Microsoft ‘Cloud for Retail’ Joins the RaaS Race

One of the most notable, yet understated, tech trends in recent history is retail as a service (RaaS). This movement is all about infusing a cocktail of AI, computer vision, and other technologies to streamline physical retail operations. The timing is right, given Covid-era demand signals… call it a happy accident.

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 RaaS platform (as we predicted). It also has other orbiting parts to its RaaS master plan including Amazon One and vertical-specific innovations in grocery and salons.

Microsoft also has RaaS deployments, with February 1st marking the general availability of it’s latest play: Microsoft Cloud for Retail (MCR). Unlike Amazon’s consumer-facing play, MCR is all about federating data to inform strategy and optimize operations – everything from inventory to store layouts.

Will Retail-as-a-Service Transform Local Shopping?

Real-World Clickstream

Going deeper on MCR, the key word above is “federating.” One challenge in retail, like many consumer verticals, is disparate data to pinpoint customer behavior, proclivities or transactional records. This is a similar battle cry to other acronym-heavy data-processing fields like CRM and CDP.

Trying hard here not to use cliches like “end-to-end consumer journey,” the idea here is to provide retailers with a more holistic and single point of insight on the who, when and where of their customers. And the desired outcome is to apply those insights towards back-end and front-end retail functions.

As noted above, that could include things like store layouts, just-in-time inventory systems, and supply chain management. These are the types of operational tweaks that can cause incremental margin gains. And for larger retail operations, those gains can really add up – a primary RaaS selling point.

MCR’s specific value proposition is also analogous to lots of the innovation we’ve seen in eCommerce over the past few decades. By optimizing things like click-streams and page layouts, conversions can be meaningfully impacted. RaaS looks to bring those advantages – erstwhile online – to physical retail.

To further explicate MCR’s value and driving factors, Microsoft’s Shelley Bransten breaks down a few of MCR’s driving factors, summarized below (see them all here).

  1. Maximize the value of retail data: Unify and process disparate data sources.
  2. Elevate the shopping experience: Use data to optimize shopper UX
  3. Build a real-time, sustainable supply chain: Dynamicly track demand signals to optimize supply
  4. Empower the store associate: The last mile is a human touch… make sure it’s right.

Walmart Revs Up its RaaS Engine

Your Margin, My Opportunity

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 RaaS play has similar ambitions and flight path to power the next generation of physical retail.

Moreover, Jeff Bezos has telegraphed this plan with his famously-chilling statement: “Your margin is my opportunity.” It’s about accelerating the inevitable Darwinism in retail by upending and undercutting dated technology. Look for this playbook to take over healthcare and education next…

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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