Mall Wars: Microsoft Goes After Apple
By
Tom Ryan
Microsoft
is going head-to-head with Apple yet again. This time, however, it’s
not about operating systems. It’s about retail stores in high-end malls
across America. Microsoft plans to not only open stores in close proximity
to its rival, but in some cases right beside them.
“We’re
going to have some retail stores opened up right next door to Apple
stores this fall,” said Microsoft’s chief operating officer Kevin Turner
last week at a webcast conference in New Orleans, according to Reuters. “Stay
tuned.”
In
February, Microsoft announced plans to open its own chain of branded
stores to counter Apple’s success at retail, and it has hired a former
Wal-Mart exec to run them. But few details on the new stores are out,
including where the stores will be located.
Madison
Riley, retail strategist at Kurt Salmon Associates, told The Boston
Globe that
it makes sense for Microsoft to put stores alongside Apple’s.
“You’re
going to be tapping into traffic of people who are interested in technology,” he
said. “You want to expose yourself to the competition’s consumers.
You want to fish where the fish are.”
Mr.
Riley also said that similar to Apple, the stores could help Microsoft
launch new products and redefine its image.
“What
Microsoft has to do is find a way to get closer to the ultimate consumer
of its products,” he said. “It puts more of a consumer face on the
brand.”
Observers
generally see the stores as a way to support Microsoft’s entertainment
hardware products, including further boosting its strong-selling Xbox
game franchise. The stores could also help with the relaunch of Zune,
its music player, later this year.
On
the downside, the PC software business may be more challenging since
Microsoft’s software runs on machines made by various companies while
Apple makes its own computers. At the store level, training employees
on several different brands of computer hardware, as well as the Microsoft
software will likewise be more of hurdle versus Apple. Finally, many
observers believe Microsoft has to catch up to the brand cachet and
loyalty Apple engenders not only from consumers but also employees.
“Microsoft
will have a harder time getting that kind of enthusiasm out of the
employees that they hire,” Andy Hargreaves, a consumer electronics
analyst with Pacific Crest Securities, told The
Boston Globe.
Discussion Questions:
What do you think of Microsoft opening its new stores in close proximity
or directly alongside Apple’s? Since they’ll be in direct competition,
what should Microsoft particularly focus on to make sure the new stores
are competitive with its chief rival?
What is Microsoft going to sell in the stores, the fabulously successful Zune? With the exception of X-Box, Microsoft does not have successful hardware. It is primarily a software company. Apple is primarily a hardware company that has always led in innovative, user-friendly design. Yes, techies will be able to visit both stores. In putting them side by side, Microsoft had better be ready for the inevitable comparisons. From decor to people to products to customer service, can Microsoft compete? I guess we’ll find out.
While Microsoft wants to “fish where the fish are,” there still is something to be said for not sharing the boat. Being right next to a super cool store like Apple means Microsoft will be opening itself up to comparisons. And we all know how that’s been working for Microsoft so far.
And since all the PCs will be made by other companies, how will the Microsoft store look any different than the computer section at Best Buy?
I would guess that a clear majority of retailers use competitors as a basis for site selection, and in this case, where Apple clearly spent a lot of time thinking hard about where to locate its stores, Microsoft can certainly benefit from Apple’s analysis without having to do any of it themselves. However, locating right next to a competitor (as opposed to in the near vicinity) can also seriously backfire, if your store does not compare favorably with the competition.
I think it’s clear from Microsoft’s past behavior that the company strongly believes that its products compare very favorably with Apple, if only people could SEE–thus $300 million marketing campaigns and dubious “shopper” ads. But if that is true, then why is Microsoft more often pegged for complaints about buggy products (I can name 2 or 3 bugs in my Microsoft software that I encounter daily and have existed for a year or more), while Apple is more often praised for great design and products that work?
I don’t think this will end well for Microsoft.
You can’t hide in the closet forever, while being beaten up in TV and print ads by your competitor. Provided they can execute a great shopping experience (the big IF), this is the right move to make.
Anyone remember the days when the malls used to put all the shoe retailers together in the same hallway? It made shopping for shoes easier for customers, and drove traffic for the retailers themselves.
Bring it on Microsoft…just make it amazing, please.
Retail stores are not Microsoft’s culture. A Microsoft store in the mall will help Apple sell more products next door.
The Apple stores were integral to the brand. In addition, their product was not available in the better markets except online. Only if Microsoft can make an exceptional experience above and beyond what they can find at Best Buy, will they be successful.
If Microsoft wants to go head to head with Apple then opening these stores is a good way to capture consumers already in proximity and mindset.
Where it could fail is in the execution and in-store experience. Apple has managed to create an exciting in-store experience and loaded up the stores with a ratio of knowledgeable Sales Associates per customer that goes un-matched.
Consumers love the chance to touch and experience new products even if they aren’t ready to buy and having a store presence gives them that.
The retail graveyard outside of town is filled with the failed efforts of non-retailers to open their own stores. Microsoft faces steep challenges. Apple stores are filled with vitality and innovation. Their employees are super-charged and attuned to customers needs.
It is smart from Microsoft to locate the stores in near proximity to Apple. Apple’s traffic is amazing. However, many Apple loyalists would not be caught dead in the confines of the Microsoft.
Microsoft will be challenged also to develop a comparable product mix. The iPhone and iPod families are absolute rock stars in their categories.
Microsoft will shine potentially in price. Because Microsoft has adopted hardware-neutral policy, the total cost of ownership of a Microsoft-based product is typically considerably less than Apple. Heightened competition between the two will be good.
I’m also pleased that they battle will be fought in the malls. The entire retail industry will benefit as malls become more compelling to families and younger shoppers.
Microsoft would be smart to test its retail format using a more “under the radar” real estate strategy until it gets the kinks out. Locating next to Apple stores from the outset is not a wise move until the concept is fully fleshed out, because it will suffer in comparison. (Not to mention the likelihood that Apple has lease agreements that might prevent this sort of poaching anyway.)
When Microsoft first announced its plans earlier in the year, I put the challenge to my undergrad retailing students to develop a format for the stores. Eight different study groups came back with eight very different solutions, although many of them focused on interactive products like Xbox and the solution-oriented nature of Microsoft’s business. But the bottom line is that a successful rollout will be a work in progress, and many retail and investment observers will be looking for Microsoft to stub its big toe. Why put its stumbles under the additional scrutiny of locating next to Apple?
I bought more Apple stock on the announcement…my only wish is that Microsoft had decided earlier in the year so that I could have gotten a better price.
I don’t see anything radical about opening stores next to competitors in a mall environment; that has become the standard as malls divide into easy-to-shop zones. Both stores should benefit from the shopping energy (particularly Microsoft). It will be important that Microsoft not come off as being too dowdy by (direct) comparison while at the same time not attempting to out-cool Apple.
I see an opportunity for Microsoft to create a more heavy-duty experiential, kid-friendly shopping environment. After all, Apple boutiques, as fun as they are for adults, have a “don’t touch the glass” vibe for the younger set. Also, Microsoft could win with average Joes who are intimidated by Apple’s more aspirational image. Will its growing presence in Walmart mitigate this over time? If so, the two brands run the risk of meeting, not just in middle of the mall, but in the middle of the market. Microsoft would be wise to flex in its partner’s brands in order to add variety and to show off synergies rather than going me-me mono-brand.
The Walmart tie-in at Microsoft made me think about something John Fleming (Walmart’s Chief Merchandiser) said at last week’s sustainability extravaganza. He described Walmart by saying, “We may never be cool, but we care.” Some version of that might be a good mantra for Microsoft!
I’ll echo the sentiments of several of my colleagues here…
One of the big knocks on Microsoft amongst younger consumers is that they don’t have any original ideas. Therefore, going head to head with Apple Stores is inherently risky and could look so “me-too” that it turns even more consumers to Apple.
Microsoft will need to create a new and remarkable experience that is uniquely theirs. They will need to reinvent the entire store concept and differentiate it to the point that comparisons to Apple are fruitless.
Which raises the question; if you invent something so good it stands on its own, why do you need to be beside your competitor?
The only way this can have any chance of success is if Microsoft puts a real merchant in charge of the project. They need to have someone who can engage the shopper, not someone who can sell computers. They need to learn from Gateway’s mistakes. Also, Microsoft needs to understand what their points of differentiation are. I don’t think they can do it.
Two important questions – What multi-channel (retail, online, catalog) strategy will Microsoft pursue? Will Apple continue to sell Microsoft products in their stores?
I can’t see how former Walmart executives (read “commodities sellers”) are going to compete well with the computer equivalent of Zara.
One focuses on volume and crushing competitors, the other focuses on cachet and fast fashion (and making fun of competitors). One innovates, the other commoditizes.
I wish Microsoft well, but like Nikki, I don’t think this story is going to have a happy ending.
A great strategy. Set up shop selling 3rd rate products right next door to the Ferrari of computing. Design-wise…Speed-wise…Application performance-wise–Apple crushes them on all fronts. This will be their final Waterloo. I’m only disappointed that Apple may not run those cool ads anymore after this, and just simply show the “Final Clearance” signs in front of all the Microsoft stores about to close.
A lot of people touched on this, but the key for Microsoft might be the evolving generation of “netbook” computers and the acceptance that PCs, Game Boxes, Appliances, TVs, and Stereos are all going to be connected to the network.
Apple has been successful because it has bridged the gaps between the network, software, and hardware. A user does not have to understand the technical interrelationships; they just have to know the name of the artist they like. Microsoft has always had to battle with the need to integrate its operating system and software with hardware and network connections (not just AT&T) from multiple sources. I just bought a new laptop from HP. I know it is running Vista, but if I didn’t really care I would think all the software came from HP. HP has integrated all the pieces to create the full user experience. Perhaps this is why HP seems to be doing so well in the PC market place.
My point here is that the shift to a “network-centric perspective” is the opportunity for Microsoft to get control of the total user experience. As more and more software is delivered through a common browser interface, it insulates the user from the specific hardware features. This means the software vendor is more in control of the user experience and this is good for Microsoft. Perhaps there is a Brand X Server in everyone’s basement, but the people in the household will be interfacing through a portal that runs Internet Explorer. This will give Microsoft a common platform to exploit and put them in control of the user experience.
Game hardware, music players, etc, will all eventually morph into generic devices that run a browser interface accessing the Internet and the Home Server over wireless or wired networks. Then the Microsoft retailer will have something to sell.
From the mall’s perspective, I love it. We need more new, exciting retailers for malls and Apple won’t go everywhere.
What a classic Microsoft move…copying Apple yet again…it’s hilarious. Perhaps Microsoft would be more appropriately named Xerox.
Apple’s reasons for entering retail were VERY different from Microsoft’s, with Apple standing to gain enormously by doing so. What is the ‘incremental’ play for Microsoft?
On a positive note, Microsoft has been extremely consistent employing their ‘copy’ strategy over the years, whether it be in software (Internet Explorer copying Netscape, Windows copying the MacOS, repeated search engine tries vs. Yahoo and Google) or hardware (XBox, Zune, mobile phone). It’s what they do.
But will they really sell any more copies of Vista or Office? And, if you have inferior products vs. everything Apple produces and sells, would you really want to make the comparisons easier for the consumer???
Time to sell your Microsoft stock, if you haven’t already.
Good for Microsoft going after Apple at the retail level. The retail marketplace will provide them with a head to head competitive experience to gain market share.
Consumers like Apple products for their innovation and style. This will only improve the breed of products that make it to the marketplace for Microsoft.
I really don’t have a dog in this fight and not much perspective on whether this is a smart retail siting move for Microsoft (a la restaurant land — where the site strategy is “where are all the other similar restaurants?”) or an invitation to comparative shopping disaster.
What did strike me as I read through the comments this morning is this: The tone bears a striking resemblance to when the retail experts were writing off Walmart a few years ago.
This is the strategy of a confident retailer, as it is high risk/high reward. If Microsoft is able to go toe to toe with Apple and beat them at their game, which is perhaps the best overall customer experience in all of major-chain retailing, they’ll be reaping the rewards, and the accolades and case studies will be written, and well-deserved. If they’re not able to beat Apple, the Microsoft brand will have taken a major hit at retail, and the postmortems and case studies will be written about that.
This has failure written all over it, but Microsoft is used to that. They try a lot of different things and some have worked out very well in the past and others have fallen fast and hard. I have hard time seeing a compelling reason to walk into a Microsoft store–as others have mentioned, what will they sell? MS Office? MS t-shirts, hats and coffee mugs? Maybe those little snow-falling globes will be a hit?
Microsoft will need to spend a tremendous amount of time and money on selection and training of their associates for all the reasons that have been stated here already. Their hardware-neutral policy mandates that they have associates that can answer any question about any product–even Apple products. (Know thy competition!) I can see it now, the cool guy next door to the geek–just like the commercials. That’s Microsoft’s challenge–making smart look cool.
Microsoft is once again straying from its core competencies and will again learn a difficult, and expensive lesson. Microsoft is not a retailer, and not a hardware retailer of any sort. It is a software developer. Trying to mix these, especially in the brick and mortar format, is a losing proposition for Microsoft. History will repeat itself (remember Microsoft’s phone, or Bob?) as MS realizes that it needs to stick to its strengths instead of developing weaknesses.
What is Microsoft going to sell, Vista? LOL