In Game Of Mobile Tag, Microsoft Finds Few Retailers Willing To Be "It"

Microsoft's mobile-barcode strategy is, arguably, the most ambitious in retail. It pushes a view of mobile payment, customized pricing and extensive CRM data. Although a handful of retailers—including Best Buy, Whole Foods and the Jones Group (Anne Klein, Nine West, Gloria Vanderbilt, etc.)—are experimenting with Microsoft Tag, none is using its interactive capabilities.

That poses a problem. Without those rich interactive features, it's simply a way to get additional information about a product. But it doesn't meaningfully go beyond 2D barcodes and NFC efforts. Some chains are frightened to even experiment with systems that are not only IT intrusive (they need to integrate deeply into many back-office programs) but may raise privacy issues. Without such trials, though, retailers have no way of assessing whether the privacy concerns are real or simply imagined. Consumers might love the advantages, if given a chance to try them.

Here's the future envisioned by Redmond. Customers turn their mobile phones into their loyalty cards. As they browse physical aisles, they can point their phones at these tags and, beyond product information and demos, be shown pricing individualized for them based on their membership level (for a warehouse membership club), the dollar value of historic purchases, particular purchases they have made or their demographics.

That customized pricing could also reflect short-duration sales, as in "This product will cost you $32, which is an $18 savings. But if you buy it within the next hour, it will cost you only $21."

Mobile payment would allow the customer to scan and pay for a tagged item on the spot—using an already established payment card on file—thereby sparing the customer the checkout lane.

The beauty of the system is the potential CRM integration, which would allow retailers to have a thorough record of not only every purchase (which they already have) but every product the consumer seriously thinks about. This approach assumes that a serious interest would likely merit a quick scan to learn more.

Bill McQuain is the Microsoft business development director overseeing Microsoft Tag. He said that, despite strong interest in some of these capabilities and trials of the most simple features, no one has yet agreed to even try the interactive potential.

"There is a fair amount of heavy lifting" required to tie the tags into IT back-office systems, McQuain said, along with "security and privacy concerns. As much interest as there is, this will be a much longer sales cycle. Integration into mobile payment is probably a ways off."

Some of the potential sources of data-sharing have already been cut off by Microsoft, McQuain said. For example, every customer has a unique identifier, which Microsoft calls the device ID. But that ID changes with every retailer to prevent one chain from learning about what is being purchased or examined at another chain.

"We don't allow Best Buy to see the device ID of Whole Foods," he said. "It would be very scary for the consumer." Yep, but it might also freak out the retailer whose data was being viewed by a rival chain. Then again, it might be an extremely attractive method of getting a more global view of a customer's interests.

Best Buy has started experimenting with the tags in the Southern California territory, deploying 8 to 10 tags per store, McQuain said, doing things such as showing mini-tutorials and game trailers.

Whole Foods is trialing the tags in the Northwest, using the system to, among other things, display recipes.

Some initial trials outside of retail have shown sharp increases in participation in contests and whatnot, McQuain said, citing tag participation in one trial as 2.5 times more active than PC participants. He added, though, that those high initial numbers may not last.

"There is certainly some novelty factor," McQuain said, explaining that some drop off is expected.

Microsoft sees a few ways of getting into retail environments: directly through retailers; through manufacturer deals; and sometimes through arrangements with shopping malls (the Mall of America and Westfield are already involved in trials).