M&S teams up with Microsoft for AI retail gambit

Profile picture for user slauchlan By Stuart Lauchlan June 21, 2018
Summary:
Marks and Spencer is looking to a tech alliance with Microsoft to develop new customer experiences.

M&S Marks Spencer
UK chain Marks & Spencer (M&S) has set itself the target of becoming a Digital First retailer after years of neglect resulted in it falling behind online competitors such as Ocado and Amazon.

Yesterday the firm announced a strategic partnership with Microsoft to “transform the retail experience” using the “power of AI”.

So far, so buzzword compatible, but the big question - and not one that’s got an answer to date - is what does that actually mean in practice.

In a statement, the retailer said that the two organisations will:

work together to explore how technologies such as Artificial Intelligence  can be utilised within the retail environment to improve customer experience and optimise operations.

Ocado of course already has sophisticated AI and robotics capabilities that it uses itself and is keen to sell on to third parties. M&S might be thought of as likely prospect here, particularly if it ever intends to crack the online grocery business, an area to which CEO Steve Rowe has so far resisted committing.

There’s also been much speculation about whether M&S might throw its lot in with Amazon and upskill its digital cred through association. The latest person to fuel those rumours was a former M&S digital lead, Marcus East, speaking on BBC 5 Live’s Wake Up To Money show, who said:

I would agree that for a lot of retailers, whilst they’ve put up a great fight ultimately working with the likes of Amazon is probably a good way to tackle the digital space...I don’t know what the dynamics of the (M&S) business are today, but they’ve got to be looking seriously at it.

But rather than partnering or buying in an available solution, CEO Rowe has apparently decided to build a bespoke M&S offering and turned to Microsoft to assist.

Allies

The tie-up was hinted at last month when Rowe said:

We need to embrace new technology partnerships. We’re working on that now, and we’ll talk to you about that in the near future.

This week, Rowe commented:

Marks and Spencer is transforming into a Digital First retailer, at a time when the sector is undergoing a customer-led revolution. We want to be at the forefront of driving value into the customer experience using the power of technology.

Working together with Microsoft to understand the full potential of how technology and artificial intelligence can improve the in-store experience for our customers and the efficiencies of our wider operations could be a game changer for Marks and Spencer – and for retail.

Even given M&S’s battered brand, it’s a good win for Microsoft, not least because M&S is a big Salesforce Commerce Cloud user. Certainly it’s important enough to merit a quote from Cindy Rose, Microsoft UK CEO, who says:

We firmly believe that AI has the power to amplify human ingenuity. The retail sector is one of the most challenging landscapes in the UK right now and we are thrilled to be working with Marks and Spencer to explore how AI can help such an iconic brand transform the customer experience and improve wider operations.

AI and retail

With a massive store closure program kicking in, the firm has now put in place a five year transformation programme last November, with new technology and they use of agile methods intended to save around £30 million a year.

The Microsoft deal means that AI engineers from there will work alongside the M&S Retail labs in-house team to “accelerate the retailer’s digital transformation”. Getting serious around AI is essential just as a ‘keeping up with the Jones’ tactic, never mind becoming a competitive differentiator.

The retail sector’s interest here was summed up by Ocado’s Chief Technology Officer Paul Clarke late last year giving evidence to UK legislators, when he said:

Our business runs on an intersection of five disruptive technologies: the Internet of Things, Big Data, robotics, AI and cloud. Of those we see AI, in the Tolkien sense, as the One To Rule Them All. It is the one that lets you do the really exciting things with the others. It pervades what we do across our business, and yet, at the same time, like many others, we are just getting started here.

The emphasis in the announcement on customer experience transformation is perhaps the most telling aspect. Last month at the Salesforce World Tour in London, Sam Sibbert, Marks & Spencer’s head of Digital Product (International), identified the challenge of trying to keep up with customer demands:

There’s an expectation from our customers that they get the royal treatment all the time. The customer experience is changing all the time. They’re looking to the best of every part of their digital experience – banking, transport – and they’re expecting all of that to be in a single place. Whether coming in for a bra fitting, personal tailoring or to book food for a dinner party, they want to feel like the only customer you’ve served today. They expect to be center of your universe.

That’s a point that was also made by Ocado’s Clarke last year, when he commented on the role that AI’s use of consumer data plays:

What is particularly interesting here is that there is a slightly ‘Damned if you do, damned if you don’t’ situation. On the one hand, we know that our customers expect our systems to get to know them over time.

They expect them to become knowledgeable about what they want. You could sum that up as someone saying, ‘I have been shopping with you for years. Surely you know I don’t like fish? Why do you still show it to me?’.

On the other hand, consumers are equally capable of being offended if you make a conclusion about them, even if it is correct, such as, ‘How dare you assume I’m vegan?”. In a sense, the poor old AI is caught somewhere in the middle.

My take

Coming on top of Carrefour’s signing of a similar tech tie-up with Google earlier this month, this is another indicator of an emerging pattern of retailers partnering with the technology industry to develop new platforms and channels. Whether M&S can play catch-up here remains extremely open to question of course - that Amazon alliance idea still looks appealing - but it’s a step in the right direction at least.