Retailers can harness data to strengthen their businesses, generate new revenue streams and empower their employees.

That’s the view of Satya Nadella, CEO of Microscoft, who delivered the keynote at the NRF Big Show in New York this week.

Nadella said data plays a crucial role in retail, however with 40 terabytes of data being generated every hour it’s not always useful.

“Data is only useful if in real time or near real time you can predict something better, can automate something better or you can gain an insight. Those are the outcomes that you want to drive with data, that is your true measure of your success with data,” said Nadella.

“In an increasingly digital world, it’s going to come down to one thing and one thing alone, your own tech intensity, your own independence when it comes to digital technologies.”

At the event, Nadella highlighted key steps to enabling intelligent retail. The first step was how retailers should use data to know their customer.

Today, 80 per cent of consumers expect retailers to offer them personalised products, Nadella said. For example, digital technology can be used to provide consumers with online recommendations and make their retail experience more personal.

He also strongly advised retailers to obtain a system that has the power to “take the people, the data and then match the consumer demand to it”. He used the example of UK retailer Marks and Spencer, which has taken the entire store and effectively turned it into a computer, where the physical space has computing signals which can track everything within the store, for example, the temperature of refrigerators or the stock levels on shelves.

Nadella advised retailers to empower their employees by providing them with knowledge on each customer they can obtain from data.

“How are the people who work for you in your stores, even in your online operations able to drive the decisions? So putting the right insights, data in their hands and empowering them is going to make a difference,” said Nadella.

Shaking up digital advertising

The CEO urged retailers to “change the dynamic” when it comes to digital advertising by introducing marketing and advertising units in their digital stores.

“Let’s face it, today when you look at online advertising it’s a monopoly, oligopoly, pick your word. The concentration is clear, the digital networks are clear,” he said.

“There’s death, there’s taxes and there is ever-increasing online advertising spend. There is not much we can do about the first two.

“But depending on the decisions we make now, there is something we can do about number three.”

Nadella explained Microsoft’s Promote IQ product is a whitelabel technology which acts as an auction engine or an advertising and marketing engine that lets retailers “build their own online advertising business.”

“You, as retailers, have the most valuable asset which is commercial intent and consumer behaviour data. The question is how can you convert that through your marketing efforts into effectively new online advertising channels for every brand and every supplier? This to me is perhaps what’s going to reshape retail business models.”

Nadella argued retailers can now dramatically increase revenue from their digital vendor marketing programs to create a new much-needed high gross margin business.

“You can be running super fast doing all of this capital spend, operating expense spend, doing amazing things. But if all you’re doing is allocating to more online advertising elsewhere, but not creating a new revenue stream, you will not have the gross margin to meet the needs of your customers,” he said.

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