New Microsoft store seeks to connect with customers

In the midst of a holiday shopping season in which online retail sales might fall for the first time, the general manager of Microsoft's online store said sales and traffic are "really good."

Then again, Larry Engel said the point of his site, microsoftstore.com, is not just to post robust sales figures. And Engel does not have much to compare this year's results with: There was no online Microsoft store last year.
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In mid-November, Microsoft quietly announced that for the first time all of the company's consumer products -- from "Flight Simulator X" to Windows Vista -- could now be bought directly from Microsoft online in the United States. (It launched similar sites in six other countries this year.) Most of the software is available for download. All of it is also available in a box.

Engel said the store extends a "direct connection" between the company and its customers. Currently, he said, such a connection exists with Microsoft's Zune music player and its Xbox 360 video game console, which feature online marketplaces.

One analyst said direct connections like those could become more important as Microsoft moves into providing services such as a Web-based version of Office to consumers, instead of just software in a package or for download.

"The name of the game in the end is finding ways to own the customer, to be able to not only sell them the operating system but (also) recurring revenue-based services," said Tim Bajarin, the president of consulting firm Creative Strategies.

Microsoft's Engel said the company decided to open microsoftstore.com for a simple reason: Customers wanted Microsoft to launch a store.

"Customers have been asking us to do it for years now," Engel said. "We are responding to something our customers have asked us to offer: An option for them to purchase directly from Microsoft."

He said some customers want to buy products directly from Microsoft, while others want a place to research the full range of Microsoft products.

"It is as much of an information site as a purchasing site," Engel said.

A previous incarnation of the Microsoft Store, Windows Marketplace, did not work, Engel said, because there was insufficient demand for the store's "vast" selection of Microsoft and non-Microsoft products.

But Engel said Windows Marketplace did demonstrate that there was a demand from customers who wanted to buy Microsoft products directly from the company.

"The vast majority of sales were Microsoft products, which we didn't expect. We expected to see a balance," Engel said.

On a strategic level, by launching the store, Microsoft is also providing a central place where customers can go to download Microsoft software.

Engel said the company had been considering launching the site for years but waited until now because it wanted to perfect the technology for digital downloads.

As more and more PCs come without disc drives, the market for digital downloads should grow.

Already, "well over 50 percent" of the site's software sales come via digital downloads, Engel said.

And as Microsoft moves into providing Web-based services, the site could also provide an important outlet for Microsoft to sell those offerings to consumers.

Engel said the store's "road map would include any offerings for customers."

He also said that "in the future I could see adding what we would call third-party products that complement what you could purchase from Microsoft."

Of course, by entering the direct-to-consumer market Microsoft is pitting itself directly against resellers of its products.

But Engel said that was not Microsoft's goal. (The company doesn't even have its own warehouses, instead relying on partners for that function.)

"We are thrilled with a customer that (decides) to purchase from other retailers," he said.

Because Microsoft is selling all of its products on the site at its own suggested retail prices, he said, customers shopping there are typically "not doing comparative shopping."

A copy of Microsoft Office Home and Student 2007 sells for $76.99 on Amazon.com, while the same copy on the Microsoft store costs $99.99.

"We've done post-purchase surveys: They've said to us they had not considered purchasing until they visited the site and saw there was something that piqued their interest," Engel said.

And even with the advent of services, he expects those "to be made available through many channels," not just Microsoft.

So far, there has been no adverse feedback from resellers, Engel said.

Bajarin of Creative Strategies said he thought that Microsoft was inspired by Apple, which launched its own online store more than a decade ago.

For the moment, Bajarin said, Microsoft "can't control the customer experience."

"Almost everything is parceled out to the vendor," he said. With the store, "you can get them to come back."

"One of the things that is fascinating about Apple with their stores is the fact that they know who the customer is," he said. "They know what his tastes are in the nature of what they buy and even more amazing, they have your credit card."

Bajarin added, "Apple makes it brain-dead simple to access the store, buy something and download it to your Mac or iPod. There's no question Microsoft is moving in the same direction."

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BY JOSEPH TARTAKOFF
Source：seattle Post Intelligencer

P-I reporter Joseph Tartakoff can be reached at 206-448-8221 or joetartakoff@seattlepi.com. Read his Microsoft blog at blog.seattlepi.com/microsoft.