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5. Microsoft’s Retail Push Set to Improve the Company’s Image – Analysts

It was definitely the sensation of February that Microsoft Corp. had decided to open its own retail stores to sell its products. Besides getting new sales channels, own chain of retail stores will help the company to create deeper engagement with consumers and continue to learn firsthand about what they want and how they buy. Moreover, analysts claim that own retail stores will help Microsoft to improve its image among consumers.

It is not a secret that Microsoft is not a purely software company: the firm competes with Apple for the market of portable digital media players and supporting services, the company rivals Sony and Nintendo in video game console business, Microsoft also produces keyboards and pointing devices and thus competes with Logitech. It is very likely that in future the lineup of hardware from Microsoft will expand: there are rumours about own-brand smartphone from Microsoft.

Microsoft department in a retail store. Image by Dvice web-site

Own retail stores will help Microsoft to be more competitive against its rivals in the hardware business who have their own retail outlets. This is especially important in the light of the fact that major retailers in the U.S. have become victims of economic crisis.

“If Microsoft intends for retail stores to drive revenue growth they will likely be disappointed, but leveraging stores to improve customer perception and as marketing tools could be successful,” said Allan Krans, an analyst with Technology Business Research.

It is a well known fact that stores do not draw consumers to products, but innovative products bring consumers into stores. Apple’s retail store rollout coincided with the introduction of the iPod in 2001, which gave a very compelling reason for consumers to visit its locations, reckons TBR. Microsoft’s main products – Windows operating systems and Office suites – are available by default on the vast majority of personal computers sold on the planet, hence, newer versions are hardly considered as breakthroughs that attract consumers to the stores, according to the analyst.

But besides software, Microsoft also sells its keyboards and mice, Xbox video game consoles, Zune personal digital media players and is rumoured to enter the smartphone business shortly. Moreover, latest technologies that Microsoft implements do not reach retail store shelves widely overnight: average consumers still hardly know about the benefits that DirectX 10 provides; with the Windows 7 release it will be necessary to demonstrate advantages of touch-interface (it is clear that touch-screen sensitive displays are unlikely to reach retailers truly widely); once motion-sensing Natal controller for Xbox 360 is launched, Microsoft will need a lot of physical space in retail stores to show off the benefits of “controller-less gaming”. Therefore, there are a lot of reasons to open Microsoft’s retail stores to show the latest technologies of hardware and software.

But many of computer/electronics/software stores may not like Microsoft’s initiative: with Office, Windows and video games available directly from Microsoft, many consumers will start visiting Microsoft’s stores, especially for large purchases, instead of traditional outlets.

To sum up, while Microsoft will be able to make itself look closer to the final user, it may have certain issues with relationships with its traditional partners in retail. The result of the move will only be seen in the next few years. 

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