RetailWire: Opinions Mixed On Microsoft’s Move Into Retail Arena

By Tom Ryan, RetailWire
Borrowing a page from Apple's playbook, Microsoft plans to open Microsoft-branded retail stores. Although details were limited, Microsoft said the stores' purpose will be to "create deeper engagement with consumers and continue to learn firsthand about what they want and how they buy."
To head the initiative, David Porter was hired as vice president of retail stores. He spent 25 years at Wal-Mart Stores before joining DreamWorks Animation SKG in 2007 as head of worldwide product distribution. His last role at Wal-Mart was vice president and general merchandise manager of entertainment.

Microsoft said the first priority of Porter would be to define where to place the Microsoft stores and when to open them. The stores could feature a range of products from personal computers running its Windows operating system to cell phones running the company's Windows Mobile operating system to its Xbox videogame console.

"This is an exciting time with our strong lineup of upcoming product releases including Windows 7 and new releases of Windows Live and Windows Mobile," said Microsoft chief operating officer Kevin Turner. "We're also working hard to transform the PC and Microsoft buying experience at retail by improving the articulation and demonstration of the Microsoft innovation and value proposition so that it's clear, simple and straightforward for consumers everywhere."

But many questioned the timing of the launch during a recession, as well as the potential to alienate retail distributors. OEM partners might become rankled at how their wares are showcased in the stores. The failure of Gateway's retail venture as well as Microsoft's own attempt to open a store in 1999 was also widely cited.

A lot of the criticism focused on the challenges of competing against Apple's stores and their hip design, helpful staff and "genius bars." In a research note, Allan B. Krans with Technology Business Research said the introduction of Apple stores was helped by the launch of the iPod but Microsoft doesn't have a similar traffic driver.

"Microsoft is putting the cart before the horse," wrote Krans. "Stores do not draw consumers to products; innovative products bring consumers into stores." But writing on Silicon Alley Insider, Dan Frommer saw potential benefits in showcasing all of Microsoft's products in one place. He wrote, "At very least, they could do a better job than Best Buy at showing off PCs."

Although details were limited, Microsoft said the stores' purpose will be to "create deeper engagement with consumers and continue to learn firsthand about what they want and how they buy."

There was no shortage of opinion from key industry analysts on the BrainTrust panel. A lot of the criticism focused on the challenges of competing against Apple's stores and their hip design, helpful staff and "genius bars."
“Given the capital outlays associated with a retail store, it seems to me that Microsoft would be better served by going back to their initial concept of offering support and customer service inside Best Buy and other retailers,” said Forrester Research principal analyst Lisa Bradner. “Yes, they'd still get the "complaints department" treatment but they could learn a lot in a "store within a store" environment, connect with customers, pilot new products and size the market opportunity without getting into retail management. Simply put, I think it's a mistake.”

However, if any company can undertake a major retail operation in a down economy, it’s Microsoft. This was the viewpoint of NPD industry analysis VP Stephen Baker. “Who cares what the economy is today? It is not like they are going to open 75 stores in a year,” he said. “Expect them to gradually ramp up as any smart company would, changing and experimenting along the way and stopping and restarting to incorporate with they have learned.”

Baker dismissed the idea of the “store-within-a-store” concept. No US electronics retailer has ever fully embraced that concept because of the brand dilution it causes and the difficulty in marrying different visions of marketing and merchandising between the retailer and the vendor, according to Baker.

“This is a good idea, driven more by Microsoft's needs than by any desire to compete with Apple. With the proper scale and patience, this can succeed and be a nice supplement to the volume that goes through retail,” he said.

Editor’s Note: This article is an excerpt from one of RetailWire’s recent online discussions. Each business morning on RetailWire.com, retail industry execs get plugged in to the latest news and issues with key insights from a "BrainTrust" of retail industry experts.

Domino’s Delivers Cost Savings, Data Security With Install of Thin-Client POS

By Debbie Hauss
With customer data security and current economic concerns top-of-mind at Domino’s, the 8,200-store pizza delivery chain expedited the implementation of new thin-client POS operating platforms for its stores. While in the past Domino’s may have rolled out this type of upgrade during the course of 18 months or more, this POS upgrade went out to 550 stores in six weeks.

Motivated by recent credit card security breaches, Domino’s super-charged its previously conservative implementation strategy, with great success. “It really got everyone focused on the same goal for a very short period of time,” says Wayne Pederson, VP of operations technology for Domino’s. “We started with our corporate-owned stores and now this is our template for all implementations.”

Crunching the implementation time did create some temporarily higher help desk costs, and Domino’s needed assistance from Microsoft to script the quicker process, but those minor adjustments were worth the resulting time savings, says Pederson. “We have found that it is much better not to prolong the pain and agony of transition time.”

SAVINGS FOR STORE OWNERS
The new, more secure thin-client POS operating platforms cost Domino’s franchisees $17,000, down from $25,000 for the previous system. Domino’s switched from full PCs at each workstation to an entire new Microsoft architecture that features thin client architecture.

At press time, more than half of Domino’s 8,200 stores have made the switch from Microsoft Server 2000 to Microsoft Server 2003, Pederson says, and more stores continue to make the switch on a daily basis. “The new systems provide increased operating speed, improving the overall performance of the application,” he notes.

Domino’s also is realizing savings in store downtime because each store now has two server configurations. If one goes down it can easily be swapped out with the other. “In the past stores would close down for two or three days until we were able to ship them a new server,” says Pederson. “They can’t function without their computer systems because they simply don’t know how to take manual orders.”

CUSTOMER DATA CUTS
The thin client architecture has allowed Domino’s to reduce the amount of customer information stored at individual workstations, helping the chain achieve compliance with Payment Card Industry (PCI) data security standards. “At one point we were storing credit card information on the individual workstations,” explains Pederson. “Now we are no longer exposed on the store level.”

Pederson urges other companies to secure their customer information as soon as possible. “The worst thing to have happen is a situation where consumers lose confidence in your ability to handle their private information,” he says. “That was our impetus to move as quickly as we did with this implementation.”

Domino’s is using a full suite of Microsoft products to offer the most robust system for its franchisees, says Pederson. Those components include Microsoft Windows Server System, Microsoft System Center Operations Manager 2007, Microsoft Forefront, the 2007 Microsoft Office system and Windows Servicer Terminal services.

5 Key Trends From NRF Which May Separate The “Has Beens,” The “Survivors” & “Thrivers”

Written by Andrew Gaffney
Against a backdrop of Gottschalks joining the ranks of retailers to file Chapter 11 and Circuit City in the process of auctioning off its assets, the NRF Big Show definitely had more of a sober tone this year. While Gottschalks filing was not a huge surprise to many in the industry, the struggles of the chain of 58 department stores and 3 apparel stores reflected the harsh reality that in the current economic crunch retailers are quickly falling into categories of has-beens, survivors, or thrivers.

While retailers may have cut back and sent fewer team members to this year’s NRF event, those retailers in attendance were active buyers in pursuit of solutions that could help them emerge as a company that survives and even thrive once the economy rebounds. In order to stem the current tide, most retailers in attendance were focusing on the following 5 key areas:

1. Efficiency/Cost Savings
   The ROI that tier 1 retailers like Home Depot and Sears have realized from task management and workforce optimization has been well documented, but now more mid sized chains are realizing the value in optimizing their workforce. For example, at NRF this week Books-A-Million, the third largest book retailer in the U.S., announced plans to implement the entire Reflexis Store Operations suite of integrated KPI, labor scheduling, task management, and storewalk/compliance solutions.
   
   "In this challenging retail environment, it is critical to maximize the efficiency of the store level workforce,” said Dennis Lyons, Executive VP of Store Operations for Books-A-Million. “Reducing store salaries in response to tough sales can have negative ramifications if done incorrectly. In order to benefit our shareholders, customers, and associates, it is important to understand the specific labor needs of every store. The workload given to stores must be managed upstream in the home office so that key tasks are accomplished and the right amount of time is allocated and scheduled for sales and customer interaction.”
   
   In addition, Canadian’s largest food distributor Loblaw Companies announced plans to utilize RedPrairie’s Workforce Management applications to manage over 120,000 associates in its stores across Canada
2. Analytics/Business Intelligence
   Considering the rapid change in demand cycles, many retailers are leaning more on the dashboards, real-time alerts and other insights business intelligence and analytics solutions provide. One of the most telling examples spotlighted at NRF was Family Dollar’s Project Accelerate. The Fortune 500 retailers with more than 6,600 stores and $6.8 billion in annual revenues is in the midst of a three-year transformation designed to improve the shopping experience and also improve inventory productivity and enhance supply chain efficiency.
   
   Family Dollar’s executive team has identified its use of SAS merchandise planning applications and business analytics as a key component of Project Accelerate. “SAS enables the Family Dollar merchandising organization to quickly create integrated merchandise financial plans we can share and adjust collaboratively on an almost real-time basis,” said Scott Zucker, Vice President of Merchandise Operations for Family Dollar. “With the current economy, it is important for us to make inventory adjustments quickly to minimize ‘discretionary’ risk and maximize ‘basic needs’ opportunities. During 2008, the SAS Merchandise Financial Planning solution enabled us to adjust our merchandise assortments much more quickly than in the past. This allowed us to make immediate investments in the consumable categories that our customers need most during these difficult times. Our strong fourth quarter results from June to August in 2008 reflect this mix shift away from more discretionary merchandise.”
3. Customer Centricity
   Every retailer claims to be customer centric, but in the current economic climate many retailers are actually putting their money and focus behind those claims. As a clear indication, a Sunday conference session entitled “Are You Truly a Customer-Centric Retailer?” drew approximately 800 attendees. Presented by DemandTec, the session introduced new research from IDC on the state of customer-centricity and insights from Best Buy and Canadian drug chain Rexall PharmaPlus.
   
   Leslie Hand, Research Director for IDC Global Retail Insights, previewed the results of a recent survey to be published later this month. The results highlighted suggest customer-centricity is a retail initiative that has firmly taken hold, especially among the industry’s higher performers. “We were impressed with the fact that customer centricity is one of the top three focuses of most retailers and that customer insights are being deployed extensively by both marketing and merchandising,” said Ms. Hand.
   
   Denise Darragh, VP of Marketing & Advertising at Rexall PharmaPlus, a 350-store drug chain in Canada, described how the 350 store chain has used customer segmentation to better target and promote to specific shoppers. Dan Moe, VP of Merchandising Operations and pricing for Best Buy, presented a summary of how Best Buy’s well-publicized customer centricity program has changed how the company approaches merchandising, pricing, and advertising.
   
   
4. Connected Channels
   Retailers looking to connect disparate sales channels had several live demos on the show floor of providing the ability to allow consumers to buy from any channel, and easily have that purchase fulfilled from the distribution channel of their choice. For example, Manhattan Associates showcased the integration of its Distributed Order Management (DOM) solution with WebSphere Commerce from IBM. Building a demo around their joint client David’s Bridal, Manhattan and IBM demonstrated the ability for buying products online with pickup in stores, by allowing visitors to the IBM booth to order gifts such as digital photo frames from an IBM gift registry and then have that order picked up at the Manhattan Associates booth.
   
   "Solutions like Manhattan's DOM are the future for cross-channel order management, especially given the certified integration with a leading eCommerce solution like WebSphere Commerce," said John Morrow, CIO for David's Bridal. "This technology allows us to have complete order and inventory visibility along with better communication with our customers in every selling channel. As you'd expect, having absolute certainty over ability to deliver by our customers' wedding day is core to the David's Bridal culture, and Manhattan DOM gives us the tools we need to make this happen."
   
   In another powerhouse teaming around cross-channel commerce, Accenture and Microsoft announced an initiative at NRF to help retailers tackle the challenge of linking consumers to emerging technology platforms such as social networking and online communities.
   
   Under the multi-channel retail initiative, Accenture and Microsoft will work with Avanade -- a global IT consultancy created by Accenture and Microsoft – to help retailers extend the shopping experience to an ever-widening number of locations and devices, including the Web, mobile computing, and even new ways to shop in stores.
5. The Arrival Of Mobile Commerce
   The NRF Show also featured one of the first live demos of the new Microsoft Tag short code technology. Built around a prototype retailer called Martin Blue, Escalate Retail promoted an offering for a free pair of iPod travel speakers. Retailers were invited to “snap” the tags featured in ads and post cards with their web-enabled phone and “order” the free speaker as a reward for taking part in the demo. After snapping the tag to place their order, retailers were able to stop by the Escalate booth to pick up their order and learn more about the mechanics of how the behind-the-scenes tools used to deliver the live “Buy Anywhere, Fulfill Anywhere” example.
   
   Despite huge growth in Japan, quick response codes are still in their infancy in the U.S. The debut of Microsoft’s Tag technology could change that quickly.
   
   There were also demonstrations of mobile payment solutions showcase at the NRF Big Show, with exhibitor Vivotech showcasing its Near Field Communication (NFC) software which enables mobile payments. The company also announced plans for a trial with Sheetz and Wright Express, which will enable drivers to make fuel purchases by merely tapping their phones at contactless payment readers.
   
   In collaboration with Sheetz and Wright Express, ViVOtech will provide the complete end-to-end NFC mobile solution including a mobile wallet, Over-The-Air (OTA) fleet card provisioning infrastructure software, promotion management software, and contactless/NFC terminals installed at Sheetz locations. The trial will include more than 350 participating Sheetz locations throughout Pennsylvania, Virginia, Maryland, West Virginia, Ohio and North Carolina.