Microsoft opening retail stores

Today, Microsoft announced that they will be opening their own stores around the country. Apparently, they hired David Porter, ex-Wal-Mart manager and a former executive at DreamWorks Animation house, to get them started. Well, I am not sure if this experiment will work.

They tried a retail store a few years ago in San Francisco by opening up a boutique type of shop but it didn’t work out and they ended up closing it. They focused mostly on software at that time and now they do have more hardware to add to their product line, like Xbox360 and Zune, but primary focus seems to still on their Operating System and other software.

Dell tried the same strategy and they failed miserably in the past. So did Gateway and their retail failure was the start of their demise as a computer company. So, why did Apple succeed where others have failed?

First, Apple actually benefited from having small PC market share by avoiding channel conflict. They competed with their customers but did two things right, they kept the prices at the full retail level and differentiated by providing the overall experience of customer visits. Retailers still had room to provide small discounts so that if the price was the main object, people will still buy from retailers.

Second, Apple provided a entire eco-system of products, which Microsoft does not. Since Apple produced everything from hardware to software, they owned entire experience, which meant that they can focus on solutions, not products. For example, if someone who has a camcorder and wants to find out about how to edit home video to share with others. They can come in to an Apple store and find everything they need in store. They can find out about the computers, iMovie or Final Cut Express software, DVD burning software like iDVD or signup to Mobileme services to upload to the net. If the customers has some of these already, for example they have YouTube account, they can still learn from experts on how to do that. I have doubts that Microsoft can provide this complete solution based retail experience.

Not only that, the most important part of the Apple store was the Genius bar. This service assisted Apple’s highest customer satisfaction ratings. As an personal example. If I wanted to have something fixed on my computer, I would have to take it to local dealer, who knew nothing about Macs, then have to wait days to find out what was wrong, then even more time to get it fixed. I was out of my device or computer for weeks. In contrast, I can make an appointment online to an Apple Genius, walk up and get diagnosed right away. Then, if the problem was not solved on the spot, which most of the time it does, they can take it in for repair and return in a few days. I had part of my iPhone’s screen not respond to touch. I walked up, diagnosed, got a new phone, transferred the SIM card and walked away in less than 20 minutes. That’s the kind of service Microsoft will have to provide the compete. Unfortunately, I can just see their support people telling customers, "you need to contact xxx for the computer, yyy for the graphics card, zzz for the disk drive, it’s not the software issue". This will not work well with customers who are used to this type of excuse from current vendors.

Lastly, Apple chose selected other vendor’s products at their store to complete the product lines. This provided a significant part of their revenue and profits. Since they don’t have conflict with vendors, they can provide the best solutions possible to the consumers. How will Microsoft choose? Will they choose HP computers but not Dell? Will they choose based on which is biggest customers or best value for the consumers? I have a feeling that they will choose best customers of theirs to be sold at the retail stores. This may not be providing best experience for the consumers, who may stay away. They just don’t have the independence like Apple to do this "right".

Will Microsoft retail store work? I am not sure yet since no one knows what their plan is. I just hope they learn from their past mistakes and mistakes made by others, like Dell and do it right. That could mean borrowing heavily from Apple’s strategy.

On February 13, 2009, posted in: Uncategorized by
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