On Biting the Hand that Feeds You
Microsoft has announced that they will open their own branded retail stores in an effort to gin up publicity, sales and their public image. It’s going to be yet another in a long series of disasters for Redmond. I predict that Microsoft’s stores are going to fail (my guess: within three years). This will happen for several reasons.
“Me too!”
Let’s get the obvious point out of the way first: this foray into branded retail sounds an awful lot like Apple’s own retail endeavor, which started in 2001. For a company like Microsoft to resort to such also-ran tactics reveals an inferiority complex that anyone should be able to recognize. Microsoft doesn’t have to define its success by others’ failures. That willingness to buckle down, focus only on your own products and customers and ignore what the other guy is doing is exactly why Apple is ascendant today. If Microsoft were to crib anything from the Apple playbook, that kind of discipline would be the most valuable idea to copy.
Why did Apple open their own stores?
Apple launched their self-branded retail stores because they weren’t getting respectable shelf and display space at other retailers. Apple launched the iMac in 1998 to immense popular response, but if you had walked through your local CompUSA, Best Buy or Circuit City between 1998 and 2001, you might not have guessed that Apple was selling anything. If your local computer store did have a Mac section, it was small and pitifully underdeveloped, often crammed in a corner while the computers from Gateway and HP and Compaq and the rest dominated the department. In short, Apple’s presence in the retail space was being undercut by retailers who didn’t see Mac users as being worthy of shelf space investment. Apple wanted to have a presence at retail that they could be proud of and especially one that could showcase Mac OS X, which had just launched just a few months before the first retail stores opened.
Microsoft, by contrast, has immense presence in retail channels; retailers not only have dedicated displays for Microsoft products such as Windows and Office, but Windows comes on every single computer for sale at your local Best Buy. Every single one. So Microsoft doesn’t really need more exposure; they need to make better products that people want to use.
Edit: To be fair, another reason Apple started its own retail store chain is that Apple loves to totally control how their products are displayed, something a lot of retailers are loathe to do. Knowing Apple, they probably wanted large, open displays of their products, which retailers probably didn’t like. Big retailers like lots of shelves, tightly packed with merchandise.
Boutiques are a really tough business.
Other companies like Gateway have tried to build storefront retail channels and failed spectacularly. Apple has succeeded because they were essentially starting their retail business over from square one and they have a small, well integrated product line that can be explained in a small store. Microsoft has zillions of products that all do different things and some even compete with each other for users (e.g., Microsoft Works versus Microsoft Office). This makes it very difficult to bring across the “Microsoft message” in a small store at the local mall. (Sony’s stores, as far as I have been able to tell, are not profitable and survive through sheer force of will and Sony’s sizable pockets.)
The stores will only hurt other Microsoft retail channels.
Imagine for a moment that you own a hardware store. You sell wrenches, screwdrivers, toolboxes, drills, saws and the like. Now imagine that one day, Binford Tools decides that they’re going to open up a Binford Tool Store that sells only Binford tools. You would probably feel pretty screwed by Binford, wouldn’t you? After all, Binford decided to cannibalize sales from your store, even though you’ve been selling Binford tools for years.
It’s never a good idea to steal sales from people who are making you a great deal of money. Apple wasn’t making lots of money from sales at CompUSA and other retailers, so going their own way on retail didn’t really hurt those companies. Microsoft stores, on the other hand, will take sales right out of the hands of computer retailers everywhere and that’s not going to sit well with those retailers, because now they’re competing with the very company for whom they loyally sold products.
The stores will showcase Microsoft’s weaknesses, not its strengths.
One of the key feelings you get when you spend some time in an Apple store is that Apple has a whole line of computers and other electronics that not only work, but that all work with each other in a seamless fashion. (Every iPod, for example, is promoted in concert with iTunes; that’s why the button at the top of Apple’s website reads “iPod + iTunes” and not just one or the other.) It’s not enough for Apple to just build a great product; that product must also complement the other products in Apple’s lineup, so that people get the sense that there’s an over-arching philosophy to the things Apple makes. This has the added benefit of keeping Apple from slipping into Sony-ism, where the company makes anything and everything electronic, regardless of how it complements the rest of the product line.
Microsoft’s products, on the other hand, are all over the map and the company showed with Windows Vista that they still don’t get what people want. Even worse, Microsoft tries to compromise between what home users and IT departments want and ends up with an operating system that doesn’t quite fit either role. Microsoft has made strides in this aspect in recent years—their Xbox product line has shown a good deal of polish and completeness and their Windows Live services are getting better—but Microsoft is a company that doesn’t quite know where they stand. They know that they’re some sort of software company, but they’re so afraid of anyone else being in any sort of business involving programming that they dive into markets they’re not ready for or release products no one really needs (a perfect example is Microsoft’s Zune, a product that has shown remarkably little ability to gain traction in its market).
God help them if they have a tech bench.
I worked at a Best Buy for two and a half years when I was in grad school and although I never worked at the Geek Squad desk, I can safely say that it is probably the most thankless and time-consuming job in the whole store. Apple’s Genius Bars are there to service Apple equipment running Apple software, so there is a limited number of different computer configurations necessary to support. Microsoft, on the other hand, only sells the operating system that runs on PCs, so there is a virtually limitless number of permutations and combinations of hardware and software, any of which can be in conflict. How will a Microsoft tech explain to Grandma that the problem she brought her PC in for has to be taken care of by her PC manufacturer? Expect a lot of angry customers. If Microsoft offers technical service for Windows computers at their stores, that tech bench will be an incredibly miserable place to work.
Microsoft is adrift.
Even Microsoft’s press release on the new retail stores displays the company’s naïveté in going into retail. Microsoft’s new vice president of Retail Stores, David Porter, will be “working hard to transform the PC and Microsoft buying experience at retail by improving the articulation and demonstration of the Microsoft innovation and value proposition so that it’s clear, simple and straightforward for consumers everywhere.” If that doesn’t sound like a company that’s trying to pull a snow job on people, I don’t know what does. Microsoft doesn’t need to “articulate and demonstrate”; they need to make best-of-breed products that do amazing things easily, without getting in the user’s way or making her jump through hoops. All the demonstrating of innovations and articulating of value propositions in the world aren’t going to fix that problem.
One day, we may all look back on this time as Microsoft’s days in the wilderness. The company has made one misstep after another in recent years: this retail idea, turning Windows Vista into a pariah or their outright bizarre $100 million ad campaign with Bill Gates and Jerry Seinfeld. It’s a company that doesn’t know how to say, “No, this is not a product for us,” and that makes it a company that doesn’t know where it’s going. Until Microsoft can get people at the top who know how to say, “No,” it will be a company adrift.