The announcement
Microsoft announced this week the hiring of 25 year Wal Mart veteran David Porter to run a new retail experience. Highly intriguing indeed. Microsoft seems bent on copying every move Apple makes recently, even though they have very different business models.
David Porter
Does a veteran of Wal-Mart know how to create a retail experience? Wal-Mart’s business model is not built on a great shopping experience, but rather having the leanest supply chain, and thus the best prices. They are masterful at setting price points to maximize profit. They are masters at knowing the best mix and layout of products to maximize profit per square foot. Does this mean David Porter lacks the knowledge of how to build a retail experience? Absolutely not, but his resume is seemingly (never seen it) devoid of such experience.
Timing
Several business pundits have lamented the timing of opening retail stores in the middle of a deep recession. The timing is perfect. What separates average businesses from great businesses is how they operate in good markets to have the advantage in troubled times. Great businesses use strife to gain market share when their competitors are wondering how much work force to cut, not that they may not have to cut some themselves. Remember Apple opened their retail experience in a recession. Irregardless if the timing is good or bad, the real question is whether Microsoft should open retail stores.
Why?
The biggest question is why Microsoft feels they need a retail presence. Apple was fighting inconsistent retail experiences, serious support issues, and an image problem.
The retail experience for apple prior to the Apple stores was primarily mail order, with a network of small privately owned boutique stores. While some of the stores were operated by very passionate business people (the ones still here today), many lacked the skill or resources to provide anything close to what PC users had. Most users simply picked up one of the many mail order catalogs and placed an order. When potential customers did browse the sole Apple machine in the big box, the sales associates lacking Apple knowledge would talk consumers out of the purchase. Apple needed stores with a friendly and inviting atmosphere with help only a black shirt away.
Apple also had serious support issues. When hardware problems did arise, customers without a good independent dealer nearby were forced to use telephone support or box up a computer and ship it to Apple. Not fun. Now it is simply logging on to apples website and reserving an appointment with a genius at an Apple store. My personal friends that have experienced this have reported great satisfaction with the relative ease. Apple needed great customer support.
PC users either take the product back to the store they purchased it from, or the local computer repair shop on every other corner, your friendly neighborhood geek, and perhaps even attempt phone support. The point is that there are many ways to get Windows boxes serviced and repaired. Is Microsoft planning on getting in the computer repair service to compete with the genius bar? The implications are mind boggling. However, pc users have a myriad of options today, do they need another?
Apple stores also support the image of Apple. The clean stores, glass walls, iconic clean furniture, lack of cash registers, playfull balls for children to sit on while playing games all add to the image that is Apple.
Microsoft still owns the market even if Apple and Linux have cut into their market share. They are currently battling an image problem created by Vista, and are throwing money at possible solutions.
Products are the centerpiece of any image. Apple stores would not create the image if not supported by a product line that matches the same image… or the proverbial putting lipstick on a pig. Is a dedicated store going to help Microsoft’s image?
Revenue
Apple leads retailers in the dollars per square foot of their stores, partially to their healthy margins. Were is Microsoft going to make profit? Today Microsoft makes the majority of their profit selling Windows to pc builders, and Office to companies.
Will they sell pc’s from partners on the showroom floor? If so, this opens a big problem with choosing who to partner with, and how to handle every builder not getting prominent space. Is this simply based on who provides the best opportunity for profit per square foot? Or the vendor that provides the highest customer service ratings, and thus the best windows experience? Or do they simply use Surface computers and large LCD’s with the boxes hidden from view?
Certainly the XBox division is turning a profit, especially the games, making their inclusion a must. How does this differ from every other game store in every mall, or even Wal-Mart?
My Take
This sounds like a knee jerk reaction to Apple’s retail success by an upper level manager, rather than a solid plan based on Microsoft’s business model. No image is built on lipstick alone, and Microsoft should become more efficient at building better products first. They have shown some glimmers of success recently with the totally new ribbon interface in Office 2007, and finally broke from tradition with the promising new “dock” in Windows 7 that is gaining great reviews.
Every way I look at it, Microsoft lacks a real need for retail stores.
Just for Fun
In the meantime read Brennon Slattery’s hilarious PC World article on ways Microsoft’s stores will differ from Apples.
What is your take? feedback [at] boldsunflower [dot] com, or leave a comment below.