Best Buy Business Model

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					                                               Microsoft Customer Solution
                                               Retail Industry Case Study

                                               Localized Online Offers Help Retailers Drive
                                               Shoppers into Stores

Overview                                       “The world of digital marketing is changing rapidly,
Country or Region: United States
Industry: Retail
                                               and Microsoft software provides capabilities we need
                                               to help retailers stay ahead of the pack.”
Customer Profile
                                               Bill McCarthy, Chief Operating Officer, ShopLocal
ShopLocal offers a suite of services that
help retailers such as Best Buy, Home
Depot, Staples, and Target take advantage
of the Internet to drive in-store sales. The   While many consumers use the Web to research products, the vast
company has 156 employees and is based
in Chicago, Illinois.                          majority of purchases are still made in local stores. ShopLocal
                                               enables retailers to reuse localized print advertising on the Web,
Business Situation
The company’s business model is based on       helping them to draw consumers into local stores or to e-commerce
the fact that most consumers use the           sites. The company’s SmartCircular service replicates print circulars
Internet to research products yet still
choose to buy those products locally. As       online in an interactive format that lets retailers reuse the
such, ShopLocal needs to use the Internet      merchandising and creative effort that goes into those ads, while
to help retailers drive in-store sales.
                                               the company’s SmartMedia service delivers targeted local offers
Solution                                       through interactive banner ads. With Microsoft® software,
The company is using Microsoft® software
to deliver a suite of multichannel shopping    ShopLocal can support strong demand for its services and seasonal
and marketing services that make it easy       shopping peaks and is delivering new offerings to help retailers
for retailers to localize advertising on the
Web and draw shoppers into their stores.       better understand the growing influence of the Internet on in-store
                                               shopping and how they can best take advantage of that trend.
 Increased advertising reach and
 Ability to successfully accommodate
  large, seasonal retail peaks
 New insights into cross-channel
  consumer behavior
                                       Situation                                      combination of offers and prices, ShopLocal
                                       ShopLocal helps retailers implement multi-     must preserve the merchandising and
                                       channel marketing strategies that drive in-    geographic targeting that goes into those ads.
                                       store sales. The company’s services are used
                                       by more than 150 top retailers, including      In addition, as a hosted solution provider,
                                       Albertsons, Best Buy, CVS, Home Depot,         ShopLocal must deliver its services in a
                                       Lowe’s, Office Depot, Sears, Staples, and      reliable, scalable, and cost-effective manner.
                                       Target.                                        “Our customers include many of the largest
                                                                                      retailers in the United States, and they have
                                       To deliver on retailers’ needs, ShopLocal      extremely high expectations,” says Bill
                                       must bridge the gap between traditional        McCarthy, Chief Operating Officer at
                                       advertising methods—such as the weekly         ShopLocal. “We need to provide fast,
                                       circulars that are inserted into newspapers—   uninterrupted service at all times, especially
                                       and the rapidly changing world of online       during the seasonal shopping peaks that are
                                       marketing. In addition, because retailers      so important to retailers, and we need to do it
Figure 1. SmartCircular enables        often invest significant effort to produce     as cost-effectively as possible.”
retailers to easily extend the reach   unique versions of weekly circulars for
of print advertising to the Web.       different geographies, each with its own       Solution
                                                                                      ShopLocal uses Microsoft® software to
                                                                                      deliver a suite of multichannel shopping and
                                                                                      marketing services that make it easy for
                                                                                      retailers to extend personalized offers to
                                                                                      consumers on the Web. “We help retailers
                                                                                      improve cross-channel marketing and sales
                                                                                      by enabling them to reach out to consumers
                                                                                      online in a way that draws those people into
                                                                                      the retailers’ stores or, if the user wants to
                                                                                      purchase online, to the retailer’s e-commerce
                                                                                      site,” says McCarthy.

                                                                                      ShopLocal provides several SmartProducts
                                                                                      that help retailers extend targeted offers to
                                                                                      consumers online. SmartCircular (see Figure
                                                                                      1), the company’s flagship offering, replicates
                                                                                      content contained in printed circulars on the
                                                                                      Web, preserving the geographic targeting,
                                                                                      product selection and pricing, and creative
                                                                                      design that go into those ads. SmartCatalog,
                                                                                      a similar offering, is designed for retailers
                                                                                      with printed catalogs. Both offerings provide
                                                                                      rich, interactive features that include the
                                                                                      ability to browse by page, category, or brand;
                                                                                      perform a keyword search; find a local store;
                                                                                      buy online; and maintain a shopping list.

                                                                                      SmartMedia, another ShopLocal offering,
                                                                                      includes many of the same capabilities of
“Microsoft software                             SmartCircular inside an interactive banner         The IT infrastructure supporting ShopLocal
                                                ad, enabling retailers to deliver customized,      services is based entirely on Microsoft
enables us to                                   personalized offers virtually anywhere on the      software. Web servers running the Windows
successfully support                            Web. SmartDelivery redistributes those offers      Server® 2003 operating system and Internet
                                                through additional channels such as Really         Information Services 6.0 host Web pages
multiple product and                            Simple Syndication feeds, e-mail, and              based on Microsoft ASP.NET, while database
service offerings with a                        mobile devices. ShopLocal also hosts               servers run Windows Server 2003 and SQL
                                      , which helps consumers find          Server 2005 database software. All
single, integrated IT                           online and in-store offers across a broad          ShopLocal solutions were developed using
infrastructure.”                                selection of retailers and merchandise, with       the Microsoft Visual Studio® 2005 develop-
                                                features that include product reviews,             ment system and the Microsoft .NET
Ed McLaughlin, Senior Director of Technology,   category searches, hosted forums, maps, and        Framework.
ShopLocal                                       dynamic shopping lists.
                                                All of the company’s SmartProducts offerings       By utilizing Microsoft software, ShopLocal is
                                                are driven by the content in retailers’ printed    helping retailers such as Best Buy, Home
                                                circulars, which the company receives at the       Depot, Staples, and Target implement
                                                same time the files are provided to printers.      multichannel marketing strategies that use
                                                Of roughly 150 SmartCircular clients, about        personalized digital marketing to drive in-
                                                one-third publish circulars weekly, with some      store sales. “Information is power, and
                                                clients having up to 30 localized versions.        consumers have both,” says McCarthy. “The
                                                ShopLocal uses custom software tools to            Internet gives consumers the power to
                                                crop and resize images for the Web; extract        research what to buy and where, and their
                                                descriptions, prices, and other information for    choice is still to buy in-store. Instead of trying
                                                each product offered; map localized circulars      to bring the consumer to the information, we
                                                to zip codes (and thus the client’s physical       bring the information to the consumer—on
                                                stores); and hyperlink offers in the circular to   clients’ Web sites through SmartCircular, on
                                                the same products on the retailer’s                our own site through, or
                                                e-commerce sites. All information flows into a     across the Internet through SmartMedia and
                                                central Microsoft SQL Server® database,            SmartDelivery.”
                                                which is accessed by the ShopLocal
                                                Localization Engine in real time as consumers      Increased Advertising Reach and
                                                interact with ShopLocal services online.           Effectiveness
                                                                                                   ShopLocal helps retailers obtain the targeting
                                                ShopLocal hosts the Web pages for                  of print advertising on the Web, reusing
                                                SmartCircular and SmartCatalog, duplicating        existing advertising assets online to increase
                                                the look and feel of a client’s Web site so that   their reach and effectiveness. For example,
                                                it appears the retailer is hosting the site. For   SmartCircular enables retailers to:
                                                SmartMedia, ShopLocal can either host the
                                                banner ad itself or make the Web services             Reach consumers regardless of whether
                                                application programming interface that                 they are in an area that receives a mailed
                                                exposes its Localization Engine available to a         circular or subscribe to a newspaper in
                                                third party, such as a client’s advertising            which such circulars are delivered.
                                                agency. Either way, content is retrieved when
                                                an ad is served, enabling the same ad to              Expose consumers to offers for a longer
                                                display an offer for sporting goods on one site        duration, past the point at which print
                                                and for a refrigerator on a different site.            circulars are typically discarded.
“In 2007, on the day                               Preserve the merchandising that goes into      has helped us manage unprecedented
                                                    print advertising, thereby achieving           growth in traffic, while meeting extremely
before Thanksgiving and                             consistent messaging across online and         high expectations of our largest retailers,”
on Thanksgiving Day, we                             print marketing channels.                      says McLaughlin. “In 2007, on the day before
                                                                                                   Thanksgiving and on Thanksgiving Day, we
reached 11 million page                         “The main things that retailers care about are     reached 11 million page views per hour and
views per hour and                              reach and effectiveness, and we’re delivering      served a record 267 million page views over
                                                both,” says McCarthy. “According to our            the two-day period, amounting to an 84
served a record 267                             research, 37 percent of SmartCircular users        percent increase over the same two days in
million page views over                         don’t look at the print circulars. Moreover, 71    2006 and a more than 600 percent increase
                                                percent of all SmartCircular users view the        over normal traffic levels.”
the two-day period.”                            online circular in the six days after the print
Ed McLaughlin, Senior Director of Technology,   version is distributed.”                           New Insights into Cross-Channel
ShopLocal                                                                                          Consumer Behavior
                                                In turn, that increased reach is helping           The company’s role as a service provider for
                                                retailers connect with the right consumers—        many of the United States’ largest retailers
                                                those who are ready to make a purchase—            places ShopLocal in the unique position of
                                                and draw them into stores. “Of users who           being able to help its customers better
                                                view SmartCircular at least once a week, 53        understand consumer behavior. In
                                                percent visit a store at least once a week,        September 2007, ShopLocal launched its
                                                and 95 percent visit the store at least once a     ShopLocal Index, which uses data generated
                                                month,” says McCarthy. “Roughly 50 percent         by the services the company provides to 50
                                                plan to make a purchase within a week, with        major United States retailers to track the
                                                an additional 40 percent planning to               overall influence of the Internet on in-store
                                                purchase within three weeks. Of consumers          shopping. Updated monthly, the publicly
                                                who make a purchase, 76 percent buy one or         available top-level ShopLocal Index covers a
                                                more additional items.”                            broad range of segments, including
                                                                                                   computers, consumer electronics, office
                                                Ability to Accommodate Large, Seasonal             supplies, home improvement, department
                                                Retail Peaks                                       stores, mass merchants, and grocery, drug,
                                                While ShopLocal services are delivering            and various specialty stores. ShopLocal offers
                                                strong benefits for retailers, the company’s       more detailed data to its retail customers and
                                                decision to deliver those services on              has recently introduced a similar service for
                                                Microsoft software is paying off for ShopLocal     the manufacturers of retail products to help
                                                itself. “Microsoft software enables us to          them understand how online promotions
                                                successfully support multiple product and          translate into in-store sales.
                                                service offerings with a single, integrated IT
                                                infrastructure,” says Ed McLaughlin, Senior        “We’re continuing to see a strong link
                                                Director of Technology at ShopLocal. “We can       between research on the Web and in-store
                                                cost-effectively scale our infrastructure to       purchases,” says McCarthy. “Reflecting
                                                support growing retailer demand for our            consumers’ heightened use of the Internet to
                                                services and the seasonal shopping peaks           search for the best in-store deals and
                                                inherent to our clients’ businesses.”              promotions, the ShopLocal Index was up 43
                                                                                                   percent for December 2007 compared with
                                                To prepare for the 2007 holiday shopping           the same period last year, and ended 2007
                                                season, ShopLocal grew its IT environment          with 36 percent growth over 2006. As a point
                                                four times its typical size. “Microsoft software   of comparison, e-commerce increased 19
For More Information                                            percent in December versus last year, and             Microsoft Solutions for the Retail
For more information about Microsoft                            total online retail spending grew 20 percent          Industry
products and services, call the Microsoft                       in 2007, up from U.S.$102.1 billion to                Large retailers, hoteliers, and restaurateurs
Sales Information Center at (800) 426-                          $122.7 billion. In terms of retail segments           are facing strong challenges in virtually all
9400. In Canada, call the Microsoft                             tracked by the ShopLocal Index, mass                  areas of their business, from ever-changing
Canada Information Centre at (877) 568-                         merchant and discount department stores               customers and increasing competition to
2495. Customers who are deaf or hard-of-                        showed the greatest growth, followed by               shifting models and emerging technology.
hearing can reach Microsoft text telephone                      consumer electronics and office stores.”              Through the Smarter Retailing Initiative,
(TTY/TDD) services at (800) 892-5234 in                                                                               Microsoft and its partners are working
the United States or (905) 568-9641 in                          ShopLocal also is using the data it collects to       together to meet these challenges and
Canada. Outside the 50 United States and                        drive new offerings that will provide addition-       empower the retail and hospitality industry
Canada, please contact your local                               al value for retailers and their suppliers. One       with a competitive edge. By providing
Microsoft subsidiary. To access information                     such project is a data warehouse based on             powerful, integrated solutions, we enable
using the World Wide Web, go to:                                SQL Server 2005 Analysis Services, which will         improved shopping for the customer, a more                                               help retailers and their suppliers to better          effective sales staff, and enhanced
                                                                understand promotional activity, consumer-            operations at store and corporate levels.
For more information about ShopLocal                            purchasing trends and cross-channel
products and services, visit the Web site at:                   behavior. “All our offerings are extensively          For more information about Microsoft                                          instrumented, albeit in an anonymous                  solutions for the retail industry, go to:
                                                                manner, enabling us to collect a great deal of
                                                                raw data on consumer behavior,” says
                                                                McCarthy. “With SQL Server 2005 Analysis
                                                                Services, we’ll be able to analyze that data
                                                                any way we want—and to make those same
                                                                business intelligence insights available to
                                                                retailers to help them optimize multichannel
                                                                marketing efforts. The world of digital
                                                                marketing is changing rapidly, and Microsoft
                                                                software provides capabilities we need to
                                                                help retailers stay ahead of the pack.”

                                                                 Software and Services                               Technologies
                                                                  Microsoft Server Product Portfolio                 − Microsoft .NET Framework
                                                                   − Windows Server 2003                              − Microsoft ASP.NET
                                                                   − Microsoft SQL Server 2005                        − Microsoft SQL Server 2005 Analysis
                                                                  Microsoft Visual Studio 2005                         Services

This case study is for informational purposes only. MICROSOFT

Document published April 2008

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