Why Microsoft Shouldn’t Launch Its Own Retail Stores

By Alexander Toldt
17:00, February 16th 2009
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Why Microsoft Shouldn’t Launch Its Own Retail Stores

Microsoft plans to open a chain of retail stores, just like Apple did, but is this the right move for the software giant or it will turn out to be another flop like the $300 million advertising campaign the company launched last autumn?

In the press conference announcing the chain of retail stores, Microsoft revealed that the main purpose of opening retail stores, besides increasing visibility, is to establish a deeper engagement with its customers and learn more about customer behavior.

However, if Microsoft intends to get rid of the stereotypes, which Apple reinforced with its “I’m a Mac” TV ads, this is surely not the way. When hearing about a Microsoft store, probably every customer will immediately say: “Just like Apple.” This is definitely not the best way to rehabilitate your image.

Microsoft makes a big chunk of its profits by selling Windows and Office. However, the most sales are made to businesses. This leaves the retail stores chain to address the other people, who, you guessed, get the Windows with their PC and think Apple is cooler because it had the idea of its own retail store first.

Why would they visit a Microsoft retail store? To buy a mouse?

What about the issue of PC selling in its retail stores? Will Microsoft sell PCs built by Dell, Hewlett-Packard or other partners? And if it will sell, what if one of the partners thinks he isn’t treated fairly compared to the others?

If it doesn’t sell, imagine how customers would react when hearing that the PC they want to buy is not really for sale, it’s there just to showcase the new version of Windows or other software.

Another reason why Microsoft shouldn’t launch the retail stores chain is because it might end up with a money-losing division. Of course, Apple earns big money through its retail stores, but the company has huge sales and high profit margins, while Microsoft is not doing so well.

The company’s revenue for Zune MP3 player fell 54%, the Xbox 360 is earning Microsoft some money, but not many and most of them come from selling games, not consoles. It doesn’t “smell” like profit. In fact I wonder if the stores will at least pay for themselves.

However, in the press release, Microsoft said the launch of its own retail stores is more about enforcing its brand and learning more about customer behavior. They are right on this one. Microsoft certainly needs a bit of brand improving.

The company also said the retail stores are more about product demonstrations and offering help and support than it is about selling products. However, this is not what ex-Wal-Mart executive, current Microsoft head of retail division David Porter seemed to have said.

"There are tremendous opportunities ahead for Microsoft to create a world-class shopping experience for our customers."

“World-class shopping experience” sounds completely different than brand reinforcing and it sounds like Microsoft and its retail division have different views about it.

However, this indecision doesn’t sound like clinging coins for Microsoft either.



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