Windows© of Opportunity?

While Best Buy is still the world’s largest consumer electronics chain, it’s no secret that the brand faces big questions about store size, format, and long-term viability in an evolving brick-and-mortar retail landscape. I found the recent announcement that Microsoft and Best Buy had reached an agreement to roll out dedicated Windows “stores” in 600 Best Buy locations across North America this summer to be somewhat surprising, but certainly in line with the needs of both companies.

The plan for each Windows mini-store is to offer a full range of PCs, tablets, accessories and support from Microsoft-trained staff all in a well-defined in-store space of around 1,500 sq. ft. to 2,200 sq. ft. On one hand, this seems like a great move for both Microsoft and Best Buy. Microsoft does not really have that many points of physical distribution (with around 70 existing Microsoft stores) so creating a 600-store network is a pretty big deal. Keep in mind, this comes on the heels of Samsung announcing a similar store-within-a-store deal with Best Buy in April — which would open dedicated Samsung spaces in 1,400 Best Buy locations — and on top of an existing Apple store-within-a-store presence.

What does it mean for Best Buy (and brick-and-mortar retail)?
This raises what I think are some fascinating questions about how this degree of brand-focused segmentation within the store will benefit Best Buy. Financially, it seems like a surefire winner — at least in the near term. That said, this represents a fairly significant shift in strategy (or, at least, a fairly significant expansion of what was formerly an Apple-only domain) and it remains to be seen how this plays with consumers. There’s a good argument to be made that, if it’s executed well, this model could help Best Buy become more experiential and better utilize its large store footprints.

As far as the manufacturers are concerned, using Best Buy as a new channel to interact with their customers has clear benefits. At the very least, it’s a way for brands like Samsung and Microsoft to get into or quickly expand their physical presence without the risk of sizable investment of opening their own stores. If we see a name like Sony pop up next with a similar announcement, it might be a sign that this category competition within the broader consumer electronics experience might be a real trend.

What does it mean for Microsoft?
Essentially, Microsoft is trying to take back some control of their brand, which is particularly difficult with the variety of companies that generate Windows-driven products. Apple/Microsoft comparisons are always lurking, and, with Best Buy splitting their operating system and software offerings between them, the companies may be directly competing for consumers within each store’s physical layout. Apple has traditionally been very succinct in their product and OS offerings, and this move gives Microsoft a retail opportunity to organize their products and services in the same way. The key difference is that while Apple has always had the hardware, Microsoft has always been a software company — so they’ll never maintain as much control of the complete consumer experience.

The Best Buy-Microsoft announcement prompted me to go back and look again at a piece I wrote in October 2009, when I had the opportunity to visit the new Microsoft Retail Store at its opening in the Scottsdale Fashion Square Mall in Scottsdale, Ariz. I wrote about my experiences and impressions afterward, and, while I was largely impressed with the aesthetics and the overall store experience, I was left with a lingering concern that Microsoft was suffering from what I described in the article as a kind of “brand identity crisis.” I wrote about how the walls were “lined with a wide variety of other manufacturers’ products.” including desktop PCs from companies like HP, Dell, Sony and Acer, a large number of laptops and netbooks, and mobile devices from several carriers, including Verizon, AT&T and Sprint. My takeaway from this cacophonous brandscape was this:

“On the surface, everything seemed great. What I could not quite resolve, however, was the nagging feeling that Microsoft’s retail initiative faces an underlying structural obstacle that Apple does not: the challenge of clearly defining the Microsoft brand. With the exception of Windows, so much of Microsoft’s product line is hidden from the customer. Computer chips and operating systems are not as memorable or as compelling as clearly labeled and instantly recognizable gadgets and machines. In contrast to the iconic iPhone and Mac computing products in an Apple store, the Sony, Dell, HP and other brand names presented in the Microsoft store cannot help but water down the physical presence of the Microsoft brand.”

What strikes me today is that the words I wrote almost four years ago still ring true. I’m not sure that Microsoft has solved that underlying structural problem of software versus hardware, but this still may prove to be a useful Band-Aid for both companies.

I’m curious to get your feedback on this one: Will the new Best Buy Windows “stores” solve or improve that brand identity crisis, or is the fact that we now have both Microsoft stand-alone stores and Windows “stores” a sign that the problem persists? Join the conversation by leaving a comment below or feel free to e-mail me at jeff@jeffgreenpartners.com.


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