Learning from the failure of the Microsoft Store

The The Microsoft Store experience has just ended, and the result was not pretty. Designed to be a competitive answer to the Apple Store, it largely repeated the recurring mistake Steve Ballmer made with every failed project. It was a good idea that was under-executed. Now, even if it had succeeded, given the rise of online stores, the decline of physical stores, and the COVID-19 pandemic, they probably would have ended up closing stores anyway. But let’s talk about why this expensive project failed.

The foundation of failure

I got my first degree in merchandising and my first management positions were in marketing and operations for a retail mall. Like many Microsoft failures under Steve Ballmer, the Microsoft Store was a showcase of things done well and things done very badly. The initial issue that should have been addressed with virtually every failed Microsoft project, ranging from the Microsoft Zune to the Microsoft Phone and now this store, was that the initial conditions for success were not set.

What was particularly strange for the store was that Microsoft had a reliable role model to emulate, and that was the Apple Store. Ironically, Microsoft had a very successful competitive model that defined the company’s initial success. It was “embrace, extend, extinguish.” Given how successful this process was, you would have thought they would use it as the default, but from the Zune they failed to even do the hugging part.

In the case of the Microsoft Store, this process would have allowed Microsoft to first mirror the Apple Store with a focus on an iconic Microsoft alternative to the iPod, then the iPhone, an alternative Genius Bar and a host of third-party products. that were affordable that people might be tempted to buy on impulse when they were in the store.

You need something to draw people to and through the store, and without a successful music product to begin with or a smartphone; eventually, they ended up with Surface. But it wasn’t a Surface store; rather, it was a Windows laptop storefront more reminiscent of PC stores that had already mostly failed in the market when it was designed.

So the Apple Stores were narrowly focused on Apple products, Apple launched products that people would line up to buy – creating a draw – and when you had a problem they had a service where you could solve that problem requiring you to go through another Apple or third-party offerings to access this service.

Now, Microsoft has copied Apple’s locations, but then they had to pull people into their stores, and yet with low store appeal, people walked past them. Worse still, because the stores were mostly empty of customers if you walked in, it felt a bit like what would happen if you fell in the middle of a school of hungry sharks or walked into a second-hand parking lot. . The commercials tended to overwhelm you, making it unlikely that you would return.

Now on the rare occasion that the store got something that people might be interested in, they put it in the display case, which was great for getting people through the door, but it didn’t attract people to across the store, so they got the traffic but not the sales. And sales, not traffic, are what keep a store alive.

So the stores became a money hole and a bit of a bad joke rather than the Apple beater they were meant to be.

Five lessons:

1. The three takeaways are that if you want to succeed with a competitive bid, you need an honest and relatively accurate assessment of the costs of that success. Then you must accept these costs before continuing. To take traffic from the Apple Store, they first had to fully embrace this store concept and then start modifying it to take advantage of it. Without the embrace stage, the extension and extinction stages never occur.

2. Second, if you’re going to be in retail, you need to have a way to bring people into and through the store on a regular basis. The whole point of a retail presence is to provide a way to get people interested in related products and close sales. Yet, if no one enters the store, or if they walk in and out without looking at your offers, you will never get the sales volume you need to keep the store open.

3. Third, those leading the effort must have experience building a retail operation, not just working in one. The average Walmart employee or manager has no idea how Walmart was built, only how to operate it once it thrives. In the beginning, you need an expert to build a store, not an expert to operate it (that will come later).

4. Fourth, given the rise of Amazon, which was happening in real time, a better alternative would probably have been an online offering taking Apple’s concept and digitizing it into an online experience incorporating a Genius Bar virtual and integrated targeted advertising for store products.

5. Finally, the goal, given Microsoft’s broader mission, should have been to develop a digital skills showcase for an integrated online and on-site experience, which could then have been marketed to other retailers who must now transition to the new normal COVID-19. But this opportunity was also lost.

Wrap

Any project should have a legitimate budget and a list of requirements to be successful. One of the common reasons for failure is underfunding the effort and treating this list as if it’s not inclusive. In other words, if you know what you need to do to be successful but choose not to, then you’re planning to fail, and that’s what happened with Microsoft Stores. Institutionally, the company knew (especially given the recent success of Xbox) what was needed. Yet they chose not to, and therefore failure was the only likely outcome. And it tends to be binary, unlike school, in real life 90% or even 95% of what is needed is always a failure when you need 100% to pass.

Finally, Microsoft can be credited with some of the strongest competitive efforts like Office, Windows, and Xbox, and their failures (Zune, Microsoft Phone, Microsoft Store) can be attributed to not replicating the processes they have used for these successes. Unfortunately, they’re not the only ones with this kind of behavior, and learning the related lesson could be critical to your future success.