Why Microsoft's Retail Strategy Might Work

Microsoft (Nasdaq: MSFT  ) opened its third retail store here in Denver yesterday. A fourth, in San Diego, is due to open before the end of the month. Investors should be cheering this news.

Sound strange? It should. I've been skeptical of Mr. Softy's retail plans, mocking the company's not-terribly subtle mimickery of Apple's (Nasdaq: AAPL  ) stores in its design. I still see the parallels; Microsoft's Answer Desk is just a Genius Bar by a different name, all the way down to the blue-and-white appointment screen.

But it doesn't matter. As my Foolish colleague Anders Bylund predicted, Microsoft's retail store is catering to customers who want a PC but not the PC experience, or at least not the PC-setup experience. "Buying a PC can be a pretty intimidating thing," says Mika Krammer, merchandising chief for Microsoft's retail operation.

Customization, served
Enter the new retail stores. Krammer says customers can choose how they want their machines to be customized before leaving with a new PC. Service techs remove unwanted promotional software, install antivirus tools, and set to local time.

Call it another attempt to replicate the Apple Store experience, but without the black turtleneck, wire specs, and techno music.

I can see it working, if only because I know my parents. PC users both, they're not particularly tech savvy nor well schooled in customizing or repairing their machine. Having a go-to guy, or store, would be a welcome change.

What about the existing retail network?
Skeptics will argue that PC makers have tried and mostly failed with retail. They'll also say Staples (Nasdaq: SPLS  ) and Best Buy (NYSE: BBY  ) already sell PCs in abundance and offer service on the machines they sell. Best Buy, in particular, has done well with its Geek Squad unit. Competition for PC sales is fierce, goes the thinking.

I'm not so sure. Microsoft stores aren't just selling computers and software, but also service, support, and training for an entire ecosystem of Windows-powered products, including the beleaguered Zune. In the process, Mr. Softy is shattering the myth that PCs are for self-starters who don't mind maintenance work.

If any retailer should be worried, it's GameStop (NYSE: GSE  ) . The Xbox section at the rear of the Denver store allows gamers to try favorites for a few minutes at a time. Titles from Microsoft and other publishers line the walls.

Going national
Microsoft executives and PR staff wouldn't comment on the national implications of yesterday's launch in Denver, but I think investors should be hoping for an accelerated national rollout.

After seeing the store, I'm convinced: This is Mr. Softy's one, best, and perhaps only chance to shift the PC computing experience from painful to personal, and profit in the process. Don't miss this opportunity, sirs.

Would you shop at a Microsoft Store? Does Mr. Softy's retail strategy have you thinking about investing in the stock? Share your thoughts in the comments box below.

Apple, Best Buy, and Staples are Motley Fool Stock Advisor selections. Best Buy and Microsoft are Motley Fool Inside Value picks. Motley Fool Options has recommended a bull call spread position on Best Buy and a diagonal call position on Microsoft. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He had stock and options positions in Apple at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool owns shares of Best Buy and is also on Twitter as @TheMotleyFool. The Fool's disclosure policy once held the high score for the video game Defender. Just sayin'.


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  • Report this Comment On June 11, 2010, at 6:09 PM, GreatOdinsRaven wrote:

    I agree--I think MSFT is finally doing something to improve their image and redefine a solid user experience for the average Joe. An added bonus is that they'll have useful feedback from consumers, which will help direct future R&D efforts. It won't happen overnight, but it's a start!

  • Report this Comment On June 11, 2010, at 6:26 PM, BabyGoat wrote:

    Microsoft copies Apple´s retail model because it is successful. So it should work the same for Microsoft, right? Well.... not really.

    The difference is in the products. Most of us perceive Apple products as premium quality, fascinating and fun. Microsoft products... not so much.

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