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Retail Management Retail Management System System Latin America Latin America Strategy Strategy September 30, 2004 September 30, 2004

Retail Management System Latin America Strategy September 30, 2004

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Retail Management Retail Management SystemSystem

Latin America StrategyLatin America Strategy

September 30, 2004September 30, 2004

RMS RMS IntroductioIntroduction & Visionn & Vision

Product Product Overview Overview

& Way & Way ForwardForward

Business Business OpportunitOpportunit

y Latin y Latin America America

RMS RMS IntroductioIntroduction & Visionn & Vision

Brief History of RMSBrief History of RMS

Acquired Sales Management Systems in Acquired Sales Management Systems in May 2002May 2002Rebranded QuickSell product line as Rebranded QuickSell product line as Retail Management SystemRetail Management SystemGrew customer base from 12,000 to Grew customer base from 12,000 to 17,000+ customers in over 55 countries17,000+ customers in over 55 countriesHundreds of customers throughout Hundreds of customers throughout Latin America – Caribbean – Central Latin America – Caribbean – Central AmericaAmericaBuilt sales & marketing momentum in Built sales & marketing momentum in the USthe US

Small & Medium Small & Medium 62.8M Lanes!62.8M Lanes!

HUGE Opportunity in SMB RetailHUGE Opportunity in SMB Retail

Enterprise Enterprise 9.3M Lanes9.3M Lanes

ISV Opportunity

Strong Brand, Complete Solution

““Lane” = PC/Software opportunityLane” = PC/Software opportunityMajority have not automated their businessMajority have not automated their businessNeed for a smart client solutionNeed for a smart client solutionEase of deployment / lack of entrenchmentEase of deployment / lack of entrenchmentStrong, positive Microsoft brand imageStrong, positive Microsoft brand imageExpands marketplace for partnersExpands marketplace for partners Source: Clarendon Source: Clarendon

20032003

Global Retail MarketGlobal Retail Market

Com

pany S

ize

Com

pany S

ize

Lane CountLane Count

No Market Leader

Retail Management Retail Management SystemSystemCustomer Value Customer Value PropositionPropositionBeforeBefore

Cash Register + Paper Cash Register + Paper Ledger + Extra HardwareLedger + Extra Hardware

PC with PC with Retail Management Retail Management SystemSystem

AfterAfterBeforeBefore AfterAfter

Why Retail POS for Why Retail POS for Microsoft?Microsoft?

““Broad and deep” opportunity – Broad and deep” opportunity – millions of retailers sharing a millions of retailers sharing a common need.common need.Clear value propositionClear value propositionStarting point in “Demand Chain”Starting point in “Demand Chain”Connection to consumers and self-Connection to consumers and self-serviceserviceSizable and growing PC marketplaceSizable and growing PC marketplaceLargest market is underserved and Largest market is underserved and fragmentedfragmented

Retail Management Retail Management System Target CustomerSystem Target Customer

Small retailers – single or Small retailers – single or multi-storemulti-storeMid-sized retailers – small Mid-sized retailers – small chainschains

Proprietor owned and operated Proprietor owned and operated storesstoresInventory managed within stores Inventory managed within stores

and/or at a lead store or head and/or at a lead store or head officeoffice

Specialty and general Specialty and general merchandisemerchandise

Inventory that can be price-Inventory that can be price-tagged and stocked in storestagged and stocked in storesExamples include hobby, wine, Examples include hobby, wine, apparel, bike shops, gift shops apparel, bike shops, gift shops and moreand more

Business Business OpportunitOpportunit

y Latin y Latin AmericaAmerica

Latin America OpportunityLatin America Opportunity2002 2003 2004 2005 2006

WW Stores in retailers with 1-9 stores by Geography TOTAL

3541984.932 STORES

W. EUROPE 3,322,714 3,304,970 3,284,126 3,260,181 3,233,135

E.EUROPE(EXCL. RUSSIA) 1,195,685 1,199,927 1,204,195 1,208,487 1,212,805

RUSSIA/OTHER C.ASIA 661,387 672,019 682,657 693,300 703,949

OTHER - - - - -

MIDDLE EAST 1,791,294 1,787,175 1,790,146 1,800,208 1,817,359

USA 1,781,062 2,574,055 2,585,649 2,597,246 2,608,845 2,620,445

CANADA 264,757 265,303 265,852 266,405 266,961

MEXICO 876,882 872,533 868,188 863,848 859,512

CA/CARIBBEAN 396,348 397,303 398,278 399,274 400,290

BRAZIL 1,179,975 1,174,286 1,168,614 1,162,959 1,157,321

OTHER SA 1,475,470 1,465,267 1,455,084 1,444,920 1,434,777

CHINA 7,801,362 7,841,467 7,881,592 7,921,738 7,961,903

INDIA/B'DESH 4,494,592 4,478,172 4,461,752 4,445,333 4,428,915

JAPAN 1,524,319 1,526,601 1,528,839 1,531,034 1,533,186

OTHER FAR E. 3,520,296 3,519,848 3,519,433 3,519,049 3,518,698

AUS/NZ 215,139 214,964 214,795 214,632 214,474

MID/S.AFRICA 1,057,727 1,066,032 1,074,364 1,082,721 1,091,104

TOTAL 32,352,001 32,371,517 32,395,161 32,422,934 32,454,836

29,785,867

% OF ALL RETAIL STORES WW ADDRESSABLE 61% 60% 60% 60% 60%

2002 2003 2004 2005 2006

WW Lanes in retailers with 1-9 stores by Geography TOTAL 4,441,148

5165827.514 LANES 7,133,860

W. EUROPE 4,019,119 4,003,120 3,983,824 3,961,232 3,935,344

E.EUROPE(EXCL. RUSSIA) 1,345,412 1,352,067 1,358,770 1,365,522 1,372,322

RUSSIA/OTHER C.ASIA 749,361 762,127 774,906 787,696 800,499

OTHER - - - - -

MIDDLE EAST 1,967,085 1,963,221 1,967,880 1,981,063 2,002,769

USA 2,175,525 3,438,128 3,461,104 3,484,087 3,507,075 3,530,070

CANADA 343,327 344,608 345,894 347,185 348,483

MEXICO 1,037,941 1,035,369 1,032,805 1,030,249 1,027,701

CA/CARIBBEAN 457,994 459,704 461,446 463,219 465,024

BRAZIL 1,329,964 1,325,350 1,320,770 1,316,223 1,311,710

OTHER SA 1,629,811 1,620,724 1,611,673 1,602,657 1,593,677

CHINA 10,222,675 10,278,971 10,335,308 10,391,686 10,448,105

INDIA/B'DESH 5,509,467 5,496,747 5,484,028 5,471,310 5,458,594

JAPAN 2,165,504 2,172,180 2,178,739 2,185,180 2,191,505

OTHER FAR E. 4,486,916 4,492,497 4,498,134 4,503,825 4,509,572

AUS/NZ 272,328 272,835 273,351 273,877 274,413

MID/S.AFRICA 1,158,197 1,167,519 1,176,876 1,186,268 1,195,694

TOTAL 40,133,230 40,208,143 40,288,489 40,374,268 40,465,480

36,747,039

% OF ALL RETAIL STORES WW ADDRESSABLE 56% 56% 55% 53% 50%

Latin America POS/ECR Latin America POS/ECR Market Market

EPOS SHIPS 2002 2003 2004 2005 2006 2007 2008ARGENTINA 6.56 6.97 8.33 10.81 13.84 17.36 21.53BOLIVIA 1.63 1.96 2.21 2.46 2.65 2.86 3.16BRAZIL 60.08 68.57 75.47 82.34 89.85 100.85 107.01CHILE 7.22 8.37 9.37 10.56 11.74 12.85 14.28COLOMBIA 10.46 11.43 12.18 12.99 13.68 14.5 15.72ECUADOR 1.57 1.35 1.14 1.12 1.1 1.13 1.29FRENCH GUYANA 0.14 0.17 0.2 0.23 0.29 0.34 0.42GUYANA 0.61 0.59 0.55 0.56 0.6 0.66 0.74PARAGUAY 0.86 0.94 1.02 1.11 1.29 1.43 1.61PERU 4.76 5.16 5.56 5.74 5.76 5.74 5.83SURINAM 0.25 0.29 0.35 0.42 0.5 0.58 0.67URUGUAY 1.81 2.16 2.46 2.72 2.88 3.1 3.46VENEZUELA 11.03 11.21 11.31 11.74 12.34 13.12 14.25TOTAL 106.98 119.17 130.15 142.8 156.52 174.52 189.97

ECR SHIPS 2002 2003 2004 2005 2006 2007 2008ARGENTINA 7.3 6.74 12.34 19.42 23.05 21.38 17.5BOLIVIA 1.24 0.92 0.79 0.86 0.63 1.27 1.35BRAZIL 14.48 18.42 19.89 23.76 26.23 28.79 29.04CHILE 6.8 4.42 4.45 4.57 3.92 3.16 2.89COLOMBIA 10.92 7.63 7.31 6.94 6.08 6.24 5.55ECUADOR 3.24 1.71 1.55 1.39 1.15 1.1 0.93FRENCH GUYANA 0.06 0.06 0.03 0.03 0.07 0.12 0.16GUYANA 0.26 0.22 0.17 0.18 0.21 0.18 0.21PARAGUAY 0.95 0.62 0.38 0.34 0.34 0.37 0.54PERU 4.74 2.17 1.51 1.53 1.54 1.36 1.05SURINAM 0.17 0.06 0.05 0.07 0.08 0.06 0.06URUGUAY 1.56 0.91 0.58 0.54 0.64 0.56 0.65VENEZUELA 8.01 5.7 4.35 6.58 8.1 9.48 11.72TOTAL 59.73 49.58 53.4 66.21 72.04 74.07 71.65

•EPOS is PC based point-of-sale hardware system

•Includes PCs from Dell, HP as well as POS from IBM, NCR, etc.

•PC white box is dominant

•ECR is Electronic Cash Register, not a PC

• ECR has larger installed base

•ECR is losing share to PCs

Caribbean POS/ECR Caribbean POS/ECR Market Market

EPOS SHIPS 2002 2003 2004 2005 2006 2007 2008BELIZE 0.09 0.1 0.13 0.16 0.31 0.38 0.46CANADA 57.98 54.03 60.23 68.12 88.9 95.27 104.38CARIBB'N-1 5.07 4.86 5.85 6.43 8.41 8.91 9.65CARIBB'N-2 10.96 9.17 9.58 9.21 11.79 12.28 13.45CARIBB'N-3 2.29 1.98 2.19 2.38 3.2 3.52 3.96COSTA RICA 4.14 4.13 4.82 5.01 6.82 7.27 7.81EL SALVADOR 2.26 2.75 3.69 4.34 5.99 6.44 7.02GUATEMALA 5.7 5.73 6.73 8.09 9.07 9.16 9.54HONDURAS 3.46 3.76 4.68 5.01 6.99 7.4 8.02MEXICO 44.94 49.54 53.56 58.87 69.51 78.02 91.4NICARAGUA 3.1 3.04 3.54 3.6 4.97 5.19 5.58PANAMA 2.99 3.26 3.96 4.3 5.97 6.32 6.77U.S.A. 556.61 562.89 663.43 718.69 897.99 961.84 1005.72TOTAL 699.59 705.24 822.39 894.21 1119.92 1202 1273.76

ECR SHIPS 2002 2003 2004 2005 2006 2007 2008BELIZE 0.08 0.09 0.11 0.12 0.13 0.16 0.21CANADA 27.42 18.83 16.97 15.44 13.82 11.63 11.08CARRIB'N-1 1.46 1.16 1.22 1.18 1.13 1.25 1.38CARRIB'N-2 2.57 1.9 1.64 1.29 1.12 0.88 0.59CARRIB'N-3 0.98 0.61 0.54 0.48 0.41 0.35 0.34COSTA RICA 1.41 1.03 1.05 0.96 0.76 0.5 0.46EL SALVADOR 0.7 0.51 0.61 0.65 0.65 0.68 0.74GUATEMALA 2.25 1.58 1.38 1.25 0.93 0.7 0.62HONDURAS 1.57 1.03 0.97 0.96 0.89 0.82 0.73MEXICO 32.4 35.09 37.22 38.7 39.57 30.6 24.72NICARAGUA 1.58 0.85 0.78 0.77 0.75 0.94 1.24PANAMA 1.06 0.72 0.73 0.78 0.79 0.76 0.79U.S.A. 379.16 307.24 240.39 206.49 178.73 161.62 145.87TOTAL 452.64 370.64 303.61 269.07 239.68 210.89 188.77

•EPOS is PC based point-of-sale hardware system

•Includes PCs from Dell, HP as well as POS from IBM, NCR, etc.

•PC white box is dominant

•ECR is Electronic Cash Register, not a PC

• ECR has larger installed base

•ECR is losing share to PCs

Latin America Retailer Latin America Retailer StatisticsStatistics

Source: AMI Research, 2002

Caribbean Regions are defined as follows:

•Caribbean 1

•Bermuda, Bahamas, Cuba, Jamaica and W. Caribbean

•Caribbean 2

•Puerto Rico, Dominican Republic, Virgin Islands, E. Caribbean

•Caribbean 3

•Aruba, Curacao, Trinidad, Tobago and S. Caribbean

Caribbean 1 to 25 Store Caribbean 1 to 25 Store RetailersRetailers

Source: Clarendon Reports, 2004

2005 11 TO 25 STORES 2005 1 TO 10 STORESCARIBBEAN 1 Retailers Stores Lanes CARIBBEAN 1 Retailers Stores LanesCash & Carry 0 0 0 Cash & Carry 11 13 42Variety Store 0 0 0 Variety Store 8 11 28Speciality 0 0 0 Speciality 139 435 679GM Ind. 0 0 0 GM Ind. 19,800 19,800 23,564Superette 0 0 0 Superette 8 26 70Small Food 9 99 99 Small Food 4,607 4,818 4,818Other 15 287 303 Other 43,111 45,704 51,753TOTAL 24 386 402 TOTAL 67,684 70,807 80,954

CARIBBEAN 2 Retailers Stores Lanes CARIBBEAN 2 Retailers Stores LanesCash & Carry 0 0 0 Cash & Carry 30 147 671Variety Store 11 122 608 Variety Store 33 45 113Speciality 42 824 1,236 Speciality 416 1,884 2,936GM Ind. 0 0 0 GM Ind. 17,552 17,552 20,890Superette 0 0 0 Superette 22 61 183Small Food 15 239 239 Small Food 6,114 6,394 6,394Other 28 421 515 Other 45,910 48,631 55,064TOTAL 96 1,606 2,598 TOTAL 89,931 96,830 121,498

CARIBBEAN 3 Retailers Stores Lanes CARIBBEAN 3 Retailers Stores LanesCash & Carry 0 0 0 Cash & Carry 7 10 29Variety Store 0 0 0 Variety Store 4 5 12Speciality 0 0 0 Speciality 31 108 167GM Ind. 0 0 0 GM Ind. 5,576 5,576 6,636Superette 0 0 0 Superette 2 5 15Small Food 0 0 0 Small Food 1,120 1,171 1,171Other 12 159 181 Other 6,948 7,362 8,334TOTAL 12 159 181 TOTAL 17,448 18,572 23,625

Caribbean Opportunity Caribbean Opportunity SummarySummary

Source: AMI Research, 2002

•1 to 10 store lane opportunity is 227,000 Lanes at 20% per year or

45,400 POS shipments

1% share = 454 RMS units

•11 to 25 store lane opportunity is3,181 Lanes at 20% per year1% share = 318 RMS units

Caribbean Market Caribbean Market OpportunityOpportunityAnnual Refresh Rate 20% 20%

Annual Refresh Shipments 45,400 45,400

Estimated FY’04 Market Share for RMS 1% 5%

Microsoft RMS shipments 454 2,270

Percentage of FY 100% 100%

FY’04 RMS shipments 454 2,270

FY’04 RMS revenue @ $1,000/lane $454,000 $2,270,000

With 1:1 Microsoft pull-through $908,000 $4,540,000

Current resellers 5??? 10????

Licenses per dealer 90 @ 5 VARs 227 @ 10 VARs

Deals per dealer per year 18 23

If we are 50% wrong 9 11

Who wants this opportunity????

FY05 FY06

Total Latin America Total Latin America OpportunityOpportunityARGENTINA Retailers Stores Lanes

Cash & Carry 38 233 1102Variety Store 112 135 193Speciality 728 5523 8219GM Ind. 62858 62858 82338Superette 130 438 1127Small Food 19262 22472 22472Other 54024 61196 62437TOTAL 205842 224466 270451

MEXICO Retailers Stores LanesCash & Carry 406 1722 5796Variety Store 370 514 1520Speciality 3070 21254 26733GM Ind. 289207 289207 403128Superette 288 558 1337Small Food 70295 74736 74736Other 302408 331567 402510TOTAL 852210 920700 1160272

BRAZIL Retailers Stores LanesCash & Carry 96 538 2440Variety Store 1187 1320 1925Speciality 3748 23366 27547GM Ind. 315906 315906 432202Superette 755 1934 5120Small Food 36893 42106 42106Other 183550 233605 252729TOTAL 921220 1030244 1258541

CHILE Retailers Stores LanesCash & Carry 15 107 417Variety Store 74 92 159Speciality 390 3139 4771GM Ind. 33912 33912 47970Superette 61 184 422Small Food 3987 4407 4407Other 16053 27759 29376TOTAL 84428 102706 130014

COLOMBIA Retailers Stores LanesCash & Carry 31 204 850Variety Store 131 144 182Speciality 982 5030 10561GM Ind. 76891 76891 105207Superette 135 454 953Small Food 8038 8884 8884Other 40782 53400 56671TOTAL 187313 208415 256902

VENEZUELA Retailers Stores LanesCash & Carry 38 268 830Variety Store 78 105 133Speciality 924 4022 5855GM Ind. 48320 48320 66127Superette 77 307 697Small Food 10375 11841 11841Other 34086 37437 37793TOTAL 136960 147415 176067

Latin America Opportunity Latin America Opportunity SummarySummary

Source: AMI Research, 2002

•1 to 10 store lane opportunity is

1,137,000 Lanes at 20% per year or

227,400 POS shipments

1% share=2,274 RMS units•11 to 25 store lane opportunity is 714,000 Lanes at 20% per year142,000 POS shipments1% share = 1,420 RMS units

Product Product Overview Overview

& Way & Way ForwardForward

Retail Management Retail Management SystemSystem

A comprehensive retail solution designed for small A comprehensive retail solution designed for small and midmarket retailersand midmarket retailersEnables small and midmarket retailers to begin Enables small and midmarket retailers to begin reaping the advantages of affordable automation: reaping the advantages of affordable automation:

POS transactionsPOS transactionsInventoryInventoryPricingPricingPurchasingPurchasingCustomer serviceCustomer serviceAccounting integrationAccounting integration

Store OperationsStore OperationsHeadquartersHeadquartersMerchant ServicesMerchant Services

Store OperationsStore Operations HeadquartersHeadquarters

The Solution Stack Deployment The Solution Stack Deployment

Store OperationsStore Operations HeadquartersHeadquarters

POS StationPOS Station

POS StationPOS Station

POS StationPOS Station

In-Store ServerSQL Server/MSDE HQ Server

Manager StationManager Station HQ StationHQ Station

Internet

TCP/IPTCP/IP

Dial-upDial-up

RMS RMS MBS Financials MBS Financials MS Office MS Office WinXPWinXP

RMS RMS WinXPWinXP

RMS RMS WinXPWinXP

RMS RMS WinXPWinXP

RMS RMS MBS Financials MBS Financials MS Office MS Office WinXPWinXP

What Success Looks What Success Looks LikeLike CUSTOMER INVOICE

Revenue Breakdown Wine Retailer with 10 Stores

Software License Revenue per StoreMicrosoft Windows XPMicrosoft Store Operations RMS

Software License Revenue for HQMicrosoft Small Business Server with 15 calsMicrosoft Windows 2000 Server for Apps ServerMicrosoft RMS HQ ModuleMicrosoft Small Business Manager Accounting 2 cals

Professional Consulting Fees

Hardware Costs

$300$1,290

$2,198$1,195$3,995$1,995

$31,500

$51,000

$31,800

$9,383

$31,500

$51,000

$123,683

SummarySummaryMicrosoft can be successful in small Microsoft can be successful in small retail with POS resellers – we have retail with POS resellers – we have proofproofLatin America and the Caribbean are Latin America and the Caribbean are high growth markets for PC based high growth markets for PC based point-of-salepoint-of-saleECRs need to be replaced with PCs ECRs need to be replaced with PCs so retailers can have faster so retailers can have faster transactions, e-mail, internet access, transactions, e-mail, internet access, CRM, Office and…CRM, Office and…Value Proposition: A small retailer Value Proposition: A small retailer can save time and go home sooner can save time and go home sooner at the end of each dayat the end of each dayLatin American can grow MBS Latin American can grow MBS business with Retail Management business with Retail Management System todaySystem today