Microsoft to Open Stores, Hires Retail Hand

[ErickMontreal]

Microsoft to Open Stores, Hires Retail Hand

 

By NICK WINGFIELD

 

Microsoft Corp. said it hired a former Wal-Mart Stores Inc. executive to help the company open its own retail stores, a strategy shift that borrows from the playbook of rival Apple Inc.

 

The Redmond, Wash., company said it hired David Porter, most recently the head of world-wide product distribution at DreamWorks Animation SKG, as corporate vice president of retail stores for Microsoft.

 

In a statement, Microsoft said the first priority of Mr. Porter, who is also a 25-year veteran of Wal-Mart, will be to define where to place the Microsoft stores and when to open them. A Microsoft spokesman said the company's current plans are for a "small number" of stores.

[microsoft store and retail concept] Microsoft

 

In a warehouse near its Redmond, Wash., campus, Microsoft created mockups for how Microsoft products might be displayed either in its own stores or in a retailer's.

[microsoft store or retail concept] Microsoft

 

It remains to be seen whether the effort can add some pizzazz to Microsoft's unfashionable image, which Apple has sought to reinforce with ads that mock its competitor. Mr. Porter, in a statement, said there are "tremendous opportunities" for Microsoft to create a "world-class shopping experience" for the company's customers.

 

"The purpose of opening these stores is to create deeper engagement with consumers and continue to learn firsthand about what they want and how they buy," Microsoft said in a statement.

 

The move is a sign of the deeper role consumer-technology companies are playing in the retail business, despite the many risks of straying from their traditional businesses of making hardware and software. Apple, of Cupertino, Calif., encountered widespread skepticism when it first began opening its own retail stores in 2001.

 

Eight years later, though, Apple's chain of more than 200 stores around the world are widely credited with helping the company boost sales of its Mac, iPod and iPhone product lines. The Apple stores, with their eye-catching architecture, highly-trained sales staff and "genius bars" that provide technical support, gave Apple a way to showcase its products in an environment where they weren't lumped in with a gamut of other electronics items. Sony Corp. and Bose Corp. also operate their own stores.

 

At the same time, some large electronics retailers have fallen on hard times amidst the weakening economy. CompUSA Inc. last year closed most of its retail stores, while Circuit City Stores Inc. is in the process of shutting down all of its stores and laying off more than 30,000 employees.

 

Microsoft has long flirted with the idea of doing its own store, even as it has tested ways that retail partners can better sell Microsoft products. In a 20,000-square-foot warehouse near its campus in the suburbs of Seattle, Microsoft has tested various retail concepts, complete with shelves displaying Xbox games and big computer monitors with touch-sensitive screens.

 

Key details about Microsoft's retail plans still need to be worked out, though. Microsoft said the stores could feature a range of products from personal computers running its Windows operating system to cellphones running the company's Windows Mobile operating system to its Xbox videogame console.

 

One of Mr. Porter's tasks will be to figure out whether to actually sell computers rather than merely show off their features. Any decision that favored some PC makers and left others off store shelves could anger some hardware partners.

 

Stephen Baker, an analyst at NPD Group Inc., which tracks retailers, said Apple doesn't face the dilemmas Microsoft will in the retail business because Apple makes the hardware and software for its products. "That's going to be a big challenge for Microsoft," Mr. Baker said.

 

A spokeswoman for Hewlett-Packard Co., one of Microsoft's biggest hardware partners in the PC business, declined to comment on Microsoft's retail strategy. Spokesmen for Dell Inc. didn't respond to requests for comment.

 

Microsoft's store plans could also irk existing retail partners like Best Buy Co., on whom Microsoft is especially dependent for sales to consumers. Best Buy representatives didn't return calls requesting comment. Microsoft said it will share the lessons it learns from its own stores with other retailers.

 

The failures of other stores opened by technology companies will loom over Microsoft as it launches its stores. In 2004, computer maker Gateway Inc. shuttered a network of more than 188 company-owned retail stores after weak sales. Microsoft itself operated a Microsoft store inside a movie-theater complex in San Francisco beginning in 1999, but two years later shut down the store -- which showcased, but didn't sell, Microsoft products.