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Can Microsoft Follow the Apple Store Model?

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In addition to making highly usable and coveted consumer electronics, one of the keys to Apple's (NASDAQ: AAPL  ) success has been its physical stores. At any Apple Store, you can not only get the tangible experience of any of the full line of devices, but you have the option of making an appointment to get help with a device you've already purchased. Roving salespeople with handheld cash registers circulate to answer new product questions, all of which creates the experience of a high-tech shopping atmosphere.

With the recent announcement that it will open two new permanent stores -- one in Honolulu and one in Detroit -- it seems apparent that Microsoft (NASDAQ: MSFT  ) is looking to capitalize on the Apple model. These locations will join some of the holiday locations that sprang up to push the company's then recently released Surface tablet. Many of these locations are being converted into permanent spots, and the company is already hiring for various critical roles within each location.

What the ultimate success or failure of Microsoft's foray into the retail hardware space turns on is the quality of the products that adorn its stores. The Apple Store may be a cool place to shop, but if they weren't selling a better widget, it would all be for naught -- it doesn't take a genius, or even an Apple Genius, to figure that out. You come to see the cool new toys the company is making and buy because the store is well executed.

The Surface Pro is coming
Set to be released this weekend, the critical product that will draw consumers to Microsoft stores -- or not -- is the new Surface Pro tablet. While similar to the original Surface RT released last fall, this version is capable of running a full version of Windows and is offered as a legitimate replacement for both your laptop and your tablet. Initial reviews have been mixed at best, but when you look a little deeper, certain critical details begin to emerge that shouldn't be overlooked.

The initial reviews of the Surface Pro have been somewhere between lukewarm and negative. While the device was praised for its solid construction and high-resolution screen, there is a list of negatives that come along with the pros. Some of the top complaints include the fact that the Surface Pro is expensive, that it's very weak on battery life, and that, as what The Wall Street Journal's Walt Mossberg calls a "tweener," the device is neither a great tablet nor a great laptop. Mossberg argues that the device is really too heavy to be great as a tablet and that the kickstand setup doesn't lend itself well to being used on your lap.

Other pros of the device include its ability to run a full version of Microsoft Office, as well as any of the 4 million Windows programs out there -- a first for a device in the tablet form factor. David Pogue of The New York Times, who is one of the more positive reviewers, said: "The Surface Pro is an important idea, almost a new category, and it will be the right machine for a lot of people. It strikes a spot on the size/weight/speed/software spectrum that no machine has ever struck."

Embodied in that insight is a point that I think most reviewers largely overlook: The device is arguably more important as an idea than as a piece of hardware. It should come as no surprise that a piece of equipment that's trying to take the place of two other devices won't be quite as good at the tasks that either perform -- the specialized versions aren't constrained by needing to serve two purposes. That doesn't mean, however, that being the first to market with a new concept isn't exactly where Microsoft -- and Microsoft investors -- want to be.

Take, for example, the portable GPS device. While a standalone version almost certainly works better and is easier to use than the version embedded in your smartphone, the GPS function has become so crucial to a smartphone that Apple's misstep led to "Mapgate." Recognizing that the map feature is important for more than simple navigation, the point is that even with reduced functionality, the feature is going strong. I believe the same can be applied to the hybrid idea of a laptop-tablet.

Why stores matter
Given the newness of the idea, therefore, it is even more critical that Microsoft provide customers with a tangible experience to evaluate its concept. Particularly at the $899 to $999 (and up) price points, you're going to want to try it out before spending that kind of money. The online shopper is more likely to opt for something cheaper in case the reality doesn't live up to the hype. And as Windows 8 is an important departure from previous iterations of the OS, giving people a place to be educated could make a real difference. Microsoft's efforts in this department are a great sign, and while they are unlikely to perfectly duplicate the Apple Store, they provide a positive catalyst to buy the stock.

It's been a frustrating path for Microsoft investors, who've watched the company fail to capitalize on the incredible growth in mobile over the past decade. However, with the release of its own tablet, along with the widely anticipated Windows 8 operating system, the company is looking to make a splash in this booming market. In this brand-new premium report on Microsoft, our analyst explains that while the opportunity is huge, the challenges are many. He's also providing regular updates as key events occur, so make sure to claim a copy of this report now by clicking here.

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  • Report this Comment On February 10, 2013, at 3:14 AM, prginww wrote:

    In order for Microsoft to adhere at the same level, Microsoft would have to make all of the products they sell in terms of desktop, laptop, tablet, and smartphone, etc. for them to be able to serve the customer as good as Apple does.

    Can they do it? Can they keep up with building the stores fast enough?

    By the time Microsoft catches up to where Apple is today, it will take them probably close to 10 years. In that time frame, Apple would have built more stores, probably at a faster rate, and they would have changed their stores along the way as things get reinvented. Apple has a LOT more experience in this area, they certainly have far more CASH and they have a great approach that's so far been successful. Apple has developed their own methodology which they just have to fine tune along the way. I think it will take Microsoft at least 10 years to catch up to where Apple is today, and Microsoft might have to buy Dell or HP along the way and start making all of their own products, which I don't know if they will or not.

    Microsoft's problem is they can support their own products better, but they can't really support third party hardware. I highly doubt one can buy a XYZ brand laptop and bring it into the local Microsoft store to have the mother board changed so easily. It's VERY costly to run a service center for other company's products because they have to deal with stocking spare parts, training their tech support people and that is a costly venture for anyone to do. Resellers have a bitch of a time being able to do that with a high level of expertise as constant training of their service techs is a BIG hassle.

  • Report this Comment On February 10, 2013, at 9:47 PM, prginww wrote:

    Microsoft has longterm, deep, culture issues. Employees don't help each other - they are in a system that makes them compete with each other. You don't get a warm fuzzy sense of Microsoft. Walking into an Apple Store you notice the staff laughing and talking with one another. If they are not the right person to help you, they easily hand you off to someone else. There is an air of collaboration. Microsoft will need to alter their culture to compete with that, even at the store front.

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