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Originally published Tuesday, January 16, 2007 at 12:00 AM

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Microsoft shops for more sales as retailers use more technology

In 1982, Time magazine named its first, nonhuman object as "Person of the Year" — the computer. Last year, the magazine made another...

Seattle Times retail reporter

NEW YORK — In 1982, Time magazine named its first, nonhuman object as "Person of the Year" — the computer.

Last year, the magazine made another surprising choice — You — for "seizing the reins of the global media, for founding and framing the new digital democracy, for working for nothing and beating the pros at their own game."

Microsoft Chief Executive Steve Ballmer told a roomful of retailers Monday to pay attention to "You," the evolving consumer who uses technology to search for, research and shop for products and services in more diverse ways.

Consumers "expect to be at the center of everything that the businesses that serve them do," said Ballmer, who delivered a morning keynote at the National Retail Federation's 96th Annual Convention & Expo in New York.

That Ballmer headlined a conference for retailers says something about the shifting paradigm of the industry.

Longtime A.G. Edwards retail analyst Bob Buchanan said technology is an increasingly important efficiency tool for retailers, especially as it becomes harder for chains to open additional stores and boost sales.

He used Seattle-based Nordstrom as a dramatic example. "This is a company that had 500 people on the payroll who had to hand-count inventory that they owned," Buchanan said.

Nordstrom's current management engineered a remarkable turnaround, partly by investing heavily in a computerized inventory system that give buyers and salespeople the data to make smarter decisions about what to sell.

Selecting handbags and designer jeans in the right styles, quantities and colors has enabled the upscale retailer to sell more items at full price. Since the start of 2000, the company's stock has risen by more than 370 percent.

"Nordstrom is one of the few department-store retailers that really understands the technology and really embraces the technology," Edwards said.

Circuit City faced the challenge of selling more complex products, such as flat-screen TVs and home-entertainment systems, with a sales force whose average age is 23 and in an industry known for high employee turnover.

The retailer recently began using Tablet PCs to walk customers through the sales process. The software, for instance, recommends a flat-panel TV based on a series of questions, taking into account room lighting and how close the TV is to the sofa.

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"In order for a strategy to win, it must be different," said Circuit City Chief Executive Philip Schoonover. "Our customers must be willing to pay for these changes over time."

Microsoft has turned increasing focus to the retail sector.

The software giant in March unveiled a $500 million, yearlong advertising campaign and sales-force expansion to target businesses that use retail software from competitors such as IBM. Called "People Ready," it aims to make employees productive through software.

As part of this broader strategy, Microsoft on Monday introduced new retail products, although Ballmer said he was a little torn sharing a long-term vision with this particular industry. "Three weeks is long term in retail," he quipped.

For single-store operators, Microsoft released Point of Sale 2.0, a new version of its retail software that enables users to enter and track inventory, invoices and accounting online. It also partnered with First Data and Hewlett-Packard to introduce an all-in-one PC-based cash register, available in stores.

The company also introduced Microsoft Dynamics Retail Management System 2.0, for retailers with 50 to 100 stores.

All the products will be compatible with Windows Vista.

For the largest retailers, the company partnered with data-storage company Teradata to provide software that allows retailers to extract information in real time.

Tom Litchford, industry director for Microsoft's Retail and Hospitality Industry Solutions Group, cited one of its U.K.-based retail clients as an example of using real-time information:

A store employee called authorities after noticing the same credit card had been used just minutes before but 100 miles away. "They broke up a credit-card fraud ring," Litchford said.

The National Retail Federation, the world's largest retail trade association, holds its annual convention at the Jacob K. Javits Convention Center through Wednesday.

Monica Soto Ouchi: 206-515-5632 or msoto@seattletimes.com

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