Ex-Apple VP Aiding Microsoft Retail Initiative

July 20, 2009

A key figure in achieving Apple’s ground-breaking retail store concept is now consulting with Microsoft on that company’s retail stores, the first of which are expected to open this fall. George W. Blankenship, 56, joined Apple in 2000, and his 20 years of experience as Gap Inc.’s vice president of real estate strategy helped fulfill the original concept developed by Apple Sr. V-P Retail Ron Johnson–position the stores at upscale, high-traffic locations to attract customers. As first reported by TechFlash, Microsoft has hired Blankenship to provide consulting services for its retail team, although the company refuses to say exactly what work he is performing. The consulting arrangement is probably meant to work around the non-competitive agreement (NCA) that Apple executives routinely sign when leaving the company. Much of the data that Blankenship might use to pick Microsoft store locations is held by third parties, so he won’t be handicapped by any NCA. As well, Blankenship’s assistance to Microsoft won’t create any peril for Apple, since after eight years of developing new Apple stores, the formula is hardly proprietary.

Blankenship was among the earliest of Apple’s retail store employees, arriving shortly after Johnson. He was there when Johnson began to clarify his vision of how the stores would operate and what they would look like, and where they should be located.

Johnson’s decision on locations flew in the face of the best computer retailer at the time, Gateway. At its peak in 1999, Gateway had over 240 retail stores. But to save money, the company located them in inexpensive, stand-alone spaces that were usually far from shopping malls and other busy locations. The locations meant that each location average just 250 visitors a week, according to Johnson. He rejected the notion that inexpensive leases were necessary to help a company’s financials, deciding instead that the high-traffic of upscale malls would generate more sales, fully justifying the additional expense.

In a 2006 speech to an investment group, Johnson recalled the early planning: “If you want to enrich their lives, you can’t be in a parking lot, off a highway. You gotta be where they live their life. You gotta be right where they work, where they play, where they live, where they shop. The only way to enrich their life is to be part of their life. They’ve got to walk 10 feet to your store, not drive the car 10 miles. That’s what enriching lives would take.”

Because of that decision, Apple has located in some of the most expensive real estate in the United States and around the world. In some cases, Apple’s choice of a store site has jump-started the location’s exclusivity. And in many cases, the presence of an Apple store has attracted other retailers, many of which demand in their contract that their store be close to Apple.

Gateway began decelerating its retail efforts in 2003, the tail end of an overall decline in revenues from competition and national economic decline. In April 2004 announced it would close its remaining 188 stores and lay off over 1,800 employees. Gateway soon purchased eMachines, hoping to leverage that company’s access to retailers like Best Buy and Circuit City. Within a year, Gateway’s stores were gone, and the company continues to limp along today.

Now, with over 250 Apple stores, the process of finding suitable locations and screening them for profitability has become routine. Apple uses various consultants and computer software to analyze its customer lists, and to find appropriate spaces that meet various location, space and lease requirements. Although the process is largely automated, many store locations are still selected less for their computer “success score,” and more for the opportunity to create an architectural statement or “home” for Apple enthusiasts.

Read more of Johnson’s recollections of the early planning for the Apple retail stores.

Microsoft has begun to hire retail store executives and managers. Download (pdf) job descriptions for two of Microsoft’s upcoming retail store positions.

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{ 8 comments… read them below or add one }

RS Douglass July 20, 2009 at 0823

Microsloth-

Always an immitator, never an originator;

Good luck trying to compete with AAPL;

I’d short MrSofty right after they’ve committed
substantial resources to occupy their new stores :)

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Alan Smith July 20, 2009 at 0919

But what does MS have to sell that the consumer wants to buy?
Nada, zilch, nothing. Their stores will be as successful as the Seinfeld ads, Bob OS, the Zune, Vista, Xbox, and all their other failures.

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John Dingler July 20, 2009 at 1001

Might the MS stores have the audacity to have both Macs and “comparable” PCs displayed side-by-side? It would be a sure fire move to dramatically put the store into media whorehouses without the need to spend more ad revenue; Sites from the MacObserver to Barrons would write and write about it. The audacious gambit would wield a stream of long-term free publicity.

Surely a superbly effective way to introduce the MS store to mall shoppers who are looking for a cheap bargain, and it would be an original way to sell at the mall. But the move would be gooberish.

Setting a PC against a Mac would be an attempt to play off of their “Mac vs. PCs” commercials as well as an attempt to leverage the message already out there that PCs are cheaply made, less capable, heavier, and not as handsome.

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Joe B July 20, 2009 at 1258

MIcrosoft’s paranoia is ridiculous. Instead of copy cat me-too, and focusing on Apple and their 10% market share, they should be focusing on developing products that people really want. They are becoming more and more like the General Motors of the computer world. Yawn.

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Jocca July 20, 2009 at 1300

There are tons of compelling reasons why Apple needed to open real stores to showcase their products which are sold in very few venues by clueless sale clerks. They needed to show the rest of the 95% non-Apple users that there is a solid alternative to the window world. By presenting the stores as a fully functioning unit offering product for sales, demos and testing, expert advices, troubleshooting, making sure that anybody walking in can try whatever they want to try on the displayed computers, Apple has expanded its presence into the consciousness of a lot of people who would not have otherwise the chance to go and play with a Mac.
On the other hand, Microsoft’s windows already run on 90% of the computers out there. Do they really need to open physical stores to sell their softwares and a few peripherals. Or is Steve Ballmer so intent on imitating Apple that he does not even know where to draw the line.
Nowadays things are getting curiouser and curiouser in the kingdom of Redmont.

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John Dingler July 20, 2009 at 1633

Jocca, yes, people already know about Windows from their jobs. Why would they want to be reminded of bad bosses, never-ending spreadsheets, cliche pie charts, tedious lists, boring graphs from their jobs while they should be happily skipping along, window shopping in the mall; what a come-down at the mall to see a reminder of their work tool. It does not sound rational. MS has been talking productivity at work for years; it’s its raison d’être. It’s what it’s known for. It has won this argument hands down. Yeah, MS has been talking productivity at work for years; it’s its raison d’être. It’s what it’s known for.

Now, all of a sudden it apparently wants people to sublimate pie chart geekdom to the sexyness of high aesthetics.

Given that the shopper would not want to be reminded, MS needs to give a transformative experience to the walking depressed. It needs to somehow, some way, to sublimate, divert, or modify MS’s instinctual impulse to do pie charts into a culturally higher activity that is socially more fun or creative. But what could that be?

Certainly not the Zune or the MS mouse so, as many have said before, it will likely partner with HP or Gateway to use them to explain Windows OS software products, as confusing as their versions are to untangle.

It could spotlight new, emerging technology and, since it does not seem to be a POS location, it can do this without getting tripped up by visitors disappointed that they can’t buy anything there. The geek running the Guru bar will just say, “Hey dude/dudette, we don’t sell stuff here so it does not matter if the Surface would work in your home without a lot of my help.”

Or it could go the route of humor, another possibility, but humor already failed on TV. And I doubt that it could make long lasting headway by promoting low cost, and have this be spotlighted on the entrance banner.

The apparent fact of the matter is that it can’t rely on geek/spreadsheet glory and low cost when it faces the, well…spiritually uplifting experience exuding from the Apple store next door.

—-

Bryan, this development will surely be fun to follow.

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HammerofTruth July 20, 2009 at 1945

John is correct in his analogy of what might/will happen. I think it’s funny in that all this time Steve Ballmer has the same playbook since he used it to steal ideas and thunder from Steve Jobs. He actually thinks that people will stand in lines to see the new version of Office, or to try to talk to a Geek Squad Elite tech to find out why his media center machine won’t work correctly with his TV or why his Zune decided to delete all his songs off his device along with the songs on his PC because of poorly implemented DRM.

Just because George Blankenship is helping, doesn’t mean it will suceed. A lot of Gap stores are gone because of lack of interest, not because of location. You could make a store that sells ass scratchers upscale, but it doesn’t mean they will come.

When they do fail (and they will), perhaps Apple could lease the space for more storage or a bigger genius bar.

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ZoetMB July 27, 2009 at 0959

This could backfire for Microsoft as it might increase the perception that they are a “me-too” company as compared with Apple’s innovation.

Furthermore, Microsoft has always tried to copy Apple, but has never really done a good job (except perhaps for Windows ’98). I find it hard to believe that they’ll do a good job attempting to copy Apple again no matter how good the prototype designs look. (The prototype designs of Vista looked pretty good too!)

On the other hand, if the stores look like Apple’s, it could leave consumers with the impression that Microsoft is “as good” as Apple, especially those who are pre-disposed to think so.

Just as Apple consistently updates the OS to be years ahead of Microsoft’s offerings, Apple has already renovated many of its stores into second or third-generation configurations. Having Microsoft stores may have a positive benefit for Apple: it will push them to keep their stores as bleeding edge experiences.

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