I admit when Apple opened their first stores I was a bit surprised, as a technology company going into the traditional retail world seemed at odds with what technology was all about.  Technology was all about the future, retail did not seem a part of the equation. But it did not take long to see that these stores were a screaming success.  They had a “cool” factor about them and parents seemed to flock there during the holidays.  I read emails by coworkers who went into these stores just to experience them.  Everyone seemed amazed at the “buzz” that these stores were creating in the industry, not to mention the great advertising it was for Apple.  Then the buzz started around the Microsoft campus. Why can’t Microsoft do this?  We have way more stuff to offer than Apple.   And so it began.

It probably really began when Microsoft hired former Wal-Mart CIO Kevin Turner to come in and act as COO for Microsoft. It was not long before he began bringing in Wal-Mart experience to the retail division, hand picking 25 year Wal-Mart vet David Porter to run the strategy around building a world-class Microsoft retail franchise.  Kevin was a new leader with a different type of history.  One that frankly seemed stuck in the past and not suited for the future.  But this was retail and retail carried with it a lot of history  Kevin had met with and learned from the king himself, Sam Walton.  How could Apple stand a chance against that?

Around the time I took my new job I had plenty of opportunities to visit the Microsoft Bellevue offices.  If I had some downtime I would take the opportunity to visit the nearby mall where Microsoft had just opened its first in-state retail store.  They were positioned just a couple of stores down from the Apple store, which was situated near Nordstrom’s, a much coveted retail space in the world of shopping malls.  If we looked first at the store sizes they were vastly different.  Apple almost seemed to be following the Subway franchise model with a narrow floor space.  If you stood back from the door 10 feet you could see into the whole store without moving your neck.  The Microsoft Store on the other hand occupied the old Eddie Bauer space.  It was probably 3-4 times the size of Apple’s floor space.  If you stood back from the door ten feet your neck definitely had to move right to left to take it all in.

I would often count how many people were in the store – usually the Apple Store was twice as crowded and every employee in the store was engaged in some type of activity.  Helping customers, restocking, doing demos.  There was a lot going on in that small space.  In short the space was lively. The Apple employees all clad in blue, running all over the place.  The noise level always seemingly on the rise.  In contrast the Microsoft store,  though stocked with lots of items seemed relatively tame.  As stated earlier it was so much bigger. There were a lot of employees just standing around and far apart, because they could be.  All clad in different colors (Red, Green, Blue and Yellow…the colors of the Windows logo) Some tinkering on laptops.  Then there was the challenge that there actually was so much stuff.  You had a Windows Phone section, Zune (OK, that’s going away), XBOX, etc..the last one would seem to be the one to generate a lot of excitement and interest but even when there were the same number of customers as Apple’s store it still managed to feel…dead.  It was very quiet in comparison. It probably did not help that the Microsoft store does not and continues to not offer a Tablet.  In today’s tech world experience is everything.

It brings to light an important difference between Microsoft and Apple…the channel.  The Microsoft model and Apple model are very different when it comes to partners .  Where Microsoft has always had a partner led model built on choice, Apple is much more controlling. To get the Apple experience I go to the Apple store.  To get the Microsoft experience I have lots of stores and partners I can go to.  Another problem is price.  Apple controls everything so my widest range of choice for Apple products will be at the Apple store and the prices will be right inline with what I get at other stores, like Best Buy.  Not so with Microsoft store.  I can choose to buy products there but they can be found for cheaper elsewhere.  If they did drop their prices they would create their own channel conflict and make for a lot of unhappy partners.

I am not going to be recruited by CNBC anytime soon to be their retail analyst on the morning show (CNBC please call me!!) but you can observe a lot by just walking the mall and paying attention to what people are doing  and how they look doing it.  You can tell if a store has excitement or not.  You can tell by looking at the people who work in the store.  Sitting around looking board is never a good look, for anyone.  But when you represent a brand it is imperative.  Especially when you are talking about two of the most recognizable brands on the planet.  In my unscientific study it seems apparent that on the Microsoft side something is missing from the formula.  I can only guess that this is a rather expensive en devour, one which if Microsoft were to fail would be a significant blow to the company.  It seems like this defeat of Microsoft by Apple is ongoing, it would be somewhat ironic if it was the retail stores, not the Tablet or Phone that put the nail in the coffin.

Good Night and Good Luck

Hans Henrik Hoffmann June12, 2011