With the hiring of David Porter, a Wal-Mart veteran with 27 years of retail experience, Microsoft is signaling that it intends to open branded retail stores. Will this move shore up Microsoft’s defenses against Apple or spread the companies resources too thin?

Porter’s last post was with Dreamworks where he served as the head of retail distribution. Prior to 2007, he spent 25 years at Wal-Mart and is best know for heading up the company’s entertainment merchandising efforts.

In November Microsoft opened the doors of its online store to US customers. The store sell Microsoft software, peripherals and hardware such as the Xbox and Zune.

Microsoft’s first task for Porter is to plan the roll out of Microsoft stores. The company is still in the early stages of determining the time frame and locations for opening the new branded stores.

The obvious corollary to Microsoft stores are the fairly popular Apple stores that are in shopping malls across the country. Apple has created its own outlet for branding and delivering its products directly to consumers.

However, there are two major differences between the two companies that relate directly to the companies’ retail outlet strategy:

First is the fact that Microsoft doesn’t sell personal computers or laptops to consumers. This is a major chunk of the Apple stores’ purpose and inventory that Microsoft can’t mirror for fear of alienating its customers.

Secondly is the difference in branding strategy for these very different product lines. Apple sells high-end products that benefit from its own distribution chain in terms of product differentiation and margins.

Microsoft, on the other hand, sells software and peripherals that are more commodities than lifestyle products. These are products that you can buy in any big bow retailer and don’t warrant a trip to a specialty store.

This expansion strategy also comes at a critical time when Microsoft is preparing to launch Windows 7 and save face over the failure that is Microsoft Vista. The company is also struggling in terms of market share in terms of smartphones, mp3 players and gaming systems.

Porter may be responsible for tapping a new revenue stream that can bolster Microsoft’s profits. However his efforts may be for naught if Microsoft can’t get its product strategy back on track.

Related:

Entry was posted on Friday, February 13th, 2009 at 11:09 am under Microsoft, Retail.

Read more entries by Dave Jeyes.
Stumble It!