Will a new store window rotten the McIntosh Apple?

Microsoft announces that it is delving into retail and it is hungry for Apples.
By: Mary-Jane Mastrandrea

On February 12, 2009 Microsoft confirmed that it is planning to open Microsoft retail locations. The goal of this initiative is “to create a better PC and Microsoft purchase experience for consumers worldwide.”[i] A retail presence allows Microsoft the opportunity to show customers the perks of having a windows computer, Xbox 360, Windows Mobile phone and Zune ---all within one location. With a focus on emphasizing the Microsoft experience, the company hired Wal-Mart executive and 25 year retail veteran David Porter to lead the venture.[ii]

Shortly after this announcement, industry analysts responded with great criticism of the Microsoft retail strategy. Historically, electronic producers have struggled to succeed in a retail presence. Companies such as IBM, Gateway, Sony, Nokia and Palm[iii] each offered consumers the opportunity to play and test electronic products. The result: these retailers enjoyed short-term consumer popularity before being phased out of their market share positions. With the exception of Apple, retail stores have been unsuccessful ventures for technology companies.

What is it about Apple that makes the consumers bite? The Apple store succeeds because it creates an experiential, idealistic world to showcase its products. Apple’s success stems from its ability to provide the customer’s lifestyle needs, filling a void whether it is entertainment, organization, technical capability or communication through a supportive and engaging shopping experience. It is truly a “your life can be like this” store.[iv] This strategy has created a record breaking retailer. Apple has earned over a billion dollars in sales since 2007 and is expanding steadily into international retail markets.[v]

Where the Apple experience and lifestyle is popular and breeds consumer expectations, can Microsoft really compete on experience?

The success of the Microsoft retail store is contingent on a retail value proposition which fills a need where a customer is currently not satisfied. The plans for the Microsoft retail stores are not currently publicized. However, as reinforced by guest speaker Bruce Reid, a company’s retail store will only be successful where there is alignment between the store strategy and the corporate strategy. Thus, experience is mostly likely the pillar quality in Microsoft’s retail value proposition.

Furthermore, a retail presence offers Microsoft to leverage its market dominant and highly profitable industry position and competed head-to-head with Apple. However, the success of this head-to-head competition is contingent on Microsoft’s ability to get creative as a competitor. Interestingly, as the retail store opening date approaches, Microsoft has taken a bold stance in its most recent advertising campaign and for the first time, acknowledges Apple as a competitor.[vi] The commercial (available at http://www.geeksaresexy.net/2009/03/27/microsoft-includes-apple-stores-in-tv-ad/) explicitly compares the prices between two similar products from the Apple and Microsoft brands. Although early in the retail development process, this advertisement hints that price may also prove important in Microsoft’s retail value proposition.

It will be exciting to witness the roll-out of the Microsoft retail locations. Microsoft will face further challenges of competing in a vast retail channel and against retailers such as Best Buy who are also its loyal customers. However, analysts also expected Apple to fail when it announced the decision to deploy a retail strategy in 2001.[vii] Perhaps contrary to analyst opinion, Microsoft’s retail “window” will be the one it masters.

Sources Consulted:
[i] http://seattletimes.nwsource.com/html/microsoft/2008738756_webmicrosoft12.html
[ii] iBid.
[iii] http://www.businessinsider.com/microsoft-to-open-retail-stores-2009-2
[iv] http://www.theweek.com/article/index/93264/Microsofts_retail_gamble
[v] http://news.cnet.com/8301-13860_3-10163206-56.html
[vi] http://www.geeksaresexy.net/2009/03/27/microsoft-includes-apple-stores-in-tv-ad/
[vii] http://www.appleinsider.com/articles/09/02/12/microsoft_to_open_new_retail_stores_like_apple.html