ates and customers, creating conditions for optimized store experiences. These solutions take place within the context of standards-based solutions that allow for a high degree of interoperability and integration.

Microsoft helps retailers accomplish this through a combination of:

Centralized Manageability Microsoft’s system management capabilities are designed to lower life cycle costs by centralizing management de-ployment and monitoring of store solutions. Retailers can consolidate IT resources and expertise, proactively respond to system and security issues, minimizing the need for store visits; and more cost-effectively implement value-added solutions that create optimized experiences.

Choice The Microsoft platform is interoperable by design and the company has developed a rich solution partner ecosystem that utilizes that platform. This empowers retailers to either create or choose from available best-of-class solutions to meet their current business needs, while also laying the groundwork to take advantage of future opportunities in a timely, cost-effective manner. This platform can also easily in-teroperate with non-Microsoft and legacy solutions, enabling the retailer to get more value out of existing technology.

Empowerment Microsoft solutions deliver relevant, real-time information to those who need it, anytime, anywhere and on any de-vice. In addition, Microsoft is a leader in consumer technol-ogy and its consistent, easy-to-use interface is familiar to a large user base of both customers and store associates.

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Business Requirements for RetailMicrosoft is aware that store systems solutions must offer retailers a consistent set of basic capabilities, and it builds these into its Windows platform:

Security: the Windows platform includes security features designed to allow access only to those authorized to either use or maintain a system. This requires hierarchical control within the organization and protection from outsiders, such as competitors or hackers.Availability: Not only hardware and servers, but applications – especially mission-critical ones such as the Point of Sale – offer virtually 100 percent uptime and are able to operate offline with no data loss or service interruption when a server or network is unavailable.Adaptability/Expandability: the fast-changing nature of retail requires store systems that can easily handle the addition of new solutions and technologies on the horizon, such as Voice over Internet Protocol (VoIP) communication and radio frequency identification (RFID).Interoperability: Solutions that use open systems and embrace industry standards allow new and legacy solutions to coexist, eliminating the need for a rip-and-replace strategy. This capability also allows for a reasonable migration strategy.Manageability: IT must be able to centrally monitor technology throughout the enterprise and automate basic functions such as application and patch deployment, and systems recovery, while proactively anticipating repair and replacement needs.Risk Reduction: Retailers dread investing in technology that may not be supported in the future, so they need solutions from reliable partners who have made long-term development and support commitments to the retail industry.Return on Investment: Today’s competitive environment and retail’s traditionally thin margins require that any solution must in essence pay for itself by driving revenue.Integrated Platform: Solutions utilizing a common technology platform allow retailers to consolidate the expertise of their IT departments, as well as that of managers and employees. By extending store systems throughout the enterprise or vice versa, retailers gain a more versatile workforce and can cut training time and costs, when employees move within the organization.

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Creating a Connected Store

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This enables collaboration at multiple levels: within the store itself; between headquarters and stores; throughout the retail enterprise; and through new opportunities by connecting to consumer devices. Being empowered allows retailers to create consumer interactions that take place when, how and where the customer wants them, thereby enabling the optimized experiences that build loyalty.

Commitment to Standards Microsoft has a long history of initiating and facilitating the development of technology standards for the retail space, allowing retailers to take advantage of plug-and-play devices and alleviating systems integration challenges.

With the combination of these major benefits and a global network of partners, Microsoft’s solutions enable the creation of connected stores that offer retailers proven solutions that lay the foundation for scalable future technology-related improvements and initiatives.

Centralized ManageabilityIf you ask retailers what inhibits them from fully optimizing existing solutions deployed in their stores, or from deploying value-added solutions, the top responses will invariably be tied to the limitations of their existing environment. Those limita-tions consist not only of the lack of needed functionality and the difficulty of enhancement, but also encompass communi-cation bandwidth to the stores and the problems retailers have in deploying, maintaining and managing those solutions.

The task of managing a wide range of disparate systems and applications that are spread throughout a geographically dispersed enterprise is challenging. The growing number of devices used in the store, from kiosks to handheld and wire-less technology, adds to the management and deployment challenge. Even the business environment is creating more complexity: ongoing retail industry mergers and acquisitions are creating numerous organizations that consist of several formerly discrete corporate entities, each with its own tech-nology strategy and architecture.

One of the main advantages of a connected store is its ability to solve this problem by simplifying and automating basic management functions. In addition to enabling retailers to take a more proactive, preventive approach to solution and technology management, centralized manageability goes a long way toward addressing total cost of ownership (TCO) by helping lower life cycle costs – a key objective for virtually all IT and store operations executives in retail.

Management and Monitoring SolutionsEven with the complexity of many store technology environ-ments, Microsoft gives retailers the ability to centrally man-

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age all their systems and to quickly establish a recovery and deployment strategy. This enables retailers to monitor virtually all the devices and solutions that are at work in their stores.

On the most basic level, the Microsoft Windows Server Sys-tem™ is capable of centrally managing the wide range of tech-nology in virtually any retail enterprise—even heterogeneous environments that feature a mix of Microsoft and non-Micro-soft based devices and applications provided through solution partner management packs. This capability helps create a high degree of interoperability among Microsoft and non-Micro-soft products, and it reflects Microsoft’s commitment to open systems and its embrace of technology standards.

Through the use of the Microsoft Windows Server System, retailers have the ability to deploy, recover and manage enabling platforms and applications, even in a low-band-width environment. Centralized manageability enhances this by giving retailers the time and resources to focus on what is important to their business goals—the ability to quickly and easily implement virtually any value-added solution that can optimize the store experience.

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Microsoft’s commitment to lowering life cycle costs is strengthened by the ability it gives retailers to centrally deploy software updates, platform upgrades and security patches, and even entirely new applications and enabling platforms. This capability is part of the intelligent management that is available with Microsoft Systems Management Server (SMS), which also provides support for mobile and wireless devices.

Not only does the management software enable automatic and instrumented recovery of devices throughout the store, it also creates automatic reports whenever such actions take place, alerting the IT department and the help desk that a failure and subsequent recovery has occurred. This function deals with an issue that bedevils many IT departments—that they often remain unaware of various store-level fixes and stopgap measures taken to deal with what may have the potential to become serious or immobilizing problems. In ad-dition, these store-level actions can over time, create marked variations in each store’s system configuration. Centralized management using automated tools and procedures helps ensure consistency form store to store, and from device to device, throughout the retail enterprise.

More Efficient Use of IT ResourcesBy providing a comprehensive log of failures and automated recoveries, Microsoft enables IT departments to make more informed decisions about committing time and people to addressing a particular store’s issues, often determining in advance whether the problem can be dealt with by phone or if it simply requires more training of store personnel. IT de-partments can then focus their resources on issues that truly require on-site maintenance, repair or replacement.

The ability to more effectively manage IT resources helps retailers address the imbalance inherent in many IT organi-zations, which, despite the amount of technology placed in the stores, often has more people devoted to headquarters technology than to store systems. Automatic and instrument-ed recovery allows an IT department to be more proactive, anticipating when a device or application will require mainte-nance or replacement, rather than waiting for an unrecover-able failure that can cost a retailer time, money and lost sales.

Microsoft extends this proactive concept to centralized device and application monitoring, helping lower life cycle costs even further. Microsoft Operations Manager gives retailers the ability to have a view into what is happening at each device, including point-of-sale peripheral devices, and with each ap-plication – all from a central location. Automated alerts can be created when events occur, leading to proactive problem reso-lution. For example, when a kiosk printer has run out of paper, an alert can be generated and sent to the appropriate store personnel, letting them know it needs replacement before customers experience the frustration of a non-working device.

Even more impressively, Microsoft Operations Manager can monitor the non-read or mis-read rates of magnetic stripe card readers that are in use at tens of thousands of kiosks and POS stations. Once a threshold number of non-reads are met, an alert can be sent letting the IT department know that the device will soon require maintenance or replacement—well be-fore the device actually fails. When IT departments can be pro-active rather than reactive, they can make more efficient use of their own resources, lowering life cycle-costs while still address-ing the needs of store associates, managers and customers.

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IT departments using Systems Management Server in conjunc-tion with Microsoft Operations Manager can create a feedback loop of important information. If a retailer discovers an applica-tion problem requiring a correction from developers, they can use SMS to deploy and test the new version in a pilot store or stores. Then, the monitoring capabilities of Microsoft Operations Manager provide a simple way to measure the correction’s ef-fectiveness before it’s deployed throughout the enterprise.

Now, retailers are able to recover, deploy, manage and monitor store systems from a central location. This opti-mized management experience can also be configured to alert responsible personnel about important events or tasks, impending hardware issues and application performance. In short, a connected store with centralized manageability can help retailers realize lower life-cycle costs while gaining the ability to implement—and manage—new capabilities within a simplified technology framework.

ChoiceA connected store is all about expanding options: the option to select the best-of-class solution that meets your needs; the option to reduce the footprint of varied platforms that enable these solutions; the option to leverage existing hardware of ap-plications, thus reducing capital expenditure or deferring it for a time. Having these choices opens up a world of possibilities for the retailer, while lacking them relegates retailers to the days of proprietary systems and the limited functionality that they offer.

Choice comes into play most strongly after retailers assess both their business needs and their stores’ technical require-ments. Microsoft offers retailers choice in the following ways:

The ability to choose the optimal platform for a wide range of target devices throughout the store—from the POS to wireless devices and from the manager’s workstation to the kiosk on the store floor.

The ability to use an enabling platform that is built to inte-grate—from the ground up—a significant advantage given the growing array of store system solutions available to retailers.

The ability to enable future-reaching technologies such as RFID in the ways that best fit the retailer’s business needs – from using it to improve supply chain efficiencies to enabling new consumer payment solutions.

The ability to choose from the widest array of best-of-class applications, application provides and hardware providers through Microsoft’s rich industry partner ecosystem.

The ability to make use of retail-hardened hardware and devices, while deferring investment in replacement hard-ware until it is absolutely necessary.

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Microsoft offers all of these abilities, while still giving retailers the tools to deliver optimized experiences to customers, em-ployees and associates—the basis for measurable improve-ments such as increased conversion rates and basket sizes.

Point of Service of ChoiceIn today’s retail store, servicing the customer is no longer just about providing a fast, efficient checkout experience at a point of sale device or checkout lane. The concept of servic-ing customers has expanded to include interacting with them throughout the store in order to provide the experience cus-tomers increasingly expect, when and where they expect it.

Point of Service of choice enables retailers to deliver that desired experience while taking into account their specific business needs and technology requirements. In determin-ing which point of service solution is right for them, retailers need to assess a range of business needs, such as the flexibil-ity to implement value-added solutions that can improve the customer experience (e.g. line-busing with handheld point of sale devices or self-checkout technology), as well as their overall capital investment strategy. Technical requirements include such elements as hardware and platform footprint, processor speeds, memory, wireless and mobile capabilities and functional capabilities.

Microsoft’s commitment to Point of Service of choice also includes the traditional point of sale device. The company’s strategy for point of sale consists of four broad elements:

Web services are revolutionizing how applications talk to other applications—or, more broadly, how computers talk to other computers—by providing a universal data format that lets data be easily adapted or transformed. Based on XML, the universal language of Internet data exchange, Web services can communicate across platforms and operating system, regardless of the programming language in which the applications are written.

.NET is Microsoft’s Web services strategy to connect information, people, systems and devices through software. Integrated across the Microsoft platform, Microsoft .NET technology provides the ability to quickly build, deploy, manage and use connected, security-enhanced solutions with Web services. .NET-connected solutions enable businesses to integrate their systems more rapidly and in a more agile manner, and help them realize the promise of information anytime, anywhere, on any device.

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Provide a standard, retail-optimized operating system platform for point of sale systems

Collaborate with a wide range of OEMs to bring these devices to market

Build a broad community of retail ISVs and peripheral vendors

Provide extended platform support that meets industry requirements for functionality and service

Many retailers, faced with point of sale systems that are reaching the end of their product life cycles and seeking more advanced functionality in this area, are evaluating their POS options right now. Once they determine their business needs and technology requirements, Microsoft enables retail-ers to take an integrated approach to choosing the combina-tion of hardware, operating environment and applications that best suit those needs.

Microsoft Windows-based operating systems for point of sale are being chosen by an increasing number of retailers, as demonstrated by the IHL Consulting Group 2005 North American Retail POS Terminal Market Study. The rapidly increasing popularity of Windows helps mitigate risks for retailers, who understandably dread being stuck with an

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“orphaned” operating system that could be unfamiliar to developers or users.

In addition to point of sale, the Windows platform for point of service creates an environment that allows a retailer to de-ploy an optimized operating environment for a wide range of capacities in the store—from a handled PDA to the manag-er’s workstation. This Point of Service platform is designed to not only target many store devices, but also to allow them to interoperate out of the box.

Choice is extended further with Microsoft’s rich solution partner ecosystem of leading providers of software, hardware and peripherals for retail. The Windows platform provides an open development environment that supports legacy appli-cations and alternative development environments. However, many leading retail application developers use the Micro-soft .NET Framework to deliver solutions that not only run smoothly and efficiently on the Microsoft platform, but also that interoperate with heterogeneous environments through Web services.

Windows® Embedded for Point of Service, the first Microsoft operating system designed specifically for retail systems, delivers many of the benefits retailers will find in a connected store.

As a core component of Microsoft’s offering for Retail, Windows Embedded for Point of Service offers the following advantages:

Easier: Windows Embedded for Point of Service extends plug-and-play support to retail devices peripherals, enabling retailers to quickly install and integrate current and legacy retail device peripher-als into a point of service system. It also offers a standard platform optimized for retail applications and familiar device management technologies.

Empowering: Retailers can create compelling con-sumer interactions with Windows Embedded for Point of Service’s ability to provide a standard, re-tail-optimized platform that includes the required retail-specific technology, along with

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full support for standard retail application and device peripherals.

Lower Life Cycle Costs: The platform addresses life cycle costs by decreasing OS and application development costs, along with deployment, servic-ing and maintenance costs and POS hardware costs, while providing the longest-published prod-uct support life cycle for point of service systems.

The retail-hardened platform is designed for a full line of point of service devices, including:

Full-function point of sale workstationsCustomer-facing information kiosksSelf-checkout systemsInstallation on select legacy POS devices.

Windows Embedded for Point of Service has a smaller operating system footprint than Windows XP Profes-sional, and can be installed on both new and existing point of service systems.

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Microsoft Offers First Industry-Specific Operating System for Retail

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Microsoft-based operating systems are installed on 73

percent of retail point of sale systems in North America, and

have risen to 77 percent of annual shipments, according to

the IHL Consulting Group 2005 North American Retail POS

Terminal Market Study.

Retail IT departments can also consolidate their expertise when the entire store systems platform is interoperable from the ground up. The common development languages and runtime environment fostered by the Microsoft .NET Frame-work allow the IT team to more easily create solutions that meet both a retailer’s business needs and its technology requirements, today and in the future.

Microsoft also recognizes that retailers require stability, not only in the systems themselves but also in the vendors sup-plying and maintaining them. The company has designed its Point of Service products to fit the extended product life cycles that the retail environment demands, and has extend-ed its support and services offerings to up to 10 years in most cases, to meet those requirements.

By expanding choices, Microsoft helps free retailers from the limitations of their existing systems. As retailers consider new technology purchases, an expanded range of choices allows them to more easily align their business needs and technol-ogy requirements with the most optimal combination of hardware, software and support.

EmpowermentBy building on the control and lower life cycle costs provided by centralized manageability, and by taking advantage of the choice offered through the selection of best-of-class solu-tions and enabling platforms designed with integration and interoperability in mind, a connected store opens the door to a world of new possibilities. Retailers who have traveled along this path are now empowered to deliver the optimized experience they want—and their customers demand.

Retailers who want to optimize the store experience must strive to make every contact with a customer as positive as possible, whether it leads to an immediate sale or not. The best way—perhaps the only way—to accomplish this is to empower everyone in the retail organization, especially those on the front lines dealing directly with customers with tools that provide employees with:

The freshest, most accurate information available•

Views into the information that provide insight and context

Quick, effective tools to use the information in their roles

This concept of providing relevant, real-time information anywhere, anytime and on any device, along with the ability to make use of it to enhance the customer experience, is made possible through the interoperability and integration of the Microsoft platform. It is also extended through a wide range of collaboration tools that help retailers manage the multidirectional flow of information.

Targeting Information to Drive Business ValueRetailers must decide exactly what types of information to make available, and to whom. No matter what their choices, all retailers can benefit from a more collaborative culture, where information flows smoothly back and forth between headquarters and stores, and employees feel empowered with the right information—not inundated with too much infor-mation. The Windows platform enables retailers to empower store employees with the right information at the right time.

For example, high-tech consumer electronics retailers often suffer from an information gap on the store floor. They may have one sales associate with deep, specific knowledge about digital cameras, but they can’t guarantee that particular associate will be working, or available, when a customer interested in digital cameras enters the store. And with the high turnover prevalent in retail, counting on one person’s expertise is a dangerous strategy, since they may move to another job sooner rather than later.

Microsoft helps enable integrated solutions that can bridge this gap, giving retailers the tools to help raise their in-store conversion rate. In this example, the consumer electronics re-tailer could deploy self-service kiosks that summarize the key features of the top three digital camera brands. An interactive decision tree could pose questions to customers about how they plan to use the camera, helping them to decide which brand and model best fits their needs.

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The same information and question prompts could be made available to store associates on wireless handheld devices, enhancing their mobility while bringing virtually anyone up to the expert level with a script of the right questions to ask, along with the answers to those questions. Such solutions help create scheduling flexibility for store managers, and they allow retailers to more easily cross-train employees on highly technical, high-margin products through consistent product information available to employees throughout the store.

Variations on this type of solution can be adapted to differ-ent retail segments and to specific companies’ needs. A home improvement retailer could arm sales associates with project-based product lists; they could remind customers who are buying paint for trim work that they will need small paint-brushes to complete the job.

Empowerment opportunities are also applicable to low-margin, high-volume environments such as supermarkets. For example, a self-service kiosk in the deli section that allows customers to pre-order a sandwich while they complete the rest of their shopping trip cuts waiting time, creates a more efficient work-flow behind the deli counter and improves customer service.

Long checkout lines, the bane of any retailer, can be ad-dressed by providing employees with handheld point of sale

devices that can be deployed at particularly busy times of the day. Such line-busting solutions would address the issue without requiring the retailer to invest in additional checkout lanes that would remain underused the rest of the time. In addition, these devices could then be used for multiple func-tions throughout the day, such as store receiving, inventory control and price verification.

Microsoft’s unique connection to the consumer also allows retailers to extend their reach to the customer. Whether at home via consumer devices such as Xbox®, on the Web through MSN® or in the store on Tablet PCs, PDAs or Smart-phones, Microsoft’s common platform and interface enable retailers to deliver content and branding to consumers wher-ever and however they interact with their customers.

Making Multichannel WorkThe opportunities offered by empowerment solutions can also be leveraged across multiple sales channels. In fact, doing so is a key element in creating optimized customer experiences. Retailers know that customers expect a positive shopping experience no matter what sales channel they use. The retailers who can deliver this integrated experience are more likely to attract new customers, retain existing customers and gain a larger share of wallet from them.

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Retailers are recognizing this need, but many have only begun to take the steps needed to create a single view of each customer, and to apply that view uniformly across chan-nels. This single view goes far beyond simply identifying the customer in the store, on the Web and through a call center, though even this basic step can prove difficult due to the siloed structure of many retail organizations.

Those retailers that have made strides toward greater integra-tion are seeing the business value of not simply recognizing each customer but of more closely tailoring interactions to each customer’s needs. For example, a call center worker could, and should have, a wealth of relevant information when John Smith calls in, including: his purchase history; his overall value to the retailer (measured by timing, frequency and spend in all channels); complaints he has lodged, along with when and how they were resolved; and a wide array of his prefer-ences, from shipping address to preferred payment method.

Armed with this information, a skilled call center operator can anticipate Smith’s needs; be ready to deal with objections; make offers based on Smith’s importance to the retailer; and more effectively cross-sell and up-sell products, increasing the value of the transaction without adding significantly to the retailer’s costs. Similar data and algorithms can be ap-plied to Smith’s interaction with a retailer’s Web site.

It’s the store environment, however, where retailers have had the most trouble leveraging a single view of each customer. Micro-soft can help retailers overcome this challenge in several ways:

The interoperability that is built into all elements of the Windows platform helps retailers integrate formerly locked-down databases and information silos that have impeded cross-channel data transparency.

Microsoft’s ability to provide real-time information to anyone, anywhere, on any device, allows in-store kiosks or store associates using fixed or handheld devices, to access the data needed to maximize each customer interaction, again without adding significantly to the retailer’s operating expenses.

For example, solutions which incorporate customer purchase histories and preferences, can replicate the best aspects of online shopping in the store environment. For customers who opt in to such programs, opportunities abound for a truly optimized, individualized shopping experience. Apparel store associates, using either fixed kiosks or handheld devices, could make wardrobe and accessory suggestions that are in tune with each customer’s budget and style. Particularly valuable customers could receive special offers while they are

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making shopping decisions, further improving conversion rates while fostering an optimized experience.

Optimized CollaborationAnother important empowerment element is fostering col-laboration within the store and between the store and the retail enterprise. Optimized collaboration can extend empow-erment to whatever level fits a retailer’s business and corpo-rate strategy, on a spectrum ranging from tightly controlled top-down communications to encouraging collaboration that supports greater store-level responsiveness.

Many retailers are recognizing the benefits of communica-tion and collaboration tools that empower store managers, allowing them to spend more time on the store floor super-vising employees, dealing with issues before they become problems, and in general, improving sales and store opera-tions. Store managers are often overwhelmed with daily tasks including filing employee information, analyzing sales reports, tracking planograms and more. These tasks tend to tie the store manager to the back room because that is where the computer with the applications that access this informa-tion resides. So, in order to keep their stores running effi-ciently, managers must run between the back office and the store floor throughout the day, decreasing productivity due to constant interruptions.

A connected store can leverage the same user directory supporting the retailer’s corporate functions to manage its store-based employees. Microsoft Active Directory® service, which is built into Windows Server, becomes the backbone of a roles-based portal that enables each user to log on and see the right information for them and their role in the organiza-tion. The portal provides a single vehicle for up-to-date and accurate information—a trusted source for managing day-to-day business. Users don’t have to manage multiple passwords or log on and off applications or different machines, thereby increasing efficiency.

By automatically prioritizing information and including trig-gers and alerts for real-time notifications, the portal becomes a workbench helping store managers focus on what’s most important and relevant to maximize sales, increase employee productivity and enhance customer satisfaction.

Microsoft’s support for mobile devices allows managers to take such portals with them on to the store floor, further en-hancing their mobility and the store’s overall productivity.

District managers are being called on to do more in less time. Microsoft solutions for these users include dashboards that

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provide a high-level view of all the stores they are responsible for, along with the capability to drill down to specific reports if they need more detailed information. Microsoft has worked with several large retailers to enable their district managers with Tablet PC mobile computers. In a wireless store environ-ment, Tablet PC-enabled district managers can save countless hours and can process their feedback to stores and to corpo-rate much more quickly, especially compared to paper-based systems that are in use today.

Another important element of empowerment is ensuring that collaboration tools are used. By deploying communication and collaboration solutions with applications and interfaces that users are already familiar with, such as those contained in the Microsoft Office System, including Microsoft Office Word, Mi-crosoft Office Excel, Microsoft Office PowerPoint® and Micro-soft Office Outlook®, retailers can help overcome user inertia, where employees continue to use older communicating meth-ods despite the advantages offered by more up-to-date tools.

In addition, by using core and common applications such as Microsoft Office, retailers can extend the value of enterprise-level technology into the store. And because a connected store is designed for maximum flexibility and interoperability, it also maximizes a retailer’s choices.

IT’s Expanding PortfolioThe tools used to enhance store collaboration are an example of the increasing number of solutions retailers are employ-ing to create an optimized experience. With components of a connected store platform in place, it becomes even easier for retailers and their IT departments to add new value-added so-lutions, as well as to manage those already in place in the store.

The growth of multichannel retailing has revived interest in customer relationship management (CRM) solutions. These range from basic customer loyalty programs to sophisticated clienteling applications, which incorporate individual custom-er data that allows retailers to create improved interactions tailored to these customers’ preferences. Overall, retailers are looking for ways to maintain a single view of the customer across multiple touch points, with the goal of more effectively targeting products, services and offers.

Automated workforce management solutions are also being called on to balance a retailer’s labor costs with its customer service requirements. These increasingly sophisticated solu-tions incorporate elements such as sales history and promo-tional activity to have the optimal number of associates, armed with the right skill sets, on duty at any given time. These solutions are moving scheduling and staffing functions from seat-of-the-pants guesswork to a more scientific approach.11

Conclusion

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The societal trend toward self-service technology has already had a huge impact on retail. After a somewhat slow start, self-checkout technology is making strong headway in sev-eral retail segments, including grocery, drug and hard goods. Kiosks have become smaller and more versatile, establishing another touch point and allowing retailers to provide deep, consistent product information to customers. Both self-check-out and kiosk technology need to be integrated with store and enterprise systems to be as effective as possible.

Wireless technology and mobile devices are another large part of many IT department portfolios, and are being used for functions such as inventory management and line-bust-ing, as well as customer service improvements fostered by bringing product information to the user’s fingertips. IT departments must maintain the devices themselves, as well as the wireless network infrastructure that supports them, both in the store and throughout the retail enterprise.

It’s clear that empowerment solutions can take many forms—appropriate in a retail industry that prides itself on its ability to meet the maximum number of customers’ needs with a vast range of products. As with other elements of a connect-ed store, the particular shape of each retailer’s empowerment strategy will be determined by specific business needs and deployed on an integrated, manageable platform.

ConclusionMicrosoft recognizes that while retailers would like to take advantage of as many value-added solutions as possible, they must do so within the context of controlling total cost of ownership. TCO can b defined as evaluating the life cycle cost of an asset, including acquisition, setup, support, ongoing maintenance, service, training and all operating expenses. Microsoft strives to deliver the lowest TCO in the retail indus-try, and the connected store concept reflects this thinking.

By delivering centralized manageability, which includes man-agement and monitoring capabilities that allows a retailer’s IT staff to support not only Microsoft-based solutions but also heterogeneous solutions, Microsoft offers low cost of owner-ship and helps enable greater return on invested capital and assets. By enabling choice, Microsoft helps control costs by allowing retailers to defer capital investment, to select the best applications for theirs needs, and to implement them on a platform that is built with integration in mind. In es-sence, Microsoft helps create a technology portfolio that is an investment sure to provide rich returns. The connected store provides a comprehensive path that allows each retailer to chart its own course toward the optimized store experience.

HEMA Dutch Retailer Raises Stock Availability and Customer Service with Mobile Solution

Background Retailing giant HEMA has more than 280 stores in the Netherlands, with further stores in Belgium and Ger-many. Employing 10,000 people, the organization sells a range of goods including food and clothing.

The organization wanted a mobile stock control solu-tion that meant staff could immediately re-order stock once they saw a shelf low on items without leaving the shop floor.

Solution HEMA rolled out a personal digital assistant device, running Microsoft® Windows® CE as the operating system, across all stores. The devices connect to an in-store server solution that automates the re-ordering process and includes a point-of-sale system that runs on Microsoft Windows XP Embedded. Using Windows CE, the devices have helped HEMA ensure that shelves consistently achieve the company’s target of holding at least 20 of each item. As staff can manage stock without leaving the shop floor, customers gain assis-tance quicker. In addition, the familiarity of the inter-face means HEMA avoids expensive training in using the devices.

BenefitsBetter stock management

Increased customer service levels

Minimal training required among staff

Advanced reliability of software environment

Peace of mind over software maintenance by vendor

“With Microsoft Windows CE, we now have a reliable mobile stock control solution that helps ensure shelves are never empty and contain at least the minimum of stock.”

- Marinus Kuite, Information Manager, HEMA, EMEA

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Customer Evidence

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Virgin Megastores USA Virgin Megastores Opens Music and Video Vault to Customers with New Digital Kiosk

Background Virgin Megastores USA, based in Los Angeles, is an entertainment specialty retailer of music, movies, books, games, fashion, electronics, and more.

Virgin needed to replace in-store CD listening posts with digital media preview kiosks that offer versatile and reliable platforms for future expansion.

Solution Seeking to lower life cycle costs for the device, Vir-gin selected Microsoft® Windows® Embedded for Point of Service, a retail-optimized operating system designed for easy setup, use, and service. The result is the Virgin Vault, a highly extensible digital music listening station that also allows customers to watch video clips and preview games.

BenefitsSoftware driver support and Plug and Play tech-nology for easy integration of peripheral devices.Proactive system alerts and accurate reporting saves IT resourcesOperating system lock-down capability helps ensure security of devices

“Installation was a breeze, and we had the machines at both locations up and running in just a few days. The entire development project—including Windows Embed-ded for Point of Service system integration and user application development—was completed on time and within budget.”

-Robert Fort, Director of Information Technology, Virgin Entertainment Group, North America

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Customer Evidence

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Microsoft Partner Ecosystem

BlueCube Software is a leading provider of integrated operations management solutions to progressive retail organizations. BlueCube Software products help clients maximize operations efficiency by enhancing the customer experience, optimizing workforce and inventory, lowering cost of operations, and improving profitability. With 17 years of re-tail experience, BlueCube Software is a pioneer of intuitive, web-built solutions offering capabilities to improve speed-to-ROI while lowering the cost and risk of system adop-tion. Industry thought-leaders select BlueCube Software to help them exceed revenue and profit goals. BlueCube Software is a Microsoft Gold Certified Partner.

www.bluecube.com

Fujitsu Transaction Solutions Inc., a wholly owned subsidiary of Fujitsu Limited, collabo-rates with retailing companies to relentlessly reduce their costs and facilitate consumer interactions that improve their profitability. Fujitsu’s Pervasive Retailing approach en-ables companies to minimize the time, cost and risk of creating interoperability between disparate applications and devices that support a multitude of consumer touch points. Fujitsu’s offering includes solution software, point-of-sale store technology, U-Scan self-checkout systems, self-ordering systems and multi-vendor lifecycle services. Customers include Canadian Tire, Chevron Corporation, Hallmark, Hannaford Bros., H-E-B, Kroger, Loblaws, Nordstrom, Payless ShoeSource, PetSmart, Regal Cinema, Staples, Stop & Shop and The TJX Companies, among others.

us.fujitsu.com/retailing

JDA Software Group, Inc. (Nasdaq: JDAS) is the global leader in helping more than 5,500 retail, manufacturing and wholesale-distribution customers in 60 countries realize real demand chain results. By capitalizing on its industry position and financial strength, JDA commits significant resources to advancing the JDA Portfolio® suite of vertically-fo-cused supply and demand chain solutions. JDA Portfolio software enables high-perfor-mance business process optimization and execution to achieve a connected view of the customer from raw materials flowing into production to end-consumer products at the shelf. With offices in major cities around the world, JDA employs the industry’s most ex-perienced supply and demand chain experts to develop, deliver and support its solutions.

http://www.jda.com

NCR Corporation is a leading global technology company helping businesses build stronger relationships with their customers. NCR’s Teradata data warehouses, ATMs, retail systems, self-service solutions and IT services provide Relationship Technology that maximizes the value of customer interactions and helps organizations create a stron-ger competitive position. Based in Dayton, Ohio, NCR employs approximately 29,300 people worldwide.

www.ncr.com

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Retalix is a world leader in enterprise-wide software solutions to retailers and distribu-tors. With more than 42,000 sites installed across 51 countries, Retalix solutions serve the needs of grocery chains and independents, convenience and fuel retailers, food service and convenience distributors, and grocery wholesalers. The Company offers a portfolio of best-in-class point solutions as well as synchronized modules and platform from Warehouse to Checkout. Products include: Point of Sale; Store Operations; Replen-ishment & Demand Planning; Customer Loyalty; Fuel & Wet Stock; Kiosk & Foodservice; HQ Merchandising, Pricing and Business Analytics; Distribution ERP, CRM and SRM; Mobile Solutions; Master Data Management; and Warehouse Operations.

www.retalix.com

Symbol Technologies, Inc., The Enterprise Mobility Company, is a recognized worldwide leader in enterprise mobility, delivering products and solutions that capture, move and manage information in real time to and from the point of business activity. Symbol enterprise mobility solutions integrate advanced data capture products, radio frequency identification technology, mobile computing platforms, wireless infrastructure, mobil-ity software and world-class services programs. Symbol enterprise mobility products and solutions are proven to increase workforce productivity, reduce operating costs, drive operational efficiencies and realize competitive advantages for the world’s leading companies.

http://www.symbol.com/retail

Sysrepublic specializes in the provision of software products and consultancy services to the Retail sector, and are industry pioneers in the use of Microsoft technologies for the implementation of ‘Real Time Retailing’. The Sysrepublic Real Time Retail infrastructure allows retailers faster access to critical business information, with increased detail and greater accuracy. Real Time Integrator (RTI) can address issues such as stock availability, loss prevention, customer service, in-store productivity and promotion tracking. Within six months, using RTI, Sysrepublic has successfully delivered to one customer a real-time sales data infrastructure, delivering POS transaction feeds from more than 1,000 stores. RTI is highly scalable and has been proven to deliver up to 1,200 baskets a second and accommodates multiple terabytes of POS data, using minimal network bandwidth.

http://www.sysrepublic.com

Wincor Nixdorf is one of the world’s leading providers of IT solutions to retailers and retail banking. The Company’s extensive portfolio, which consists of hardware, software, consulting services, system maintenance and other services, is centered on the business processes at work within banks and retail chains which operate extensive branch net-works, and is aimed at optimizing costs, reducing complexity and improving service to the end customer. Implemented using state-of-the-art Microsoft technologies such as .NET or SQL Server 2005, TP.net Enterprise incorporates control center functionality for headquarter based estate management, online reporting services for improved business process and system monitoring and various business applications for headquarter based initiation of actions such as company-wide campaigns. In doing so TP.net Enterprise helps retailers to maximize IT efficiency, ensure system and business-process reliability, resulting in significantly improved profitability.

http://www.wincor-nixdorf.com

Microsoft Partner Ecosystem

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Microsoft Smarter RetailingEnabling the next generation of retail innovation

The information contained in this document represents the current view of Microsoft Corp on the issues discussed as of the date of publication. Because Microsoft must respond to changing market condi-tions, 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 document is for informational purposes only. MICROSOFT MAKES NO WARRANTIES, EXPRESS OR IMPLIED, IN THIS DOCUMENT.

© 2007 Microsoft Corp. All rights reserved. Microsoft, BizTalk, SharePoint, Axapta and Microsoft Dynamics are either registered trademarks or trademarks of Microsoft Corp, Microsoft Business Solutions ApS or their affiliates in the United States and/or other countries. Microsoft Business Solutions ApS is a wholly owned subsidiary of Microsoft Corp. The names of actual companies andproducts mentioned herein may be the trademarks of their respective owners.

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More information on supply chain management can be found at: www.microsoft.com/retail