Microsoft Looks to Overpower Apple
In a July RetailWire poll, 54 percent of
respondents thought Microsoft’s move into operating its own retail stores was
a "somewhat
good" to "great
move" for the company. Forty-one percent thought it was a "somewhat
bad" to "very bad idea."
How good or bad the idea is will soon
be put to the test at the Mall of America as Microsoft opens a store directly
across from Apple. One big difference between the two stores will be size with
Microsoft operating in a space roughly twice that of the Apple location.
Jeff
Green, president of Jeff Green Partners, said Microsoft’s plan is to grab foot
traffic by setting up so close to Apple.
"It’s a great move that will generate cross-shopping," Mr. Green
told the Pioneer Press. "This is better for Microsoft than it is
for Apple. Sometimes you want to be directly across from your competition."
Mr.
Green did have some reservations about the size of the store, however, referring
to the Apple environment as being more intimate.
Microsoft is looking for products
such as its Xbox 360 game console and its Kinect motion-sensor device, which
allows play without a controller, to set itself apart.
Mika Krammer, general
manager of merchandising, marketing and experiences for Microsoft’s retail
venture, told the Pioneer Press that consumers entering
the store will find "there is an energy and a look and feel that is definitely
unique."
Separately, the Atlanta Business Chronicle reported that
Microsoft plans to open a 7,900 square-foot store at Lenox Square in the Buckhead
section of Atlanta. Microsoft currently operates stores in Arizona, California
and Colorado. It also plans to open a Seattle store next month.
Discussion Questions: Does Microsoft have the right products and approach
to succeed in retailing? Is it taking the right tact by inviting direct comparisons
with the Apple store?
Any time a competitor moves in near you it is good for business. Especially for Apple. They can confidently let someone “look around” across from their store. My guess is Microsoft will be weighed in the balance and found wanting but not everyone “gets” why they need an iPad or iPhone4.
Before commenting, I actually had to consciously try to recall exactly what products, aside from Windows 7, Microsoft sells.
Maybe that says it all.
The Microsoft Store has become an interesting “group project” for the retailing class that I teach at UW-Milwaukee. Especially with very few stores open so far (and none close to Milwaukee until next month), the students have a “blank slate” as far as concept development is concerned. Most of the class would agree–and so would I–that taking direct aim at Apple is the right location strategy, especially for a tech-heavy store that is not meant to be on the same scale as Best Buy.
But beyond the location strategy lies a much bigger challenge: What does the Microsoft Store actually sell? The brand and company is built around “solutions” rather than a focused assortment of items like Apple, and has not made a dent in the MP3 or smartphone markets so far.
The other big question: Who is the target customer? Not enough to say “everyone”…Microsoft will need to pick its targets carefully, between the gamer, home PC user, small-business customer for software, and so on. Clearly Microsoft is gaining enough confidence from its early tests to start a rollout strategy.
After reading the supporting articles, I have a better understanding of what Microsoft will be selling at their location. It appears Microsoft intends to not only sell products where they “own” the hardware and the software, but also have items such as PCs and phones with their various software applications. This helps explain the reason for the larger format. I wonder, are they be supported by the hardware companies whose products will be on display?
I am not an Apple user (other than an iPod I won at a trade show) but those who are tend to be much more evangelistic about the products than do those of Microsoft. Somehow, I don’t see people lining up the night before to be the first customers at a Grand Opening of a Microsoft location. That being said, given the approach Microsoft is taking to retailing I think the stores have a good chance of being successful.
To gain exposure, awareness of Microsoft as a retailer and trial of gaming systems and ancillary products I can’t think of a better location than Mall of America. Setting up across from Apple should guarantee a tech savvy audience near the store.
The Apple stores are set up almost like upscale auto dealers where the consumer makes an appointment, has his or her products serviced, and also shops the show room while talking to a knowledgeable salesperson that has a ton of pride in the brand and in the product selection.
It wouldn’t surprise me if the Microsoft stores are almost completely different than the “Mac” stores in the shopping malls. My prediction is that the Microsoft stores will be more the massive shopping experience with plenty of point of purchase flair and information but maybe not so personalized. Just guessing.
So here in Colorado, Microsoft has opened its store in the Park Meadows Mall just south of Denver, and upstairs from the Apple store in the same mall. The MS store is at least twice as big, maybe 3 times, as the Apple store. Whether they get the same foot traffic or not (and I believe Apple still wins here), in the bigger store, the same number of people looks a lot sparser.
I honestly haven’t decided if they have the right product mix or not. There is a large portion of the floor devoted to XBox, which makes sense. In fact, I think they could devote even more space to XBox than they have. There’s a lot of floor space–the Apple-like tables–dedicated to selling other people’s PCs, there’s the Office and other software corner, and then there’s a couple Surface setups and a home theater set up. I guess they’ll have to reorganize things to eventually accommodate a relaunched Windows phone market.
The bottom line: it’s just not as fun. I don’t care if you’re an Apple fanboy or not, the energy is just completely different in a MS store than in an Apple store–much less. In some ways, maybe, stifled by all that complexity that Ray Ozzie talked about when he left.
The rule of thumb says Microsoft is making the right decision locating across from Apple. But, in this case, Apple should be ecstatic. Most of those normal computer users have not been exposed to Apple products. While they may first tend to explore the Microsoft store, the Apple store across will be very inviting to explore as well.
The results will be considerably more new exposure for Apple than Microsoft. And there will be more eureka for that new exposure in the Apple store than any offering Microsoft may have.
Being in an Apple store is like being at a cocktail party. The space is crowded and that is a part of the plan for a successful party. Plus, the characters at the party are indeed unique, which is also part of the magic. I can’t see the Microsoft store ever getting that vibe right.
On the other hand, I think Apple has a lot to gain as shoppers will float across the hall to see what it’s is all about. Quick story. I was in an Apple store at 2:00 pm Monday getting a tech issue resolved. The store was PACKED with boomers doing one-to-one classes. The energy in that store was electric, and the cast of staff characters was as eclectic as a pre-Halloween party.
I actually felt like I wanted to hang around after my 5 minute genius bar visit! Experiences matter.
My opinion hasn’t changed. It will not be successful.
Mark me down as a skeptic. The reality is that Microsoft has always targeted the business and corporate customer. They compete on price, period. Customer service means speaking to someone from Mumbai who spends 10 minutes getting ID information before asking you about the problem. Apple, from its inception and as part of its DNA has focused on the individual user and has provided a steady stream of unique, fun, and exciting products supported by a devoted group of “believers.”
Rephrasing the question–“If Maxwell House opened a retail store across from a Starbucks, would you consider it a good move for Maxwell House?” Not me.
When considering the potential success of the new Microsoft store at the Mall of America, it is important to understand that the greatest reason for the success of the Apple Stores is customer experience. Apple staffs their stores so heavily with enthusiastic product advocates, that the excitement and sense of security is virtually palpable.
Just as important as the range of products that Microsoft will be selling in their store is whether or not they will be successful at creating a similar set of attitudes and behaviors in their store associates.
Microsoft is no Apple. Microsoft is primarily a software company. Apple has both hardware and software, but their revenues are hardware driven. The ability to draw consumers into their stores will be dependent not on location, but on what products Microsoft can offer for the consumer. Unfortunately, Microsoft’s foray into hardware has been less than spectacular, with the exception of their Xbox and a few mice and keyboards. Everything else has been iffy at best…and this is not the way that you want to present products in a large retail environment….
I have no idea if it’ll be successful, but it is certainly worth a try. I am concerned with the size of the store, though. What are they putting in that will justify that space? How can they build the right atmosphere?
Another thought: Microsoft has a fascinating research group, that is involved in many problems far beyond the scope of software. They also have the link to the Gates Foundation.
What if they brought some “entertainment” into the store based on that research, to create a traffic driver? Part of MSFT’s problem in hardware is that no one knows what they actually make. If you give the consumer a different reason to visit, maybe he or she will learn about the products while there.
Microsoft is like F.W. Woolworth opening Woolco stores as a defensive strategy when Kmart was eating their lunch in the 1960s–or for that matter, Sears/Kmart opening “Sears Essentials” stores in old Kmart locations as a defensive strategy against Walmart in the 2000s.
As last week’s financial results from Apple showed, they’re becoming a juggernaut, and right now there’s no stopping them. Macintosh computers are only a small part of their business now, yet are continuing their upward march in market share. Technology is changing so rapidly (and a lot of that change is being driven by Mr. Jobs) that Microsoft, despite all of its resources, will never be able to play catch up. These stores will prove to be a time-wasting distraction from their real need to reinvent Microsoft from top to bottom. Of course with mall owners desperate to fill space, there can’t be a better time to do this.
Before they had stores, Apple had passionate customers. After opening their stores, Apple has even more passionate customers. Before and after, Apple has always been passionate about its unique product.
I’ve never owned one of their products and I can’t say that I ever will. The one thing for sure is almost any one of their customers will ‘go to the mattresses’ to convince me why I should and why ‘they’ are better.
Is there a single person that really thinks Microsoft can beat Apple in a contest of passion? It wouldn’t even be close. Apple customers simply love their products. Microsoft? I’m not so sure their customers even make the connection of product to Microsoft. Its just something they use whether they like it or not. If they had a choice in most cases, maybe they wouldn’t. In many cases it’s not a choice. I’m not so sure that even one of Microsoft’s product launches has generated anywhere near the excitement that Apple does every single time–seemingly no matter what it is at all.
The comparison to Maxwell House and Starbucks really brews it up like it is in reality. You pick up a can of Maxwell House reluctantly off the shelf when you need some coffee and there just simply isn’t even a glimmer of excitement about it. You enter Starbucks feeling completely differently where you are, what you’re going to buy, and absolutely convinced you’ll enjoy it to the last drop. (Albiet a little slower to get after this week.)
Microsoft stores will have about the same feel as bending over to the bottom shelf to put one of those blue cans in your cart (or these days a blue plastic container with something less than the measurement you thought it was). Reluctance. Passionless. Needless. They might be able to generate enough traffic to survive. They won’t pack a store on a Monday afternoon as mentioned. A visit would be begrudging at best. Their chance of real success is about as likely as I am to head off in a few minutes to grab a cup of Maxwell House. But, Starbucks? Let me grab my jacket!
(Even worse, they run the risk of a bitter aftertaste!)
Microsoft is not an Apple. Most of their successful innovation to date relies on intuitive incrementalism, much like Toyota (however that’s where the Toyota analogy ends). Far different from Apple, the powerhouse in game changing innovation. They’re trying to change that by accelerating their diversification strategy with Bing, gaming, Zune etc but when Windows/Office accounts for 60-70% of your revenue, you can’t ignore your biggest, most profitable business segment.
A big part of the success of the Apple store is not just the products. It’s the service, the experience. Waiting time is practically zero, music is pumping and there’s an exciting buzz like you’re part of a new underground trend. I can’t see Microsoft mimicking this at all.
A lot of it boils down to brand identity, plain and simple. When you think Apple, you think great user experience, fashion, passion, fun, interactive, etc. Brand identity is set the moment your first product hits the market. Microsoft suggests ‘functional software’, reliable, dependable but it doesn’t have ‘pzazz’, adoration or promote evangelical fevour among its devotees the same way Apple does.
While a rising tide gathers all ships (think how Tully’s and Starbucks both benefited when one opened a store next to the other) and Microsoft stores should get some traction, I can’t picture the stores jammed aisle to aisle with ‘casual browsers’ or ‘loyal devotees’. Nor will they generate $4,000/sq.ft like their neighbor.
“Does Microsoft have the right products and approach to succeed in retailing?”
No; and I think this remark pretty much sums it up…”Microsoft’s plan is to grab foot traffic by setting up so close to Apple.”
Wow. Look at the energy here.
One of the first rules of live events is to put them in a space where the event will look crowded and buzz-y. The big space is counter-intuitive. MSFT may want to examine its goals; this sounds like a me-too to me.
It is always good to have competition in the close proximity. In most instances both are successful, especially in the restaurant business. In this case, it is an opportunity for Microsoft to find their true retail appeal.
Certainly this will help Apple but that aside, the question of how it works for Microsoft will swing on what they are trying to do. Unlike Apple, that has a list of products they specifically want to sell you while creating what they think is the best overall experience in which to demo them. If Microsoft is focused on doing much the same, i.e. creating the best demo and experience for consumers with the Microsoft solutions and offering help like the Apple Genius Bar then they can indeed win by spreading good will and good word of mouth for them. On the other hand, if they need to sell stuff to declare victory then the answer is much less positive. How they would compete with folks like Best Buy or Staples or Walmart selling computers is hard to fathom. If they do compete they risk alienating important partners, if they do not then they won’t sell much. So, how are the stores measured? What is the cost structure and how is the benefit for Microsoft defined? It does not seem likely they can make an overall good “retail” play in that good ROI would not seem likely, but good marketing may be quite another thing altogether and a good word of mouth on things like Windows Phone 7 is very important for them right now.
Lot’s of great perspectives from others that I’ll try not to repeat. I have yet to visit a Microsoft store so I’ll withhold my final opinion till I compare their implementation.
That said, I see a number of challenges ahead of Microsoft (MS):
Location: I’ll start here as it was the subject of the post. Across from Apple may be the only sensible choice for MS but the challenge MS has is that Apple is a destination store, i.e. people plan to go there for the experience. This makes it less likely they will decide to browse the MS store because it is close. On the other hand, assuming MS does some promotions to attract traffic to its stores, they are likely to also drive additional traffic to Apple. Predicted winner = Apple.
Store Architecture: Size isn’t everything! Sure Microsoft can copy Apple and go for outstanding store designs and even build them bigger, but Apple architecture is designed to reinforce the brand image: minimalist, clean lines, designer. Predicted winner = Apple.
Assortment: there is a huge difference between running outstanding retail concept stores and running a traditional retail model – not least in assortment planning. A concept store, such as Apple’s and Nike’s is designed to reinforce the brand image and enhance sales through other channels. Microsoft has a challenge with defining an assortment that uniquely reinforces its brand image in the same way Apple can. Almost all of the products in an Apple store are Apple branded products – Apple is a product company and retailing is a product business. Microsoft dilutes its brand identity by merchandising non-Microsoft brand products running Microsoft software. Predicted winner = Apple.
Pricing Strategy: Apple tightly controls its retail channel pricing, allowing it to operate at full retail and not be undercut by other retailers nearby – nor is it discounting and undercutting other retailers. This also means customers can shop at Apple without fear of paying more than they need to; by shopping at Apple they pay the same (or very near) as they would elsewhere and they get the Apple experience. Microsoft has less control across its product range. Predicted winner = Apple.
In-store merchandising: everything about the design of the Apple Store layout and merchandising is engineered to reinforce the image of Apple as a designer brand. Given the broad assortment of Microsoft’s product range it’s hard to see how the MS store can compete in brand identity (even if they are re-boxing everything into a Microsoft box it still has another brand on the PC). Predicted winner = Apple.
Customer service & experience: Apple is considered by many to be an industry leader in retail customer service (see this BusinessWeek ranking placing Apple third in customer service rankings ). Almost every retailer would love to emulate their success. My guess is that Microsoft will have a long learning curve and find it difficult to compete at Apple’s level given Microsoft’s product diversity. Another factor at play here is staffing: Apple is a highly desirable place to work – as such they can take the best and the brightest to work in the store and have low staff churn. I’m not convinced the Microsoft store has the same cachet. Apple stores have an energy that creates excitement in visitors – after the early buzz in a location wears off, will Microsoft be able to maintain this energy level – here size of store format may work against Microsoft? Predicted winner = Apple.
Tech Support: Apple has built much of its reputation on service from the genius bar where customers go to get their problems solved. Microsoft is offering a similar option and it will be interesting to see if they can deliver the same kind of experience as Apple. I wonder if I could take my 20 year old PC into the Microsoft store and have them help me with it in the same way I can an old Apple to the Apple store. Ironically this could be the one area where Microsoft can beat Apple – my guess is they have more frustrated customers looking for help which could well attract many customers to the store – I wonder what percentage will leave happy? Predicted winner = Apple.