Building a Presence in Retail

The retail industry is changing rapidly as retailers turn to technology to improve efficiency and competitiveness. Microsoft has some presence in the industry: many point-of-sale devices use Microsoft OSs, and Microsoft purchased Sales Management Systems, a retail software firm, in 2002. Microsoft is now trying to build on that presence by positioning key products as tools for store management, business intelligence, and supply-chain management in retail environments.

However, Microsoft faces entrenched competitors and lacks a broad range of retail-specific products. It is leaving the development of such products, as well as their integration with existing products in retail environments, to partners. These partners’ loyalty could be tested if Microsoft attempts to raise its profile in retail by creating products that compete with their offerings.

Why Microsoft Pursues the Retail Market

The retail market has several characteristics that warrant unusual attention from Microsoft. Most important is its size in terms of customers, spending, and license units. Microsoft and partners already have a strong presence at the point of sale and the potential to expand into more strategic functions such as inventory control. However, retail’s tight margins and built-in technology conservatism will challenge such expansion.