Retail reportedly accounts for some 20 per cent of Microsoft's overall revenue - not an insignificant sum of money. ARN's Retail Section editor, Gerard Norsa, recently cornered Alan Bowman (above), Microsoft Australia's director of consumer and retail sales and marketing, to gauge his opinions on retailing in AustraliaARN: What is your job description?
Bowman: As the director, consumer and retail, sales and marketing my role is twofold. Firstly, I facilitate our products and their marketing into the retail channel, while the other part of the job is to take our product messages to the consumer. Basically, I manage a channel and create demand amongst consumers.
How would you define Microsoft's presence in retail outlets at the moment?
We have a group of about 20 accounts which could be described as being pure retailers and also another group which we call direct marketing resellers. Our pure retail accounts would include organisations such as mass merchants, computer service chains and partner stores.
There is a group of account managers which have a direct relationship with those customers in terms of building ranges and establishing store presence. In the past we have relied on distribution channels to provide those services. But in reality, we have found that you really need to have very focused attention in there to make sure you have secure business and get the shelf space and the promotional focus required.
What we have done is evolve that sales approach over the last 12 months to be very much a cooperative effort between us and our three principal distributors: Express Data, Tech Pacific and Dataflow. Lots of work is put into making sure we get the right balance.
We have an extensive range of products sold through retail with everything including games, edutainment, office solutions and Small Business Server, and of course Windows.
Stores like Harvey Norman would take the lot as would the people that run mail-order marketing campaigns, but in other areas like department store businesses where they don't have the same degree of floor space dedicated to computer sections, we'll do selective ranging.
An account executive will sit down with the buyer regularly and determine ranging. It will always be a fairly finite thing - we will have this much shelf space with a said number of titles. So naturally we go for items with broad appeal.
What are the most popular products at the moment?
Obviously, Windows 98 is going very well. If you took our retail and direct marketing business as a whole, though, more than half of the business we do in retail revolves around what we call office or desktop applications.
That represents about half the retail business. After that, Windows is a steady run-rate business for us followed by edutainment and hardware. Our joysticks, keyboards and mice also tend to generate a lot of revenue, as they are bigger ticket items. They probably generate about 20 per cent of revenues in the retail area.
How much of Microsoft's total business turnover is through retail channels?
Managed accounts represent just a bit over 20 per cent, which sort of surprises a lot of people. We are very much a consumer brand these days as much as we are a corporate brand and have worked very hard at getting to that stage.
Where do the small independently owned stores fit into Microsoft's whole retail equation?
Those stores are serviced by our distributors. We have a channel group that manages distributors and what we call our broad channel - the VARs, service providers, small independent retailers - so they certainly wouldn't get the same degree of account management and marketing time as the big retailers do.
Do they represent a large proportion of sales?
They are an important part of the business, there are lots of them and they play a big part in our overall packaged goods and licensing business. The issue becomes a little hard to pin down because a lot of independent retailers are also systems builders, so they are selling software just as a good add-on part of their business. As they tend to be regionally based and in suburban shopping centres and the like, they play an important role, but naturally, they won't commit to the range and inventory that a department store would.
Are there any innovations Microsoft has introduced to retailing in Australia?
One of the things that has become critical to our business is a very systematic approach in relation to accounting for stock and accounting for sell-through from manufacturing right through to the consumer sales.
We have really worked at a business level with our major accounts to be able to provide electronic reporting.
The issue there is not just a benefit for us in terms of marketing and product range, but the ultimate benefit is to the retailer because we can work with them to implement the right inventory profiles and make sure they don't have obsolete products on the shelf.
While that doesn't sound very innovative, it is a critical part of the whole retailing business and we've really driven that initiative in IT retailing. It amazes me that people didn't really know what their inventory levels were and what their sell-through rates were on particular items.
What are the growth markets that retailers should be staying abreast of?
From Microsoft's point of view, our outlook for retailing is really huge. After the current push from Windows it will be time to prepare for the holiday season and then after that there should be a big retailing spike on the new generation Office. We find that we really need to plan that far in advance and it is part of the business plan to keep the whole pot continually boiling.
How can retailers best prepare for seasonal fluctuations?
Christmas is a very late and short thing these days. It is better for retailers to treat the whole period from November to February as a longer peak period that needs to be built up. There is so much clutter at Christmas that if you rely solely on that period it is very hard to break through with any clear message. My advice would be to build your message up early and sustain it through that period and then move into something new in March.
How can retailers maximise sales of Microsoft products?
When people come in looking for Microsoft products there are two things that happen. People come in looking after being impacted by the marketing we do or because of word of mouth referrals. One of the biggest opportunities for retailers in selling Office, a joystick or a game is in the add-ons.
When someone buys a PC, or any IT product for that matter, they are in a buying mood, so that is when retailers need to optimise the contact. Often it can be as simple as asking the question or enlightening them to possible add-ons. Often they will not even know what else is suitable to their needs.
There is a lot of benefit to be gained from add-on selling, so I guess my message there would be that with such a broad range of products, there is always something from Microsoft that you can add on to every sale.
It's the old "fries with your burger?" routine. You get the joystick to go with the games to go with the PC.