As rumours of a Surface phone crop up, I'm increasingly convinced that Microsoft is restructuring its marketing strategy to route consumer products through its own line of branded stores. The suckers who have implemented Windows Phone 7 and Windows Phone 8 were merely test marketers for what will eventually become a Microsoft-branded phone, possibly made by the same Foxconn facility as Apple's iPhone.
Many people, until recently, were predicting that Microsoft would simply buy Nokia, which currently has a market value of just under $10 billion (around £6 billion). But why should Microsoft buy an aggravated company and then try to shoehorn the firm into its own operations when it can simply work with a monster like Foxconn and avoid managing a Finnish phone company? Besides, if it is going to set up its own channels of distribution using the Microsoft stores, it does not need all the infrastructure and distribution channels developed by Nokia.
Within the decade, Microsoft should have a minimum of 300 stores. They should do as well as the Apple Stores, which are 17 times more profitable than a typical retailer. Some figures worth noting: An average retail store in the U.S. generates $300 to $400 of sales per square foot per year. The median for the top 20 retailers is $787 per square foot per year. Apple makes more than $6,000 (£3,700) in sales per square foot, a number that will only continue to increase. This is outrageous and obviously set off alarms in Redmond.
Microsoft's early entry into the same game has shown similar results, so we can expect Microsoft, once again, to follow Apple's lead.
You must always remember that Microsoft predated Apple with retail experimentation that provided mediocre results. Microsoft also predated Apple with the smartphone. But Microsoft missed the mark on both occasions due to boxed-in thinking. Apple had to show Microsoft the way.
With the $6,000 per square foot factor in place, all Microsoft has to do is precisely copy the Apple model with its own Microsoft products. But it needs a laptop and phone to sell at the store, hence the rumours about the Surface phone.
Despite seeming behind, Microsoft has an edge on Apple in some ways. The company can sell the Xbox 360 and rumoured Xbox 720 at the stores, along with online gaming subscriptions. Apple has nothing of the sort. And Microsoft does have software, including Mac software, for sale.
The company is going to experiment with pop-up shops in the run up to Christmas this year in various cities across the States. I predict they will be hugely successful.
It is hard to say what impact the Microsoft shops will have on the Apple Stores, but it would not be a surprise if they eventually topped the Apple Stores in sales per square foot annually. Microsoft has to have more things to sell and it knows that. That is why it will be opening stores and releasing new products like never before.
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