Microsoft Announces Retail Store Initiative

February 13, 2009

Microsoft Corp. has appointed a 27-year Wal-Mart veteran to lead the company’s second entré into retail stores. David Porter will become corporate vice president of Retail Stores, the company said in a press release, and will begin work on February 16th. Microsoft did not provide specific details of its retail initiative, but said it’s intended to, “create a better PC and Microsoft retail purchase experience for consumers worldwide.” Porter most recently worked at DreamWorks Animation SKG, where he led the movie and interactive entertainment company’s worldwide product distribution for seven years. Before that, Porter spent 25 years at Wal-Mart, most recently as general merchandise manager, with a particular focus on snagging favorable contracts for DVDs from the major movie and music studios. Microsoft’s move comes eight years after it closed its only retail store after a two-year stint in 8,500 square-feet at the Metreon entertainment center in downtown San Francisco.

Microsoft’s move to retail comes as the nation’s economy is at a record low, and shoppers have cut back their spending dramatically. Hundreds of retailers have closed locations, while electronics retailer Circuit City declared bankruptcy and shut down completely. Even in earlier times, retail computer stores have had a tough time. Gateway Inc. operated a chain of 188 retail stores, but closed them all in 2004 because of poor performance.

On the other hand, the company may be able to find low-priced retail space at major malls, and use the stores to bolster its current advertising campaign, intended to deflect Apple’s “I’m a Mac” campaign. The stores might also provide a personal point of contact for service and support for the company’s products.

Microsoft opened a Retail Experience Center at its Redmond (Wash.) headquarters earlier this year, a 20,000 square-foot space intended to serve as “a center of innovation for how Microsoft and the retail industry can address rising consumer expectations and competitive pressures during today’s challenging economic conditions.” [press kit]

Microsoft did not provide details about the initiative, including in what cities, the size of the stores, their locations–mall or street, and what products would be promoted. A company spokesman said only a “small number” of stores will be opened.

The company said that defining the time frame, locations and specifics for the new stores would be Porter’s first order of business. “The purpose of opening these stores is to create deeper engagement with consumers and continue to learn firsthand about what they want and how they buy,” the press release noted.

Microsoft’s COO Kevin Turner said the company is working on the “exciting” release of Windows 7 and new releases of Windows Live and Windows Mobile. “We’re also working hard to transform the PC and Microsoft buying experience at retail by improving the articulation and demonstration of the Microsoft innovation and value proposition so that it’s clear, simple and straightforward for consumers everywhere.” He said that Porter’s “unique and diverse” background, and his “deep retail roots and distribution understanding,” would be invaluable for the project.

In a press release, Porter said, “There are tremendous opportunities ahead for Microsoft to create a world-class shopping experience for our customers.” He added, “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.”

Porter started from the bottom at Wal-Mart, working as part of the cleaning crew in 1981 at the Broken Bow (Okla.) branch during high school, eventually becoming a clerk/cashier. He later worked in the information technology division.

Interestingly, it was Porter who was responsible for Wal-Mart’s bat swinging in 2006, playing hardball with movie studios so the company could retain its position as the largest retailer of DVDs in the U.S.–a 40 percent share. Porter tried to convince the studios to cut prices and provide marketing help, hoping to better compete with the then-nascent iTunes Music Store (iTMS). Ultimately, the studios’ reluctance to distribute digitally dissapated, and they agreed to distribute through ITMS, and didn’t agree to Wal-Mart’s price cut demands.

Porter continued to to be Wal-Mart’s principal deal-maker with the studios, working to cut prices that would give Wal-Mart a competitive edge, until he left for DreamWorks in 2007. At DreamWorks, Porter was in charge of worldwide product distribution.

In a January 2006 Los Angeles Times story, Porter summed up his Wal-Mart responsibilities, saying, “I wake up and put my head on a pillow every night looking for opportunity in the music and movie worlds. We are interested in growing sales; these are important areas to our stores, and we are a growth company.”

Porter’s retail credentials appear to be completely different from Apple senior VP Retail Ron Johnson, who directs the company’s retail operations. Porter seems to be a deal-maker with a focus on his big-time Hollywood connections.

Johnson came from the mid-west and a Target stint, and has been focused inwardly on interior design, customer service and “the experience,” the hallmarks of Apple’s retail stores. Under Johnson, Apple’s retail chain became the fastest growing retailer in history, surpassing $1 billion in sales within three years. 

Head-to-head, here’s how the two retail chiefs compare:

David Porter, 43 Ron Johnson, 50
  • Executive, DreamWorks Animation – August 2007 to Present
  • Vice-President/Director, Wal-Mart Stores, Inc. – 1987 to 2007
  • Senior vice president Retail, Apple Inc. – January 2000 to Present
  • Vice president, merchandising, Target Stores – 1984 to January 2000
East Central University B.A – Stanford University, M.B.A. – Harvard University
stores: 7,000 world-wide stores: 251 world-wide
sales: $375 billion (2008) sales: $6.31 billion (2008)
employees: 1.2 million employees: 15,600
employee turn-over: 44% employee turn-over: 20%

Update: At a later public meeting, Microsoft Entertainment and Devices president told three local reporters more about the company’s initiative. “You should think about…it quite differently. Apple is all about distribution.” He added, “We have plenty of distribution. These stores for us are about building our connection to customers, about building our brand presence and about reaching out and understanding what works and what improves the selling experience.”

Read blogger Robert Scoble’s take on retailing by both Microsoft and Apple.

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