Digital Transformation of Retail Industry in Asia Pacific to Redefine Customer Experiences and Improve Revenue

• Kroger and Microsoft will jointly bring to market Retail as a Service product for retailers, aiming to reinvent the customer experience. The partnership brings together Kroger's world-class expertise in the grocery industry with the power of Azure and Azure AI.
• Microsoft Asia's Unlocking the Economic Impact of Digital Transformation in Asia Pacific [1] study predicts that the retail industry is expected to add US$272 billion to the region's GDP by 2021, should all retail organizations embrace digital transformation initiatives.

SINGAPORE - Media OutReach - 9 January 2019 - The Kroger Co. (NYSE: KR), and Microsoft Corp. (Nasdaq: MSFT) announced a collaboration to redefine the customer experience using Kroger Technology products powered by Microsoft Azure, the retailer's preferred cloud platform for Retail as a Service (RaaS). Through this innovative partnership, Kroger together with Microsoft, will jointly market a commercial RaaS product to the industry, as well as pilot a connected store experience.

Retail as a Service Commercial Product

The introduction of the commercial RaaS product, a Kroger solution powered by Microsoft Azure, offers a suite of capabilities to support KPIs and merchandising plans, collect customer insights, enhance employee productivity, improve out-of-stocks, better the customer experience, and allow for hyper personalization using proprietary technology.

The RaaS product is enablement software built by a retailer for retailers, supporting modern retail experiences and harmonizing customers' digital and physical shopping experiences. The rapid transformation platform enables industry players to prioritize their most desired initiatives. Future commercial products include: Scan, Bag, Go; Virtual Store Manager; sensor network; and connectors to corporate systems like point-of-sale, inventory management, as well as tag and merchandising systems.

Connected Store Experience Pilot

The Kroger Technology team has developed a smart technology system, powered by Microsoft Azure and connected by IoT sensors, to transform two pilot stores. They will leverage RaaS, establishing a way to quickly add innovations to create new customer experiences, enable higher levels of personalization through insights, and enhance store associate productivity.

"Kroger, the world's third-largest retailer, is embracing next-level digital strategies to redefine shopping experiences and provide personalised services, leveraging the power of Azure and Azure AI," said Raj Raguneethan, Asia Lead, Retail and Consumer Industries, Microsoft. "We believe it is time for industry players in Asia to accelerate their digital transformation journeys. While 64% of Asia Pacific retailers have a full or progressing digital transformation strategy in place, they must move more aggressively towards an Intelligent Retail approach, where customer-centricity and new omnichannel experiences are keys to success."

Digital Transformation Improves Retailers' Profits and Revenues through Customer-Centricity

Microsoft Asia's Unlocking the Economic Impact of Digital Transformation in Asia Pacific study, which polled 240 business leaders from the retail industry in the region, found that half of the respondents will focus on transforming customer service and support as part of their digital transformation journey to deliver customer-centric offerings. 

Top business priorities included improving business agility to respond quickly to market trends and opportunities; employee productivity, along with integrating digital channels to deliver omnichannel experiences. To address the latter, respondents will also focus on sales and IT operations for the year.

More significantly, the Study predicts that the retail industry is expected to add US$272 billion to the region's GDP, or 1.5% CAGR by 2021, should organizations embrace digital transformation initiatives.

In addition, respondents identified improvements to profit margins; revenue from new products and services; customer advocacy; productivity and revenue from existing products and services as a result from their digital transformation initiatives.

Accelerating Digital Transformation Journeys with Data

Part of the reason why retailers like Kroger have been able to reap immediate benefits from their digital transformation journey is the realization of data as a key asset for growth.

Close to 50% of respondents are already using data capitalization, or how data is being leveraged as an operational asset, as a metric to measure digital transformation success. Additional metrics tracked for their respective digital transformation journeys include non-traditional business KPIs such as customer advocacy and process/service effectiveness.

"We see the opportunities for the region's retailers to zoom into four key areas to build a customer-centric operation for the future. First, they must exceed customers' expectations both in-store and online. Second, they need to start creating actionable insights for intelligent operations to deliver customer-first offerings. In order to do so, retailers need to empower employees to deliver in a digital and data-first retail environment with the right tools. Lastly, they need to acknowledge the competition by competing with innovation in a global marketplace," added Raguneethan.

With data, organizations can accelerate their digital transformation journey via a three-step process:

1.     Collection of data to improve decision-making processes

Retail organizations need to have a data strategy in place in order to manage the streams of data available. By doing so, and applying big data analytics, they will be able to develop real-time insights that can deliver personalized experiences while simplifying the decision-making process for employees.

2.     Optimizing existing products and services with data

Data can be used as an asset to optimize existing processes and for developing predictive analytics to improve delivery of services and products across channels. Retailers can also tap on artificial intelligence (AI) to deliver personalized experiences, while reducing time spent on menial work.

3.     Creating new business models with data

Data can also be used to develop new products, services and experiences, as well as new business models, like RaaS product by Kroger.

In Kroger's case, its RaaS offering will also see a pick-to-light productivity solution for store associates. The solution reduces time taken to fulfil curbside pickup orders by using visual cues to help store associates quickly find items. Additionally, solutions like Microsoft Azure-powered video analytics will help store associates identify and address out-of-stocks to ensure customers can locate products on their shopping list.

"Through 2021, retailers that leverage AI, AR, and IoT for employee and customer engagement will see customer satisfaction scores rise by up to 20%, employee productivity rise by up to 15%, and inventory turns rise by up to 25%," said Victor Lim, Vice President IDC Asia/Pacific. "This will be the result of building upon existing and new data streams to transform their business models, whereby employees are more empowered to make real-time decisions, and customers more engaged on a digital front."

To learn more about Microsoft's participation at the National Retail Federation (2019) visit https://www.microsoft.com/en-US/enterprise/events/intelligent-retail-2019 

To view photography and video of RaaS and Kroger's connected store experience, visit here.

About The Kroger Co. 

At The Kroger Co. (NYSE: KR), we are dedicated to our Purpose: to Feed the Human Spirit™. We are nearly half a million associates who serve over nine million customers daily through a seamless digital shopping experience and 2,800 retail food stores under a variety of banner names, serving America through food inspiration and uplift, and creating #ZeroHungerZeroWaste communities by 2025. To learn more about us, visit our newsroom and investor relations site.

About Microsoft

Microsoft (Nasdaq "MSFT" @microsoft) enables digital transformation for the era of an intelligent cloud and an intelligent edge. Its mission is to empower every person and every organization on the planet to achieve more.