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Microsoft to open its own retail stores

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Ina Fried CNET News

Published: 13 Feb 2009 08:41 GMT

After years of brushing off the notion, Microsoft said on Thursday that it plans to open up its own line of retail stores.

Without detailing the plans, Microsoft said it has hired David Porter, a 25-year Wal-Mart veteran, to lead the effort. Sources say that Porter's mission will be to develop the company's retail plans and that the effort is likely to start small with just a few locations.

Porter, who will start next week, will report to Microsoft chief operating officer Kevin Turner, also a Wal-Mart veteran. Most recently, Porter was at DreamWorks Animation, heading that company's product-distribution effort.

Although Microsoft has generally relied on others to sell its wares, this is not Microsoft's first foray into retail.

Back in the dot-com days, Microsoft had one retail outlet, at the San Francisco Metreon mall. However, it never expanded the effort and closed that location in November 2001.

Last autumn, Microsoft built its own concept retail environment at its Redmond campus. At the time, the company said the effort was aimed at showing retailers how they could better market Microsoft products, and was not an indication that it was going into the retail business itself.

"We're not planning to open stores, but we need to learn more about stores," Microsoft general manager of worldwide retail services told the Seattle Post-Intelligencer. "We need to take more of a leadership role."

The company has also made a variety of moves to sell its products directly to customers over the internet, including a recently opened online Microsoft Store. Starting last holiday season, it also started placing Microsoft workers as "gurus" inside other retail stores.

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"There are tremendous opportunities ahead for Microsoft to create a world-class shopping experience for our customers," Porter said in a statement. "I am excited about helping consumers make more informed decisions about their PC and software purchases, and we'll share learnings from our stores with our existing retail and OEM partners that are critical to our success."

Rumours of Microsoft's interest in retail have cropped up at various times over the years, including in 2005, when the company was said to be interested in a Times Square location.

Apple began its retail push in 2001 and now has more than 200 locations in several countries. Microsoft's entry comes as Apple has started to slow its retail store expansion.

NPD Group analyst Stephen Baker, a computer-industry retail veteran, thinks Microsoft's decision to open up its own retail stores is a relatively safe bet, but not without challenges.

"The real issue it that it's not as easy to pull off as Apple. Apple has more of an owned ecosystem than Microsoft has," Baker said, referring to the fact that Apple makes the finished products it sells, while Microsoft's software — particularly Windows — typically comes on hardware from dozens of companies. And the PC industry already has its own well-honed distribution channels to bring those products to market.

The upside for PC makers is that Microsoft-branded stores could display products that are hard to fit into the big-box retail shopping experience, such as high-end Alienware PCs or HP's Home Server, Baker said.

"It doesn't have to be about sales. They are going to want to sell stuff, but it's going to be equal parts sales and branding," Baker said. For example, Apple's retail experience is as much about exposing you to the Apple brand and Apple family of products as it is moving widgets into and out of inventory. The same could be said for Sony's retail stores.

At the moment, Microsoft and its partners don't really have a one-stop shopping experience that can put all the pieces together the way Apple can in its stores, Baker said.

Baker said to expect Microsoft to start scouting locations in either hip downtown spots or newer 'lifestyle centre'-type retail environments.

CNET News' Tom Krazit contributed to this report.

Credit: Microsoft follows Apple into the retail business from CNET News