Microsoft’s Retail-as-a-Service Ratchets Up

retail as a service microsoft

One of the most notable, yet understated, tech trends in recent history is Retail as a Service (RaaS). This movement is all about infusing computer vision and other technologies to streamline retail operations. In some ways, it’s like bringing the digital advantages of eCommerce to physical spaces.

Amazon has led the way with its “just walk out” technology that was incubated in Amazon Go stores and is now rolling out more broadly as a platform for retailers to integrate. And it has other orbiting parts to its RaaS master plan such as Amazon One and vertical-specific innovations in grocery and salons.

But Amazon isn’t alone. Another software giant has its eyes on the Retail as a Service prize: Microsoft. Its Cloud for Retail (MCR) federates sales and logistics data to optimize operations – everything from inventory to store layouts. This extends Microsoft’s overall enterprise software empire deeper into the retail vertical.

Microsoft Advances its RaaS Play

Smart Stores

Joining Microsoft’s ongoing RaaS efforts, the latest from Redmond is a new partnership with retail tech startup AFI to create and support smart stores. Known as Smart Store Analytics, it’s a new component of MCR that provides retailers that are already use AiFi with shopper and operational analytics.

Backing up for context, what do we mean by “smart stores.” This includes any retail outlet that utilizes cameras and computer vision to track what consumers pick up and put in their carts. The endgame is to avoid the retail bottleneck of checkout aisles (a.k.a. cashierless), similar to Amazon’s Just Walk Out.

The way this works is that that Smart Store Analytics ingests data from the AiFi platform and synthesizes it into insights that can be fed to retail managers. Those insights can be things like adjusting store layouts or inventory/ordering. Altogether, its the art of yeild optimization for the AI era.

The key is delivering the insights in a simplified and human-readable way, which is where Microsoft comes in. For example, a heat-map format is offered to visualize hot zones where foot traffic tends to concentrate. That works three dimensionally as vertical shelf placement is often an influential factor.

Of course, when going through this list, privacy flags start flying up. Microsoft and AiFi have pre-empted these concerns and stumbling blocks by making the system privacy friendly. For example, there’s no facial recognition nor biometrics happening. Virtual avatars replace customers in any recorded material.

Amazon Carries the RaaS Torch Into Fashion

Flight Path

Stepping back, why are tech giants like Amazon and Microsoft going after retail? It’s fitting perhaps for Amazon which was the original retail killer. But it’s more about finding new sources of revenue growth. This gets harder as tech giants get bigger, so they have to shoot for massive markets like retail.

For Amazon, you could also say that it’s following the AWS playbook. There, it incubated a technology internally before spinning it out as one of the most successful tech products of the past decade. Its Retail as a Service play has similar ambitions and flight path to power the next generation of physical retail.

And the revenue projections support that story. Juniper Research estimates that automated checkout systems processed $78 billion+ in transactions in 2022 across 5,000+ retail outlets. The firm also estimates that the integration of these systems will boost basket sizes by $300 per shopper per year.

Back to Microsoft, its motivations are similar in terms of finding new enterprise SaaS growth. Retail now joins the functional targets for its signature operational efficiency and productivity. Salesforce is on a similar path to find new verticals and functions for its software. Microsoft hopes to get there first.

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