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Microsoft CEO: Tech intensity is the key to retail victory

| by Elliot Maras
Microsoft CEO: Tech intensity is the key to retail victory

Photo: provided

Retailers are scrambling to get the best data about their customers and about what marketing channels are most effective. That much was evident from the exhibits on the trade show floor at the National Retail Federation's Big Show Sunday.

It's also why thousands of attendees crowded an auditorium at the Jacob K. Javits Convention Center to hear Microsoft CEO Satya Nadella's keynote address. Nadella pulled no punches in describing the challenge facing retailers: use data to learn more about consumers, empower employees and create new business models.

"The meme of the twenties will be retailers moving to their own tech intensity," he said. "It's not about taking away the art of retail. It's about building your tech intensity."

Digital advertising challenges

While digital marketing opportunities have mushroomed in recent years thanks to the explosion of online advertising, Nadella said the result for many has been a confusing marketing environment that is difficult to navigate.

"Today, when you look at online advertising, it's a monopoly, an oligopoly; pick your word. There's death, there's taxes and there's ever-increasing online advertising spend. There's not much we can do about the first two, but depending on the decisions we make now, there is something we can do about the third."

The 'win, win, win' strategy

The companies that have been able to use their data successfully, such as Home Depot, are creating new opportunities for not only customers, but for brands and suppliers, he said.

"This is about win, win, win," Nadella said, referring to the retailer, the brand and the consumer. 

"You can't be cool by association with a tech friend — you have to be cool on your own," he said. "You have to take pride in the digital capability that you have built."

Partnerships and the e-commerce imperative

E-commerce holds a big key to retail's future in Nadellas' view.

Retailers that create successful e-commerce businesses are giving brands an opportunity to partner to both parties' mutual benefit as opposed to dealing with a myriad of online channels, Nadella said.

Such retailer/supplier partnerships will be the highest gross margin retail business model, he noted.

"We have to change the dynamics here because you (retailers) have the real data here," he said. The data, used effectively, will reshape business models, he explained.

"The question is, how can you, through your marketing efforts, convert that into effectively new online advertising channels that could benefit every brand, every supplier," he said. "This, to me, is perhaps what's needed to reshape retail."

Investing in advertising and marketing, without having a revenue stream that generates profit, will not provide a sustainable business model.

Data and employee empowerment

In addition to supporting the increasingly important role of e-commerce, data also empowers employees. Nadella characterized the "art of retail" as successfully enabling employees to serve customers.

"Giving data to employees is the single most ROI intensive thing you can do," he said. "It increases your conversion rate by 15% and your satisfaction rate by 10%."

Nadella cited Ikea as a company that has done a good job of empowering employees. The furniture retailer has teams from Microsoft assisting in its digital transformation journey.

One development has been an app that arranges work hours in a way that balances employee time preferences with store activity levels, he said, which has significantly reduced management's administrative work load.

Nadella then invited representatives from both companies — Microsoft and Ikea — to the stage to present a video about how Ikea has support teams for its employees.

While retailers and brands need to find ways to leverage higher data loads, they also have to ensure that proprietary data is secure, Nadella said. With artificial intelligence, a party no longer has to be able see data in order to steal it, he said.

In the quest to leverage rising amounts of data, retailers and suppliers need to commit to partnerships in Nadella's view.

Photo courtesy of the National Retail Federation.

Topics: Customer Experience, Retail, Trends / Statistics

Elliot Maras

Elliot Maras is the editor of and

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