11.02.09

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Readers’ Post: Microsoft’s Retail Efforts

Posted in Dell, Hardware, Microsoft at 3:19 am by Dr. Roy Schestowitz

Shirts market

Summary: Thoughts and analysis about Microsoft stores that have opened recently

MICROSOFT has opened some stores, which the press wrote quite a lot about. Microsoft enters deeper into the hardware business. Not everyone is entirely happy, for example:

Microsoft Retail Store PCs Will Be Crapware-Free, But I’m Still Unsatisfied

[...]

No one likes uninstalling bloatware, trialware, and craplets from their freshly unboxed PCs. Microsoft finally acknowledges this by skipping the unnecessary third-party software in Microsoft retail store PCs. That’s truly great, but they should do a little more than that.

When talking about “crapware-free” computers we typically think about PCs that do not come with Windows preinstalled (and obligatory “Microsoft tax”).

People may be able to recall that Dell too planned to make high street stores, so what Microsoft is doing here is likely to alienate OEM partners. We have discussed this quite thoroughly in IRC and now we find a former Microsoft senior saying that Microsoft lost touch with partners. Microsoft does the same thing in phones (with Pink) and the anti-virus business.

Sage Channel Chief: Microsoft Lost Touch With Partners

Tom Miller, Sage’s vice president of channel management, who oversees all channel programs, operations and channel marketing for the $2.55 billion applications software vendor, spoke Thursday with Channelweb.com’s Steven Burke and Rick Whiting about partner enablement, channel changes in the wake of the failure of Sage’s largest partner, MIS Group, and how the Sage partner philosophy compares with rival Microsoft.

One reader has mailed us his thoughts about Microsoft’s new stores — a move that he described as follows:

There was a flurry of stories about the new Microsoft retail stores over the last few weeks. They proclaimed crowds but pictures only came from a tween star appearance. Some mentioned Apple envy. More interesting they talked about “crap free” computers. I did not see any stories digging into the deeper implications of these stores, though a few of those ran months ago. The puff pieces gloss over real marketplace change and Microsoft failure.

Example puff pieces, praising Microsoft’s move into retail:

http://news.cnet.com/8301-1386…
http://www.slashgear.com/not-just…
http://www.bloggingstocks.com/2009/10/3…
http://www.crn.com/softwar…

The “crap free” PCs at Microsoft stores violate 25 years of operating principles and are a clear sign of Microsoft’s collapsing influence over computing. How dare they stab their retail partners in the back so blatantly? Previous Microsoft stores were set in places like casinos and designed more to create a perception of value than to sell computers. Ridiculously expensive computers languished on shelves. Now it looks like Microsoft is serious about selling computers itself and will use every advantage they have. They claimed back in July they would open one of these next to every Apple store.

As usual, the big boys are hurt the least. OEMs like Dell, HP and Lenovo have broken the boot rule with ARM based GNU/Linux in laptops and GNU/Linux netbook sales are an increasingly important source of revenue for them. Surviving retailers like Best Buy, Office Depot, Walmart and Target will be harmed to the degree they got channel stuffed with Windows 7 and suckered into supporting the same. Mom and pop stores, which make most of their money repairing broken Windows, might as well give up or move on to free software if Microsoft opens a store next door. Even the big boys can’t hide from the future and their tenetive revolt shows they know this.

Having squeezed the life out of all their partners Microsoft is forced to do all of the hard work of selling and supporting computers themselves. They can not do this as broadly or even as well as the fiercely competitive ecosystem they once ruled. They are forced to this by eroding margins and declining hardware prices. Retailers must chose between revolt, failure or simply exiting the market. If Vista ruined retailers like CompUSA and Circuit City did not drive the point home, Microsoft retail stores do. Most retailers will chose to exit but none can rely on PCs for big profits again. Microsoft will have to pick up where others leave and will face stiffer competition than their previous partners did.

Microsoft stores are too little too late. In the long run, nothing can save Microsoft from the day when retailers are selling $100 GNU/Linux machines that just work. The rise of iPhone and Droid, while not free software, show where the PC market is really going. It’s doubtful Microsoft stores will get out of the money losing phase before it is apparent that there’s no room in the computer market for software that costs hundreds of dollars.

Another reader of ours actually went to one of the stores yesterday and wrote about her experience thusly:

I did visit the new Microsoft store yesterday, even got a few pictures. I actually enjoyed the store and found the sales help to be an interesting mix of ages and personalities. The store is in a great place in the mall and gets a lot of traffic, it was pretty busy when we were there. The Sony Styles store was on a lower level and off the beaten path, so it was practically empty and quiet. Few customers there. I didn’t go to the Mac store, it was down the street a ways.

Anyway, I don’t like Microsoft any better than I did before visiting the store, but I did enjoy the visit. We even got a free gift as we entered…lol…it’s a “Bing” branded “stress-ball”. Quite appropriate for stressed-out Windows users.

Maybe this adds a little balance. To Microsoft, the stores are a matter of evolving to survive now that Windows sales are down almost by half.

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5 Comments

  1. Chips B. Malroy said,

    November 2, 2009 at 5:05 pm

    Gravatar

    I see really only two possible reasons to open Microsoft stores next to Apple stores. 1. the “kill Apple” plan, which is similar to the kill Google plan. 2. a direct assault on retailers and OEM’s.

    Since Ballmer at first said he would launch with 12 of these stores, and there are only two, it sounds more like cold feet, and the fact that these stores will most likely be long term profit losers. While this is the most likely reason (kill Apple) for opening these two stores, the second possible reason is the more interesting scenario

    For a “direct assault on retailers and or OEM’s” to happen, one thing would have to happen. Microsoft would have to acquire a hardware manufacturing company that made laptops. Even so, they would just be another manufacturer, like the other OEM’s at that point, except for the Windows OS.

    But since I am speculating about MS buying or otherwise acquiring a computer manufacturing company, and possibly a retail store chain that could be converted easily into computer stores, what way would maximize MS profits the most and knock out all their competition (OEM’s and retailers) in the shortest possible time, and would do it in typical MS play?

    Look at Apple, where MS is getting most of its idea’s from lately. Look at the Pystar vs Apple lawsuit. If Apple wins, the road is paved for MS to think about making its own computers, with its own EFI chips, and to stop selling to others, and milk the market the way Apple does. While I doubt this is what is happening, it is certainly possible. No doubt their might be some anti-trust problems with MS buying a computer manufacturer, at least in the EU, but in the USA, its would likely be rubber stamped.

    Roy Schestowitz Reply:

    Well, USA != USDOJ (and not GWB, either).

  2. Chips B. Malroy said,

    November 2, 2009 at 5:52 pm

    Gravatar

    Roy,
    The USA is one of MS main cash cow markets. While being a mature market, it is the one with the least percentage of copywrite infringing, therefore making it a very profitable market for MS. Now if MS could increase its stranglehold on the USA computer market by having computers made with EFI chips, do you really think the DOJ will stand in their way???

    As far as other markets, like the EU it could be business as usual, with a slightly different version of Windows, that would run on OEM’s there, if somehow the EU would not let MS take over that hardware market. Funny thing about EFI (DRM on a chip) is that its closed source, and as such sometimes, somehow, might just not let other operating systems work quite right on MS manufactured computers, if they came to be. But MS would not do that, would they, or have they ever sabotaged other software makers products with windows, or perhaps hardware?

    Roy Schestowitz Reply:

    I think they quite like the extended family (“ecosystem”) of OEMs. They are not ready to flip that table, yet. They do in mobile, though (Pink).

    Andrew Macabe Reply:

    With all the ongoing flaps microsoft’s committing, you can’t rule that out (MS-Retail). I, for one would encourage microsoft to do so. It will be a quicker ‘death spiral’; also if it blocks other OEMs from competing, i.e. Taiwan, China, there could be global repercussions. China’s got over 1and a half trillion in US notes ready to be cashed in.

    HP, Dell and the like can also begin to work on quality drivers for other than windows os. It can be a real stinker there if ms tries to block such actions against a direct hardware competitor. Just imagine: competition against GNU/Linux on an equal or similar footing. (priceless; dead-stick-dive, no spiral there)

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