Microsoft Cloud for Retail — Architect Perspective
2020 was the year within which we experienced disruptive changes at a pace and a scale that we could never have imagined. COVID-19 caused disruptions in product supply and demand, in the labor pool, and consumer spending. But it also allowed many sectors to embrace digitalization like never before.
Retail is 31% of the world’s GDP, and that data is the demand signal for the world. In 2020, the retail industry faced challenges but also opportunities. First, the retail sector accelerated the already underway transition from physical retail to e-commerce quickly.
Retailers who invested in digital technology were better equipped to deal with this shift and stay connected with existing customers while attracting new ones. For example, during the pandemic, retailers accelerated their digitalization process to overcome disruptions in product supply and demand, consumer spending, etc. Microsoft Cloud for Retail (MCFR) can help the retail industry adapt and build digital resilience in the most trying of circumstances.
Five Retail Industry Trends in 2021
1. Anywhere Commerce: Bridging Digital & Physical Worlds and Personalization
Consumer anxiety about the virus and infection increased shelter-in-place orders, and consumers shifted to online channels. In the coming years, driving unique in-store experiences will become even more critical. Now consumers expect personalization at an unprecedented scale. Social Style, Tastes, and preferences are no longer declared but learned in real-time through the ‘digital exhaust’ they create as they navigate their virtual and physical worlds.
The new consumer responds to a one-to-one approach, both in-store and online. To deliver this custom personalized experience at scale, retailers need to leverage connected solutions, AI, and real-time observations to create 360-degree customer profiles. It is necessary to deliver the insightful, safe, and efficient shopping experiences that consumers expect. By seamlessly integrating web and app-based digital channels into the in-store experience, retailers can elevate customers’ purchase journeys and power end-to-end omnichannel analytics capabilities. As consumer expectations shift at an unprecedented scale, retailers need to ensure:
a. Personalize Interactions on every channel & touchpoint
b. Design stores with visitor recognition in mind to reduce unnecessary contact between customers and associates, better assist customers in efficiently locating desired items and tailor current offers and digital signage on a one-to-one basis.
c. Leverage AI/ML to drive ROI via personalized product, promotions, and experiences
d. Synchronize digital and physical data & systems
e. Deploy private 5G networks (PWN) for immersive differentiated In-store experience
f. Leverage Real-Time insights to drive innovation into product usage to strengthen shopper profiles.
g. Use technology, like beacons or RFID, to better optimize store layouts and inform ideal, social distance compliant traffic flows while also gauging customer interest and merchandising Effectiveness.
2. The Rise of Frontline Employee
Retailers empowered their workforce through connected solutions, tools, and technology to safely optimize customer service levels. The Covid-19 crisis and online shift demand flexible resource allocation to deploy labor across a broader range of activities. This will drive new models of collaboration between retailers and their stakeholders to address scarce capabilities and enable the labor pool to move more fluidly to meet demand across priority activities.
This comes to life through Mixed Reality (MR) based training tools and real-time communications between executives, managers, and frontline employees via connected portals and devices, eliminating lags between corporate policies and company-wide adoption. Additionally, retailers are tapping into tools to retrain store associates for telecommunication and digitally based customer service positions.
In addition to flexibility and Digital Fluency enablement, Retailers need to:
a. Provide 360-Degree customer profiles to the frontline employee
b. Embed Intelligent Assistance inside workflows
c. Provide associates with Digital Fluency training with tools and technologies. For example, digital tools connect them to customers virtually and provide them with a profile of each shopper to offer relevant recommendations.
3. Shift to value for money and responsible brands instead of Loyalty
Covid-19 has led to a paradigm shift in the shopping patterns of consumers. 75% of U.S. buyers report new shopping behaviors, such as changing brands or retailers based on value for money, and globally, 50% of customers have tried new brands.
Buyers are now relying more on online stores and demanding contactless pickup of purchases. Companies that shifted their businesses online and took advantage of digital technology thrived well during the pandemic by building customer loyalty, which attracted many new consumers. Retailers now need to:
a. Go beyond transactional messaging by embedding meaningful experiences to help customers take action and achieve their goals
b. Experiment with subscription-based models and proactive notifications to ascertain if these added-value services are essential to your customers.
4. Sustainability as a competitive advantage
The adoption of technology in enabling sustainable initiatives and optimizing operations is paramount. From a personal safety perspective, the future consumer will demand transparency throughout the entire shopper journey and know where a product was sourced. To deliver that level of transparency, retailers bring supply chain and distribution logistics front of the house and incorporate them into the consumer experience. As a result, retailers now have an unprecedented view into their operations, allowing for more significant streamlining across supplies and workforce production, creating a more sustainable, efficient ecosystem throughout the supply chain and the consumer journey.
5. Need for sustainable and resilient supply chain
Covid has shown that traditional lean supply chains will not work, and businesses need to re-imagine and develop a Sustainable and Resilient Supply Chain. As inventory and last-mile delivery become increasingly essential differentiators, stores need to create intelligent supply chain strategies. Retailers should adopt a 360-degree view of their entire supply chain by adopting intelligent, data-driven processes. Retailers need to:
a. Build a Connected Organization where everyone can share from anywhere
b. Build agile inventory & operations resilient to sudden change
c. Synchronize digital and physical data & systems
d. Coincide information sharing amongst all members of the supply chain
e. Avoid oversaturation of data collection by identifying key questions and appropriate metrics for collection and analysis.
f. Augment the power of predictive algorithms with human thinkers, customer feedback, and qualitative analysis.
g. Use machine learning to track what consumers purchase and return, enabling you to refine your inventory selection.
Cloud Imperative in Retail
As retail organizations still reply to the rapid changes led to by the COVID-19 pandemic, their top priorities relate to keeping employees productive (and safe) and improving the customer experience. As a result, retailers need to adopt health and safety protocols for essential workers in warehouses and retail stores and implement multi-channel solutions to improve customer relationships.
Retailers feel generally positive about their digital journeys. They believe their cloud strategy enables them to fulfill their goals for improving productivity and customer experience and maximize the worth of their data. However, there’s a risk if confidence results in complacency. To stay competitive, retailers must consider the cloud not as an end but as a foundation that may enable them to quickly and effectively adapt any technology, today and into the longer term.
Introducing Microsoft Cloud for Retail (MCFR)
Microsoft has recently revealed a new cloud solution, “Microsoft Cloud for Retail (MCFR),” tailored to the retail industry. According to the Frost & Sullivan survey, 95% of Azure users are satisfied or very satisfied with their choice of the cloud provider.
I am sure you might be wondering then What’s the need for Microsoft to launch “Microsoft Cloud for Retail (MCFR).” So, let’s look deeper into MCFR.
Microsoft Cloud for Retail (MCFR) connects experiences across the end-to-end retail shopper journey through integrated and intelligent capabilities. It brings value to the industry by uniting and unlocking the power of Microsoft Azure, Microsoft 365, Microsoft Dynamics 365, Microsoft Advertising, and Microsoft Power Platform to help solve the challenges that retailers are facing.
MCFR uniquely connects experiences across the end-to-end shopper journey, employing a set of capabilities that deliver more relevant personalized experiences and operational excellence for sustained profitability. MCFR data services consolidate disparate customer data sources — your data, your suppliers’ data, the information you don’t even comprehend yet — to uncover actionable insights in minutes, not days. Discover retail insights from all data sources — data warehouses, data lakes, and massive data analytics systems — with one unified experience at any point within the shopper journey.
MCFR connects experiences across the end-to-end shopper journey, using capabilities that deliver personalized experiences and operational excellence for sustained profitability. MCFR data services consolidate disparate customer data sources to uncover actionable insights in minutes.
MCFR provides a modular framework for retailers to innovate as they progress on the Digital Transformation journey. This modular and deployable solution activates end-to-end services like BOPIS, curbside pickup, and standalone services like Intelligent Recommendations.
MCFR is designed to give retailers the flexibility to adapt their capabilities to address their most pressing business needs, be it better knowing customers, empowering employees, building resilient supply chains, or re-imagining retail.
Architecture of Microsoft cloud for retail
One of the critical strengths of MCFR is its robust partner ecosystem (150 partners from ISVs to Systems Integrators to Advisory firms) that expands the value of Microsoft Cloud for Retail.
Some of the initial partners of MCFR are Blue Yonder, Kantar, Adobe, Sitecore, dunnhumby, AWM, SES-Imagotag, LS Retail, New mine, and Sparo. In addition, Microsoft has been intentional in ensuring that Systems Integrators (SI) are also part of the MCFR ecosystem. Some of the early SI partners of MCFR are Avanade, Accenture, Infosys, TCS, Cognizant, and Capgemini.
Partner Opportunity
MCFR comes to life through the combination of Microsoft and a rich partner ecosystem engagement to build, enrich, and unlock intelligent and connected capabilities across the end-to-end retail value chain.
Retail partners do this in four ways:
a. Implement: Promote integration of Microsoft Cloud for Retail into the Customer’s environment.
b. Integrate: Extensible, Scalable and Secure integration into the Microsoft Cloud for Retail.
c. Extend: Beyond compatibility. Seamless interoperability
d. Amplify: Evangelize the value of Microsoft Cloud for Retail to Boards, C-Suite, and LOB owners. Demonstrate the value and business case for MCFR to influence top-down decision-making and the market.
How is MCFR Integrating Capabilities Across the Shopper Journey?
MCFR brings together various data sources across the retail value chain. It aims to address retailers’ most pressing business needs: knowing more about their customers, empowering employees, building resilient supply chains, or re-imagining retail.
MCFR can help retailers with the Intelligent Retail Model to design rich, customer-first experiences at all touchpoints. With a data-driven approach, retailers can turn data into dollars by drawing in customers through personalized messaging, merchandise they desire, excellent support staff, and an ultra-responsive retail experience that is underpinned by the power of data collection and analysis.
MCFR will provide solutions that will handle workflows in demand generation, stores and operations, purchase, fulfillment and service, post-purchase, and merchandising and distribution.
1. Demand generation
Creating product awareness using the right strategy and digital marketing channels is essential in gaining new customers. MCFR performs tasks including intelligent recommendations and product search and targeted digital marketing and advertising.
a. E-commerce personalization — Deliver a shopping experience that provides relevant, personalized results through Intelligent Recommendations and product search. This showcases how well you know your customers. MCFR’s personalization capabilities offer an intelligent shopping experience, build Loyalty, and connect your customers with data.
b. Digital advertising — MCFR can help build customer loyalty and gain new customers through interactive and personalized experiences. Almost a billion people use Microsoft’s extended network, including Microsoft News, Bing, Edge, and Outlook.com.
2. Stores and operations
Retail associates or frontline workers are the face and humanity of every brand. MCFR provides retail-specific tools to the frontline employees, enabling them to provide the best service, multi-channel experiences.
a. Associate operations and collaboration — Frontline employees should use assertive communication, collaboration, and sharing capabilities to manage their tasks anywhere. Microsoft Teams is making collaboration easy and instant across countries.
b. Digital and Intelligent stores. The suitable usage of real-time observational data to improve in-store operations results in building customer loyalty. Microsoft Dynamics 365 Store supports omnichannel purchasing, builds and enhances commerce experiences, and provides a single view of customers across channels.
3. Purchase
MCFR offers connected tools to drive customization with on-site advertising, social selling capabilities, and safe payment enablement across all channels.
a. Anywhere commerce conversion — Retailers can enable shoppers to purchase anytime from anywhere with any device, supported with intelligent tools to deliver personalized, intuitive, and relevant shopping experiences. In addition, Microsoft cloud for retail maximizes customer conversion and increases the average basket of goods with Microsoft Dynamics 365 Commerce.
b. Loss and Fraud prevention — Retailers can leverage the platform’s computer science (AI) capabilities to know and detect patterns of fraudulent transactions across the omnichannel shopper journey.
4. Fulfillment and service
Fulfillment and service are about simplifying operations to make the delivery process as seamless as possible.
a. Multi-Channel fulfillment: MCFR can help manage Buy Online Pick-up In-Store (BOPIS) and Curbside pickup operations with simplified payment processing, customer notifications, and consistently engaging customers across online and offline channels. MCFR’s multi-channel fulfillment capabilities offer retailers the ability of pickup scheduling, efficient on-site handling, and customer notifications.
b. Integrated customer service: MCFR streamlines customer service while empowering the employees to foster long relationships with customers through insights and delivering constant collaboration across online and offline channels
c. Increase employee effectiveness: MCRF customizes time management and infuses intelligence across your sales operations with AI capabilities that improve customer experience and drive improved ROI.
5. Post-purchase
With Microsoft cloud, retailers can easily understand customer demand and changing behavior with intelligent post-purchase analytics that brings together multi-channel data in real-time to create a full view of the Customer to take relevant actions to increase customer loyalty.
a. Shopper analytics — It unlocks data insights across every touchpoint of the shopper journey enabling an overall better customer experience. Retailers use Microsoft Dynamics 365 Customer Insights and Azure Synapse to create a full view of the consumer.
6. Merchandising and distribution
The intelligent supply chain capabilities of MCFR are designed to make sure channel operations are optimized. Capabilities include real-time, centralized insight into omnichannel inventory data, further as vendor marketing management.
a. Inventory management — Build a resilient supply chain by creating a centralized system that gives omnichannel inventory data in real-time. Delight and satisfy customers by placing inventory and resources within the right place at the proper time to fulfill orders within the shortest interval.
b. Retail media — Generate new revenue streams from your website. Retailers are increasingly investing in retail media centers or vendor marketing to use retail media, vendor marketing for e-commerce, to generate high-margin revenue by running promoted products on your website in an unobtrusive way with complete control over the consumer experience. Microsoft PromoteIQ allows online retailers to enhance vendor marketing programs on-site, creating incremental high-margin revenue.
Cross-Industry Empowerment
With Microsoft Industry Cloud, I see across industry collaboration would become more manageable and help with more significant human impact and customer experience. It’s up to imagination on how such cross-industry cloud-powered integration can help with:
- New Business models and bundled services for new revenue streams
- Optimized, Resilient, and Sustainable Supply Chains
- Better Consumer Experience
- Lower cost to serve and higher profitability for businesses
- Greater operational efficiency and agility
- Efficiency and Effectiveness across all aspects of different personas of the same person (Patient, Consumer, Customer, Environmentalist, Food Conservationist)
The common cross-industry collaboration includes
a. Retail + Finance
b. Retail + Manufacturing
c. Retail + Non-Profits
d. Retails + Sustainability
e. Retail + Health: has been working together for quite some encompassing opportunity in both physical and digital arena (e.g., the convenience of retail clinics from Walgreens, CVS, and others), but with Microsoft Industry Cloud, I see that collaboration will become more pervasive and will also expand to the growing number of digital touchpoints and intelligent devices.
Microsoft Cloud for Healthcare and Microsoft Cloud for Retail can be leveraged together, underpinned by a Common Data Model and an industry-leading security and compliance posture, to empower better care everywhere for everyone.
What SI Need to do differently
Organizations are shifting to internal and external cloud services permanently, but they are also facing
integration challenges. The traditional system integration products and processes do not reflect
strategic focus or the concerns of IT that the path of a company to the cloud raises.
Suggested changes in the SI business model and solution design approach from long drawn custom development to:
1. Faster and Lean migration to Public Cloud and Distributed Cloud for Cost saving and IT agility
2. Outcome-based migration, modernization, and Managed Services for Cloud Workloads
3. Invest in developing Regional Retail and Privacy compliance controls and associated automation for Security & Compliance as Code bundled with Managed SIEM and SOC solution or complete Managed Cybersecurity Services bundle
4. Avoid Bespoke solutions and adopt Composable Solution architecture based on the foundation provided by Retail Cloud Solutions (e.g., MCFR) for innovation in business models, new supply chain, re-imagined channels and customer experience (AR/VR/MR), Customer on-boarding and personalized marketing and pricing/subscription-based bundling, and integrated Process Integration and optimization
5. Accelerated development using Low Code No Code platform, hyper-automation:
In addition to providing significant cost savings, these enterprise low-code solutions help streamline, automate, accelerate, and increase the efficiency and performance of the app development process. As a result, enterprises no longer need to utilize only software developers.
6. Deliveries aligned to Faster Time to Market and Market Innovation on top of Healthcare Common Data Model: Common Data Model simplifies data management and app development by unifying data into a known form and applying structural and semantic consistency across multiple apps and deployments.
7. Bring best of niche industry partner ecosystem relationships and expertise for Composable Solutions: This concept enables computing, storage, and networking devices to be pooled and used as needed without requiring physical configuration, opening the door to a nimbler environment, in which resources are not only accessed quickly but also used precisely.
8. Bring in Cross-Industry integration, learnings and develop new decentralized computing enabled business models and solutions
Summary
If the COVID-19 pandemic has taught us anything, it is that no business is resilient to everything. Nevertheless, the retailers who laid their ‘digital tracks’ early have emerged stronger, tracking increased consumer spending and driving business growth. In the current moment, customers seek more choice, transparency, and control in how they shop without compromising on the level of personalized sales and service they expect. 5
The future of retail requires a flexible cloud‑based digital foundation that will continue to support retailers and their customers with intelligent, next-generation functionality.
Microsoft Cloud for Retail is an excellent opportunity for Retailers and System Integrators to work with Microsoft side-by-side to co-innovate and co-develop next-generation solutions that address their most pressing business opportunities in the Retail vertical. Microsoft Cloud for Retail (MCFR) will help retailers create a retail platform to eliminate outdated legacy applications and technical debt. In addition, MCFR will accelerate the adoption of advanced digital tools such as analytics, AI, and ML to deliver the unique, personalized experiences consumers crave. In short, Microsoft Cloud for Retail is a catalyst for much-desired accelerated Digital Transformation.
