Envy

Microsoft has announced that it too will go into the retail business. From what has been leaked so far about the venture it looks like it will be every bit as successful as the Zune, Microsoft's pathetic attempt at putting together an iPod. The press about the idea says they will have a "Guru Bar" which sounds a lot like the Genius Bar in the Apple stores. But if imitation is the sincerest form of flattery is this idea likely to be as successful as the Apple stores?

I say no. The Apple store has been successful, in my view, for a couple of reasons which cannot be replicated by Microsoft. First, the stores have allowed Apple to sell their line of products in an integrated way. The Microsoft store will have to make a larger number of choices. For example, the peripherals sold in an Apple store all link to Apple products. But in a Microsoft store choices will have to be made about which computers and laptops will be offered in addition to which peripherals to offer. At the same time the Apple stores sell a lot of non-Apple related software (including some Microsoft products like Office). Microsoft is unlikely to sell many titles which are not Microsoft.

Second, the Apple store was built around a large group of fanatics who found that they could not get the products they wanted through normal stores. If Microsoft is successful they are likely to cut into retail channels like Frys or Best Buy. That could lead to one of two results - a division of the market into smaller bites or having the mega retailers leave the selling of computers altogether. Either way Microsoft is a net loser. PCs are now mostly commodity products so margins are small. In the end the introduction of the Apple stores caused some of the other electronic retailers to introduce Apple products. In that sense the effect of these new retail outlets could be the exact opposite of what happened when Apple got into the retail business.

Microsoft has spent a good deal of its corporate energy trying to emulate Apple in the last few years with the Zune, with the big bucks advertising campaign and now with the stores. Apple keeps trying to simply innovate. Any first year MBA could tell you which strategy is likely to be more successful.