February 12, 2009 4:03 PM PST

Microsoft follows Apple into the retail business

by Ina Fried Poll

Microsoft's retail foray
Should Microsoft go into retail?

Yes. It worked for Apple, it will work for them.
Yes. They need a place to show their wide range of products.
No. It's a terrible time to be going into retail.
Who cares? I still won't buy anything from them.

View results

After years of brushing off the notion, Microsoft said on Thursday that it will open up its own line of retail stores.

Without detailing the plans, Microsoft said it has hired David Porter, a 25-year Wal-Mart veteran, to lead the effort. Sources say that Porter's mission will be to develop the company's retail plans and that the effort is likely to start small with just a few locations.

Porter, who will start next week, will report to Microsoft COO Kevin Turner, also a Wal-Mart veteran. Most recently, Porter was at DreamWorks Animation, heading that company's product distribution effort.

Although Microsoft has generally relied on others to sell its wares, it's not Microsoft's first foray into retail.

Back in the dot-com days, Microsoft had one retail outlet, at the San Francisco Metreon mall. However, it never expanded the effort and closed that location in November 2001.

Last fall, Microsoft built its own concept retail environment at its Redmond campus (seen in the video below). At the time, the company said the effort was aimed at showing retailers how they could better market Microsoft products and was not an indication that it was going into the retail business itself.

"We're not planning to open stores, but we need to learn more about stores," Microsoft general manager of worldwide retail services told the Seattle Post-Intelligencer. "We need to take more of a leadership role."

The company has also made a variety of moves to sell its products directly to customers over the Internet, including a recently opened online Microsoft Store. Starting last holiday season, it also started placing Microsoft workers as "gurus" inside other retail stores.

"There are tremendous opportunities ahead for Microsoft to create a world-class shopping experience for our customers," Porter said in a statement. "I am excited about helping consumers make more informed decisions about their PC and software purchases, and we'll share learnings from our stores with our existing retail and OEM partners that are critical to our success."

Rumors of Microsoft's interest in retail have cropped up at various times over the years, including in 2005, when the company was said to be interested in a Times Square location.

Apple began its retail push in 2001 and now has more than 200 locations in several countries. Microsoft's entry comes as Apple has started to slow its retail store expansion.

Update 5:30 p.m. PT:

NPD Group analyst Stephen Baker, a computer industry retail veteran, thinks Microsoft's decision to open up its own retail stores is a relatively safe bet, but not without challenges.

"The real issue it that it's not as easy to pull off as Apple. Apple has more of an owned ecosystem than Microsoft has," Baker said, referring to the fact that Apple makes the finished products it sells, while Microsoft's software--particularly Windows--typically comes on hardware from dozens of companies. And the PC industry already has its own well-honed distribution channels to bring those products to market.

The upside for PC makers is that Microsoft-branded stores could display products that are hard to fit into the big-box retail shopping experience, like high-end Alienware PCs or HP's Home Server, Baker said.

"It doesn't have to be about sales. They are going to want to sell stuff, but it's going to be equal parts sales and branding," Baker said. For example, Apple's retail experience is as much about exposing you to the Apple brand and Apple family of products as it is moving widgets into and out of inventory. The same could be said for Sony's retail stores.

At the moment, Microsoft and its partners don't really have a one-stop shopping experience that can put all the pieces together the way Apple can in its stores, Baker said.

Baker said to expect Microsoft to start scouting locations in either hip downtown spots or newer "lifestyle center"-type retail environments.

CNET News' Tom Krazit contributed to this report.

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During her years at CNET News, Ina Fried has changed beats several times, changed genders once, and covered both of the Pirates of Silicon Valley. These days, most of her attention is focused on Microsoft. E-mail Ina.

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Add a Comment (Log in or register) Showing 1 of 3 pages (69 Comments)
by mortis1138 February 12, 2009 4:12 PM PST
Microsoft is going to corner that mouse and keyboard market, I would hate to see that tech support area, at least they will be busy.
Reply to this comment
by Vegaman_Dan February 12, 2009 5:28 PM PST
MSFT already has the most respected keyboards and mice in the marketplace now. Even Macintosh users use them. Most are produced by Logitech.
by Penguinisto February 12, 2009 7:38 PM PST
...which begs the question: why bother going through a rebrander instead of just buying from the source?
by kieranmullen February 12, 2009 9:57 PM PST
The question never begs, it is raised.
by jedmmj11 February 12, 2009 10:43 PM PST
(unrelated to above comment)
i wonder if they will sell computers. i think they should sell all/only the really good ones so ppl dont make bad choices.
by pcnightowl February 16, 2009 3:30 AM PST
I don't want Microsoft to corner the mouse and keyboard market. Logitech is a whole lot better.

@Vegaman_Dan: Microsoft has their own brand of mice and keyboards and so does Logitech. Are you saying the mice and keyboards with the Microsoft logo them are made by Logitech?

If Microsoft sells all there products in their retail stores like Apple, There would be Zunes and 360s everywhere. There probably should be a separate Xbox tech support area, just because.
by lonestarState February 12, 2009 4:23 PM PST
It will be a failure in the making. Save your money MS!
Reply to this comment
by skillingssucks February 12, 2009 4:24 PM PST
Epic Fail!
Reply to this comment
by The_happy_switcher February 12, 2009 4:26 PM PST
Operative word here is 'follows.'
Reply to this comment
by viper396 February 12, 2009 5:40 PM PST
Sony, and Gateway's had physical stores long before Apple ever thought of it. The very concept of a store is hardly original to Apple so get off your smug self-indulgent assumption that Apple was the inventor of everything. You only look like an idiot.
by rwm72 February 12, 2009 5:58 PM PST
It's not a case of who did it first. It's a case of who did it best.
Whether you love them or loathe them, there is no denying that Apple have had a hit with their retail stores because they have provided consumers with an interesting and engaging experience. They thought outside the square, looked at what consumers loved and hated about their shopping experience, and came up with something different and memorable.
It harks back to the days of the 1950's where giving good service and a good customer experience was as important or more so than getting the sale. It also generates return sales and referrals from happy customers. A lot of businesses are doing this now, and it's a good thing. There is no substitute for good old fashioned customer service and attention to detail, and with a little Apple flair and style thrown into the mix, they have shown the way. Like the ipod, they weren't first, but they had a different plan to everyone else's and customers understand and appreciate their efforts and attention to detail.
If Microsoft realise this, then who knows. But their challenge is perhaps a lot greater than Apple's. I just hope they don't copy the look and feel of an Apple Store. That would be foolish, as there are enough accusations of imitation out there already with Microsoft.
by seven7dust February 12, 2009 6:06 PM PST
nobody's claiming Apple invented n e thing !

it's just these days
Everything MS seem to do to is copy Apple,google and everybody else
MS seems to have complex especially when it comes to Apple

2 yrs bck if n e body would have said Ms would be opening retail stores
it would have made a good joke
but now it's true and futher Proof that
"Meetoo"soft's dominance is slowly coming to a end
by Penguinisto February 12, 2009 7:39 PM PST
Gateway is dead, and Sony sells more televisions at their stores than they do laptops... not exactly shining examples there...
by ca5ter February 12, 2009 4:28 PM PST
What will they copy next?
Reply to this comment
by topgunb2 February 15, 2009 1:27 PM PST
what ever they copy next they'll make heaps of money off it!
by ServedUp February 12, 2009 4:28 PM PST
monkey see monkey do.. they must really have it bad strategy wise..
Reply to this comment
by viper396 February 12, 2009 5:53 PM PST
The irony of using the "monkey see monkey" statement when you appear to be copying several other Mac users with your adolescent banter. Couldn't be original yourself either, could you?

Either way, contrary to the preception of your fellow Mac users, Apple wasn't the leader at the concept of a store. People were visiting Sony and Gateway and other tech stores long before Apple ever thought of having one. But, in the end, when it comes to business and sales does the world actually care who does what first?... Nope. That proof is in the numbers.
by WittsendinTX February 15, 2009 3:13 PM PST
From PC

? The store will have six different entrances: Starter, Basic, Premium, Professional, Enterprise, and Ultimate. While all six doors will lead into the same store, the Ultimate door requires a fee of $100 for no apparent reason.

? Instead of a "Genius Bar" (as Apple provides) Microsoft will offer an Excuse Bar. It will be staffed by Microsofties trained in the art of evading questions, directing you to complicated and obscure fixes, and explaining it's a problem with the hardware -- not a software bug.

? Store hours are undetermined. At any given time the store mysteriously shuts down instantaneously for no apparent reason. (No word yet on what happens to customers inside).
by MaLvaDo39 February 12, 2009 4:36 PM PST
Copy Copy Copy. Microsoft needs to fail and rid the masses of the dark ages.
Reply to this comment
by CDubber February 12, 2009 4:38 PM PST
Microsoft's desperate desire to be like Apple has officially gone from pathetic to LOL.
Reply to this comment
by Penguinisto February 12, 2009 4:40 PM PST
Holy Crap!

I wish them luck and all, but... wow. I don't see it happening.

Apple is successful at it because they have actual, tangible, decent-margin hardware goods to sell.

Microsoft has... what? Boxes software, mice, keyboards, maybe some home networking gear? Even on the boxed software front, the majority of their software sales come from OEM preloads and MS licensee site downloads. I doubt that even 1/20th of their income comes from boxed software sales.

I can see one bit of thing they might have seen as a plus: OEMs will be fighting to get floor space in one. OTOH, Best Buy, Wal-Mart, Staples, Fry's etc etc will be screaming bloody murder at the same time. Best Buy and such enjoy having Apple products because Apple's stores are huge customer magnets. Microsoft is trying to approach the concept from the other end... which doesn't seem very smart.

Finally, MSFT doesn't have near enough of a comfortable margin (and neither do the OEMs) to afford to keep something like this going for very long. Apple has mountains of margin, more than enough to front for the overhead costs of a store. Not so sure MSFT has that...

dunno - I'm thinking that either MSFT is throwing a ton of BS out in order to keep the buzz going for their name, or they're desperately casting about for some sort of long-term survival strategy that doesn't involve building a better product. :/

Reply to this comment
by Vegaman_Dan February 12, 2009 5:36 PM PST
I can't help but notice that you have zero proof or evidence to base any of your comments on so they are just speculation. It's a pretty good description, I'll give you that, but not soemthing I can see agreeing with.

Fry's had Apple as a primary core OEM at their stores. Year after year, that has shrunk. The iPods alone used to be a complete two row area at the Renton, WA location, but is now reduced to a single small sealed wired cage on an end cap. They have moved out most of hte Apple products in favor of USB thumbdrives and overhead projector units. Make of that what you will.

What does MSFT have to offer? A heck of a lot. Ford uses their products in their own line of vehicles. Most GPS units on the market run Windows as the core OS. Enterprise customers depend upon it. Then there's the whole gamining industry based around xBox, Windows PC, etc. Heck, the new LIve services alone are a big deal.

There was an article this week here on CNET talkng about how Apple was going to reduce the space in their retail stores dedicated to hardware / computers to promote their online software and services instead. Your comments would suggest that this is a mistake for Microsoft, and yet Apple is doing the same. Would that make this a msitake for Apple as well?

I realize you have the reputation of spending your every waking moment coming up with new ways to fuel your bigoted hatred against all things Microsoft, but I really would advise you to consider approaching things with an open mind once in a while.
by Penguinisto February 12, 2009 7:44 PM PST
"I can't help but notice that you have zero proof or evidence to base any of your comments" which points do you require evidence on, exactly? Are you asserting that Apple has the same or lower margins than Microsoft on their products overall? Are you asserting that OEMs would not want to sell their wares at a Microsoft store? C'mon Dan... let's see what you want evidence for.

You also take an edge case (Fry's of all things), and try to claim it as the example which somehow proves the whole. Doesn't work like that. ;)

"Ford uses their products in their own line of vehicles. Most GPS units on the market run Windows as the core OS."

So you're saying that Microsoft will be selling cars and GPS nav units in their stores now?

Hold on dude - I need to go laugh for a bit...

by Dorram February 12, 2009 4:43 PM PST
Apple had a draw with the wildly popular iPod and made their stores hip and clean feeling. Oh yeah and all those "switch" ads. The genius bar could handle tech support, mostly, because most of the initial software and hardware comes from Apple. Apple fans had an outlet now instead of online or maybe CompUSSR. It works because you're wrapped in this Apple "wooby" from beginning to end.

Can Microsoft pull off something like this? I'm skeptical. I'll eat crow if it work though.
Reply to this comment
by Maccess February 12, 2009 6:03 PM PST
Make it the only place where Windows XP is sold and it could do well. Keyboards and Mice could do well too.
by yipcanjo February 12, 2009 4:51 PM PST
I'm sorry, but why is it always "Microsoft follows Apple"? Did you read the article? Microsoft had a retail location *before* Apple ever did. Where were the "Apple follows Microsoft into retails" articles back in 2001? Hmmm? Where?


And CNet likes to raise a fuss with poorly titled articles.

Reply to this comment
by skillingssucks February 12, 2009 9:52 PM PST
Einstein, one showcase only "store" in the Sony Metreon building doesn't count as a retail presence. They didn't sell anything there, it was showcase only. Hardly qualifies as a "store" now does it?
by LunaticSX February 12, 2009 4:58 PM PST
Perfect timing for a retail effort, during a down economy, too.

Oh wait, it was a down economy when Apple opened its first stores in 2001, too. What, MS even has to copy Apple's TIMING?
Reply to this comment
by myles taylor February 12, 2009 4:59 PM PST
See I think this is so sad. Microsoft actually has potential if it would stop doing trying to copy other's successes.

A perfect example is the iPhone. Apple came into the phone market late in the game, and they didn't just make another phone, or copy the success of the market leaders; they tried something completely different. They did the same with the Apple TV and the Cube and other failed products, but they take risks and it pays off.

Microsoft looks at markets that seem like they could do well and already have a lot of players and does nothing new. The Zune, the desktop OS, and everything else. I wish they would use all that money to make something really amazing. I guess they've done a few things with the Surface and some other things, but none of them have really broken out. It's like they're scared. I read somewhere that Microsoft is so afraid of fail and there are too many board members who never let them do anything really risky.

I too wonder what they will sell. Microsoft, unlike Apple, is a software company. Their hardware is just branded, not even designed by them, unless I'm wrong.
Reply to this comment
by Spartan_458 February 12, 2009 5:36 PM PST
I'm not sure that last bit is true. I know that the Zune and 360 were most certainly developed and designed in-house, but I believe that the mouse and keyboards are as well. Again, though, I'm not entirely sure.
by Akiba February 12, 2009 7:02 PM PST
No they design their own hardware. They have for a long time. The guts of the original Zune were based on a Toshiba device, that's about it. The X-Box, mouse and keyboard etc were designed by MS. The difference between them and Apple isn't that they are a software company, it's that Apple almost always provides a complete hardware and software package while MS often involves partners. But I don't think MS has much of a choice if they aren't satisfied with what partners are providing. The X-Box is doing good and even if the Zune isn't doing so well, it's still doing better than everything else that isn't an iPod.

The same could be said about retail. Comp USA and Circuit City are closed now. Would you really want to rely on Best Buy and the occasional Fry's electronics? I doubt they really want to open retail stores. They probably just feel like they have to take matters into their own hands.
by pentest February 16, 2009 12:22 PM PST
There is a huge difference between designing hardware and putting off the shelf parts together.
by jessiethe3rd February 12, 2009 5:05 PM PST
It's interesting to see people come on here and think Microsoft will approach a retail effort like Apple did. Microsoft makes very little of it's own hardware, what it does and does better than almost any other vendor is partner. Think Sony, HP, Lenovo, Dell, Toshiba, Panasonic, etc, etc, etc... the partner application are limitless. I'm a vendor and I want to get my new HTPC highlighted in a Microsoft store to drive interest in the product. I am going to go to the Microsoft store. I'm a phone vendor and I want to show off my new phone's capabilities... I advertise int he Microsoft store jointly. Since the execs heading it up are ex-Walmart think floor space dominated by partners advertising their wears all walking along to the beat of the drum of Microsoft tech. It's actually a pretty good idea. People think of Microsoft as this company that makes software but they fail to realize that it's not it's software that it's selling - it's it's brand image. If users had a place to go to complain and learn about what's out there it's possible that thing like Vista wouldn't get as bad of a wrap - it's really not as bad as people think it is... it's the effective marketing and internet blab that has been the nail in the coffin for the OS. Regardless - I think it's a smart idea especially when you begin to pull all the pieces together. Microsoft has been in the mobility market longer than Apple, it has been in PCs as long as Apple, and it has a rich partner community - something that Apple lags sorely. Couple all this with deep pockets and willingness to win - while Apple is drawing down Microsoft has found a moment to ratchet up.

The other side of the coin is the market and economy... if this DOES come to fruition it'll be interesting to see the approach... can't wait.
Reply to this comment
by Vegaman_Dan February 12, 2009 5:38 PM PST
Looks like you are one the few people to see the opportunities with such a store.
by Penguinisto February 12, 2009 8:36 PM PST
I mentioned something similar above, but there is still one problem...

If the MSFT store starts featuring xboxes, what will the stores that normally sell xboxes think? (you know, places like Wal-Mart, Target, and etc...) I don't see much love going on from Microsoft's existing retail base...

OEMs like Dell and HP, who have no real retail presence of their own, sure... but retailers at large will likely loathe MSFT's move enough to stop featuring MSFT products so much in their own efforts, instead touting the competition (e.g. Nintendo, Logitech, Sony, maybe even Apple...) - especially in an economy where retailers are scrambling for every last sale. They may even start taking it out on OEMs.

Apple had an advantage in 2001 of not having a massive number of retailers selling their stuff, and were pretty much going it alone anyway. MSFT has no such advantage.
by africanbees February 12, 2009 10:04 PM PST
Penguinisto, channel conflict does not necessarily arise out of the mere act of selling the same item.

So long as Microsoft is not selling an Xbox 360 at a lower price than Walmart or Target, then the comparatively few Microsoft retail locations will not pose significant competition for the major retailers. The Microsoft stores are likely as much about carrying the brand and message directly to the customer as they are about actually making sales.

I can imagine someone in MS telling Walmart and Target that the Microsoft stores will improve the public image of Microsoft products and that is a positive thing for their respective retail sales. Whether or not that succeeds will be interesting to see.
by atomD21 February 14, 2009 2:21 PM PST
Really, Penguinisto, that's stupid. Walmart and Target don't hate Apple for having retail stores and selling the same products.
by stalexone February 12, 2009 5:05 PM PST
Hahaha. That ad about the MSFT store was so lame. I mean, look at the Customer Experience Center itself! It is like an improvised miniaturized version of Bet Buy or Office Depot! There is nothing innovative about what they are doing! I saw a bunch of laptops lined up like in any other retailer. I saw the same marketing info that I see in any retailer. Why does MSFT think this store is so unique? Why would anyone go to these locations when there is also a perfectly good to order this stuff from and at a discount. I don't know, but this like a poorly implemented bad idea.
Reply to this comment
by Vegaman_Dan February 12, 2009 5:39 PM PST
I hate to tell you, but Apple Stores are the same way. Products lined up, staff available to answer questions, etc. It's called a 'store'.
by topgunb2 February 15, 2009 1:32 PM PST
Apple store is a mystic experience, where your soul goes into next dimension and is in union with the almighty steve jobs soul, I hope you can read the sarcasm here.
by LunaticSX February 12, 2009 5:13 PM PST
BTW, Microsoft's one previous retail attempt at the Metreon in SF was kind of sad. The main thing I remember was how much of the merchandise was Microsoft-branded notepads, backpacks, and other junk like that. There's so little point in going to a Microsoft store to get boxed Microsoft software and the kinds of things you can get anywhere else. The Apple Stores, on the other hand, provide availability for Apple products, accessories, and Mac software that you'd be hard-pressed to find on store shelves elsewhere (sure you can find iPods and stuff at BestBuy, along with iMacs and MacBooks, but their Mac software and accessory selection is minimal).

The a big difference, now, though, is that Microsoft would be able to sell Xboxes and Zunes as well, which didn't exist when their store in the Metreon was open. Still, why not go to a dedicated game store or BestBuy for those? It's not like they NEED their own presence to get the word out about those things.
Reply to this comment
by plee86 February 12, 2009 5:19 PM PST
I guess Microsoft has decided it has too much cash on hand and has come up with a brilliant plan to quickly and efficiently burn through tons of it. What other brilliant ideas does Steve Ballmer have up his sleeve? Restart Kozmo?

If there is any person left alive who does not believe Microsoft has Apple envy and incapable of an original idea of its own, this retail plan should dispel all doubts. I look forward to a nationwide chain of stores selling Zunes, mice and keyboards. And then, 2 years from now, after burning through billions of dollars, the press release announcing the closing of the retail division.
Reply to this comment
by why do i need a name? February 12, 2009 5:29 PM PST

The first thing that they should do is offer a free service for you to bring your Windows PC into their store and they'll remove all of the junk that the PC vendors install so that they can make a couple of bucks selling the box. (it would cost them less to allow the PC vendors to make a buck on the hardware so that they didn't have to do this, but I digress) I'd venture to guess that huge percentages of the issues with Windows are those crapped-up configurations. In all of the days that I used a Windows Box, I had so many fewer problems on the systems that were installed from a Microsoft-generated Windows disk than the one that came from the vendor.

That said, I made the switch to Mac three years ago and never looked back. I do have XP and Vista installed in a VM on the Mac, but use it infrequently. the out-of-box experience of my Mac's has been wonderful (I now have 4 of them) and substantially better than any Windows box that I have ever purchased. I've had great experience walking into an Apple stores either when I needed something or when I had a question.
Reply to this comment
by JCPayne February 12, 2009 5:35 PM PST
Imitation is the sincerest form of flattery....

Looks like the folks at Apple should pat themselves on the back for being light years ahead of M$ again.
Reply to this comment
by JCPayne February 12, 2009 5:36 PM PST
Hey Microsoft you should throw way more money behind the HD-DVD standard next.
Reply to this comment
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During her years at CNET, Ina Fried has changed beats several times, changed genders once, and covered both of the Pirates of Silicon Valley. These days, most of her attention is focused on Microsoft.

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