Ten years after Apple opened its first retail store, Microsoft is finally ready to follow suit in a big way, announcing plans to open 75 new Microsoft Stores over the next two years, on top of the 11 stores it opened over the past two. Why the interest in massively expanding its retail presence? Well, it might have something to do with this:
Booming demand for the technology giant's iPhone, iPad and Macintosh personal computers has made Apple (AAPL) the fastest-growing major retailer in terms of sales growth in the U.S. In the first three months of 2011, Apple's U.S. sales rose by $4.6 billion, an 80% increase from a year ago.
That increase accounted for one-fifth of all sales growth by publicly traded retailers in the U.S. ...
Back in 2001, my namesake at Channel Marketing dissed the Apple Store concept, famously telling Businessweek: "I give them two years before they're turning out the lights on a very painful and expensive mistake." (See, not all David Goldsteins are infallible prognosticators.) But Steve Jobs had a few tricks up his sleeves. Shortly after the first Apple Stores starting sprouting up in malls nationwide, Apple introduced the iPod. Then the iPhone. Then the iPad. Apple Stores now generating some of the highest revenues per square foot in all of retail.
Perhaps Steve Ballmer is similarly tricksy, so far be it from me to question the wisdom of Microsoft's retail initiative. But if building out a chain of Microsoft Stores is such a good idea, isn't it fair to ask why the fuck it took them so long?
And that in the end sums up much of the frustration felt by many Microsoft observers... the sense that, rather than leading the industry, Microsoft has been reactive for years, and lumbering at that. It took five years for Microsoft to respond to the iPod with Zune, three years to follow the iPhone with Windows Phone 7, and it won't be until at least two years after the introduction of the iPad before the first Windows 8 tablet hits the market. If not for the amazing (and amazingly successful) Kinect, it would be fair to wonder if Microsoft had lost its ability to innovate.
Sure, Microsoft remains staggeringly profitable, largely due to its Windows and Office near-monopolies, with "Server and Tools" also providing a bright spot on the profit loss statement (Microsoft is looking more and more like IBM everyday). But Xbox profits amount to little more than static, while Microsoft's online services operate at a perpetual loss. No wonder MSFT's stock price has remained stagnant for just about ever.
And Microsoft isn't just coasting on its past success, it appears to be completely blinded by it, viewing the entire world of innovation through rose-colored windows. When iPod sales started to really take off, Bill Gates dismissed the product's sustainability, arguing that Windows CE powered smartphones would soon swallow the MP3 player market:
"You can make parallels with computers: Apple was very strong in this field before, with its Macintosh and its graphics user interface — like the iPod today — and then lost its position," Gates said.
A couple years later, when Apple introduced the game-changing iPhone, Ballmer laughed that there was "no chance" that the gadget would gain significant market share. And in 2010, when Apple showed off the iPad, Gates was once again unimpressed, this time with Apple's take on tablet computing: "I still think that some mixture of voice, the pen and a real keyboard — in other words, a netbook — will be the mainstream on that."
That seems to be Microsoft's strategy for everything. You know, slap a copy of Windows on it.
Or in it. Now Ballmer wants to duplicate Apple's retail success by matching the iEverything juggernaut store for store, because... well... because. I mean, I suppose you could make parallels between retail and computers: Apple was very strong in this field before, with its Macintosh and its graphics user interface — like the Apple Store today — and then lost its position. Or something.
No doubt this thread will fill with commenters dismissing me as an Apple fan-boy, and that's fair enough. I've developed, published, and supported software for both platforms, but have long preferred Apple products for my personal use. (And for the sake of disclosure, I once again remind folks that I also own a few shares of AAPL in my IRA.) So diss away on my partisanship. I'm okay with that.
But what I fail to understand is the unbounded confidence Microsoft boosters seem to have in the company's ability to out-innovate/out-market/out-compete their competition, when they haven't managed to achieve that trifecta in a new product category for well-nigh twenty years.