Microsoft steps into the smart retailing arena

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By: Wise Marketer Staff |

Posted on January 19, 2004

Microsoft steps into the smart retailing arena

Microsoft has revealed the beginnings of its plans for a more high-technology retail world with the unveiling of its 'Smarter Retailing Initiative', which focuses on technology-based improvements for retail shopping, selling, and business operations. But not stopping there, the Redmond giant has also teamed up with METRO Group's Future Store Initiative...

Microsoft's Smart Retailing Initiative (SRI) has been planned to help create a technology and solutions framework that will enable and support the next generation of retail innovation. The initiative focuses on three areas: Smarter Shopping, Smarter Selling and Smarter Operations. Based on extensive research, feedback from Microsoft's customer advisory board, and industry-specific development investments by Microsoft's retail-focused industry solutions team, the SRI allows for an innovative approach based on open standards, to allow retailers to take full advantage of their legacy investments by connecting the retail enterprise to the store and to the consumer; in short, top-to-bottom management of customers, stores, and the supply chain.

Developer support The initiative is launching with the active support of over twenty retail industry partners - including systems integrators (SI's), independent software vendors (ISV's) and original equipment manufacturers (OEM's) - all of which have committed to delivering solutions and services that align with the SRI's vision, and all using Microsoft's .NET Framework (Microsoft's latest programming model for XML-based web services and applications).

The supporting retail partners include Accenture, BlueCube Software, Cap Gemini Ernst & Young, Cisco Systems, CRS Retail Systems Inc., Dell, Fujitsu Transaction Solutions Inc., HP, Infosys Technologies Ltd., Intel Corporation, JDA Software Group Inc., Manhattan Associates Inc., NCR Corporation, NSB Group, ProClarity Corporation, Retalix Ltd., Sysrepublic, Trax Retail Solutions, and Wipro Ltd.

"We are truly impressed by the calibre of companies announcing their support for the SRI," said Brian Scott, general manager for the Retail & Hospitality Industry Solutions Group at Microsoft. "The enthusiastic adoption by partners offers retailers the freedom to maximise their unique strategic advantages while reducing the challenges and risks involved in deploying and integrating newer technologies."

Potential retailer support Several well-known retailers have also recently adopted Microsoft-based solutions ranging from smarter operations to smarter shopping - these include 7-Eleven, Circuit City Stores, Costco Wholesale, Meijer, METRO Group, and Rite Aid. One example cited by Microsoft is the growing use of Windows XP Embedded technology within the retail industry; this operating system is at the heart of a number of POS and kiosk solutions including the cash lanes and kiosks at RadioShack. Since its inception in November 2001, Windows XP Embedded has been licensed for more than 300,000 POS terminals and kiosks worldwide.

"Microsoft's Smarter Retailing Initiative stems from our belief that, while there are many opportunities for innovation in the retail industry today, they primarily lie on the edges, where retailers interact with consumers and manage their supply chains," added Scott.

Smart focus Smarter Retailing solutions will focus on three key areas, which work together while offering unique business and financial benefits:

  • Smarter Shopping enables retailers to leverage their IT investments to create a seamless and personalised retail experience, to satisfy consumers who demand service, convenience, and information. Some focus areas include leveraging the digital devices that employees and customers already know (such as cellular phones and personal digital assistants) to differentiate product and service information.  
  • Smarter Selling helps retailers maximise customer satisfaction and sales through more appropriate employee deployment, and by providing them with production location and inventory information, as well as customer relationship management (CRM) skills. The sales associate and customer interaction can be improved through more efficient and better informed processes, allowing employees to address each customer's question or need, and even to anticipate the customer's needs before they are expressed.  
  • Smarter Operations means increased efficiency through the provision of real-time measurement of profitability. This focus area includes the development of tools to manage the adoption of transforming technologies, such as wireless devices and RFID (radio frequency identification). It also includes store management and flexible infrastructures.

"It is clear that the rules for engagement with customers are changing, and new technologies such as RFID are playing a big role," said Jeff Smith, global managing partner for the Retail and Consumer Goods practice at Accenture. "Microsoft's Smarter Retailing Initiative will help the industry embrace innovations that will allow them to turn customer information into insights they can use to tailor the consumer experience, differentiate themselves from competitors, and win customer loyalty."

Standards-based Microsoft's SRI is built on open standards such as web services and XML (eXtensible Markup Language), and retail-specific standards such as IX Retail, OPOS, RFID and UCCNet. Microsoft has also been working with the Association for Retail Technology Standards (ARTS) - the standards division of the NRF (the USA's National Retail Federation), to improve the use of technology in the retail industry. Because of its focus on standards, the SRI promotes simplicity, consistency, and choice throughout the full spectrum of hardware and software.

In the past year alone, Microsoft says it has invested more than US$6 billion in research and development on technologies that could fulfil its vision for the future of computing. It has created an internal group focused on the long-term vision of its R&D efforts, and how those efforts can apply to vertical markets such as retail.

The SRI combines the practical involvement of today's digitally-enabled consumer as well as finding a path for simple and affordable integration of future innovations, such as in-store communications (either via internet protocols or wireless networking) and RFID tagging technology.

Partner contributions Accenture has designed several tools and RFID-based technologies to help retailers improve both store operations and selling to customers. One tool, the Shopping Cart Assistant, allows shoppers to scan and pay for items as they are selected, completely bypassing checkout queues. This can help retailers increase sales and profit margins by predicting a customer's shopping list and offering discounts tailored to individual shoppers. RFID applications embedded throughout retail operations can also help decrease errors in inventory handling, and improve inventory and goods-inward in terms of accuracy and speed while also reducing labour costs.

Cap Gemini Ernst & Young (CGE&Y), Intel, and Cisco (which, with Microsoft, form the Extended Retail Solutions or ERS initiative) aim to improve the customer's in-store shopping experience through end-to-end, tailored technology solutions for the retail market. Meanwhile, Infosys Technologies brings to the mix a portfolio of global delivery model-driven solutions, including multi-channel retailing, lead-time optimisation, RFID systems, performance reporting, and item data synchronisation. To address current and emerging business trends, Infosys' dedicated retail business unit serves clients in the grocery, apparel, and consumer product sectors. Wipro Technologies has developed a new store managers' WorkBench solution that provides store managers with predictive data analysis.

And, in terms of ISV contributions, BlueCube software is to provide its web-based performance management suite of applications; CRS Retail Systems offers software to improve the retail in-store shopping experience; JDA Software Group brings an integrated suite of applications for demand chain management; Manhattan Associates offers a warehouse management solution including RFID tagging for the supply chain; NSB Group provides solutions for retail planning, sourcing, merchandising, CRM and analytics; ProClarity brings analytical business applications; Retalix specialises in modular, scalable transaction solutions that can handle rapid scanning across a variety of store formats and hardware systems; Sysrepublic brings expertise in real-time retailing based on Microsoft platforms; Trax Retail Solutions provides systems aimed at stock loss prevention and profit optimisation.

The OEM partners currently supporting the SRI may be few in number but their impact is significant: Fujitsu offers its GlobalSTORE POS software, SmartPoS peripherals, and its new Team PoS 2000 M terminal, all of which support an open Microsoft environment. HP is also introducing a comprehensive POS migration service for the retail industry, based on Microsoft .NET and Windows XP technologies, to enable retailers to move to cost-effective POS platforms more rapidly. NCR, meanwhile, is producing its new Advanced Store 5 software suite which uses a variety of Microsoft technologies.

The Future Store... Microsoft has also partnered up with the Future Store Initiative (FSI) created by the international retailer, METRO Group, to similarly develop a technology-based vision of the 21st century grocery shopping experience. And, rather than being concerned about a potentially competitive set of standards developing, Microsoft has embraced the initiative with enthusiasm.

"Microsoft's retail perspective and expertise bring together the consumer, the store and the retail enterprise, which fits extremely well with the METRO Group view," said Zygmunt Mierdorf, a member of the management board and CIO for METRO Group. "We believe that the future of shopping lies in technology, both in the hands of consumers and extensively, but unobtrusively, deployed throughout the store, to create a more satisfying shopping experience and a more profitable, sustainable business."

Clearly echoing the principles of Microsoft's own initiative, Brian Scott commented: "The new solutions we have created for the METRO Future Store directly address the key business factors that define differentiation: smarter selling, smarter shopping, and smarter in-store operations."

The next-generation Microsoft-based solutions to which Scott referred, developed in conjunction with Sysrepublic, include real-time retailing solutions (such as fraud detection systems for the checkout lane, and staff scheduling based on customer traffic analysis) that use advanced communications capabilities in the store, as well as wireless and mobility applications that enable store managers to make better informed, more timely decisions. Such solutions are initially to be deployed in METRO Group's Rheinberg Extra site in Germany - the first project of the FSI.

Company-wide RFID usage METRO Group's Future Store embodies all that is high-tech, capturing the imaginations of retailers and consumers alike with its futuristic vision of the ultimately convenient retail experience. But all of this only becomes possible through the application of technology behind the scenes. The company says it will begin using RFID technology throughout its entire process chain, starting in November 2004. Approximately 100 suppliers will initially affix RFID tags to pallets and transport packages bound for delivery to ten central warehouses and around 250 stores within the METRO Group's sales divisions.

The use of RFID is the most sweeping project so far for the METRO Group's future store initiative, meaning that 100 stores from the Real and Extra sales divisions, 122 Galeria Kaufhof department stores, and 59 Metro Cash & Carry wholesale stores in Germany will receive RFID-tagged deliveries.

Tests with RFID have been successfully conducted in the past few months at the Rheinberg Extra store, where FSI has been implemented to test the use and interaction of a number of new retailing technologies under real-life conditions, with the aim of developing benefit-driven solutions for both customers and retailers. To achieve this, RFID technology is seen as being of particular importance, enabling non-contact transmission of product information (such as price, manufacturer, expiration date, and even a product's weight) via radio frequency communication.

RFID tags in-store So far, the FSI has only been testing RFID in a few specific areas of the process chain - mainly in the area of warehouse management - but it will potentially expand to in-store applications such as smart shelving and theft reduction. The technology enables the automatic inspection of incoming goods upon arrival, during transportation, and when moved into the store itself. The tests in Rheinberg have shown that RFID offers retailers and their customers enormous advantages: more effective processes (and consequently lower costs), directly benefiting both parties.

The vision for RFID's use in-store is extensive: using RFID tagging, goods will be able to be located anywhere through the entire process chain, from production through to the shelf in the store. Order management could then be optimised, losses reduced, and out-of-stock situations avoided, ensuring more consistent availability of goods for the customer.

RFID is crucial "We see RFID as one of the crucial technologies for the future of retailing," explained Mierdorf. "The strongly expanded and mutually supportive cooperation with our suppliers in this area will help to significantly move forward the establishment of international standards for RFID."

"Because of emerging technologies like RFID, retailers everywhere now have the opportunity to rethink their entire supply chain approach," says Christian Nivoix, general manager for IBM's Global Distribution Sector division. "A cornerstone of this new project is IBM's RFID systems integration expertise and a new RFID laboratory to be created in an IBM-led programme for METRO Group."

The new RFID laboratory will enable METRO Group and its partners to evaluate the readiness of new technologies for retail, and allow suppliers to test their readiness for RFID. And, according to John Davies, vice president for Intel's Solutions Market Development Group, "RFID technology and the EPC standard have the potential not only to make inventory and supply chain management more efficient but to create a new shopping experience for consumers."

Seeing is believing METRO Group has created a multimedia virtual tour of the Future Store itself, visually demonstrating a few of the more innovative and convenience-oriented features of the store. At the time of writing, the tour can be either downloaded or watched online (as a streamed video) by visiting the Future Store web site, at

For additional information: ·  Visit Microsoft SRI at ·  Visit Metro Future Store at