Microsoft (NASDAQ: MSFT) Targetting Apple (NASDAQ: AAPL) Retail Model
Apple (NASDAQ: AAPL) has been able to succeed in an area where other tech giants have failed – retail stores. Apple stores have, by all accounts, been a resounding success. Their model isn’t necessarily new, Gateway computers had essentially the same distribution model a decade earlier, but ultimately, failed to garner the success enjoyed by Apple. As the old saying goes, imitation is the best form of flattery. Imitation, in this case, will be tech giant Microsoft (NASDAQ: MSFT) pursuing the retail market with their own branded stores as well.
Microsoft’s plans to expand its network of retail stores mirrors the company’s broader transformation; with the release of the Surface, the company took another step beyond its software design beginnings to further incorporate hardware design into its business. Just as Microsoft has taken note of the success of Apple’s retail stores, which have the most profitable floor space of any top company in the United States, the company has also taken note of the iPhone maker’s success with vertical integration.
Apple’s United States retail network consists of 250 stores, with each earning an average of $51.5 million in the fiscal year 2012. Microsoft has opened nearly 40 “pop-stores” over the past few months to push its new operating system and tablet. To build on this effort, the company announced on Wednesday that it would transition some of those specialty stores to into permanent full-line stores, in light of the success it has had with them. On January 1, Microsoft will open six new stores throughout the United States.
The iPhone maker makes its annual $6,060-per-square-foot sales based on several key precepts: don’t try to sell, delight the customer, use an operationalized “steps of service”, and constant innovation. But as data from Piper Jaffray analyst Gene Munster revealed, Microsoft yet to develop an adoring fan base as Apple has. Munster’s data, which was reported by Forbes, showed that in an eight hour period, the Apple store in Minneapolis’ Mall of America recorded 47% more foot traffic than Microsoft and shoppers at Apple purchased 17.2 items per hour, while the average at Microsoft was 3.5 sales per hour.
Microsoft, and nearly every other tech firm currently may lack the ‘cool factor’ enjoyed by Apple, but companies are definitely catching up – Samsung has enjoyed great success in the smart phone market, Google’s Android operating system has been embraced, and Microsoft’s Surface product has become highly regarded. The competitive advantage of Apple seems to be diminishing at an astonishing rate, and 2013 could be a precarious year for the firm – that is, unless they release another game changer, like the long expected Apple Television.