Microsoft returns to retail. Blogosphere already assumes it will fail.

Last week Microsoft announced plans to open its own retail stores to "transform the PC and Microsoft buying experience," the company said Wednesday as it hired David Porter as corporate vice president of Retail Stores.

Although Microsoft hasn’t publicized the scope or mission of this new retail initiative.  Many reporters and bloggers responded by immediately assuming the stores will directly complete with Apple and that Microsoft’s efforts will fall short of the Apple experience.

• Microsoft Retail Stores a Risky Proposition – PC World
• What Microsoft Can Learn About Retail from Apple and Best Buy  – Fast Company / Robert Scoble
• Microsoft apes Apple – Tech Harold

I’m excited that Microsoft is getting back into retail (Microsoft opened a store at the Sony Metreon in San Francisco from 1999 to 2001), and I think they have every chance to do so successfully.

First of all, we don’t yet know what the scope and mission will be for this new initiative.  Will it be a single flagship store, or a world-wide chain?  Will it cover the full range of Microsoft products, or perhaps just be a gaming store?  One thing we do know, it’s purpose will be very different than Apples was.

When Apple hired ex-Target exec Ron Johnson to open a Chain of Apple stores in 1999, Apple had a major problem.  They had a well recognized brand with a zealous community of users, but no reliable place for them to buy products.  Today Apple operates 250+ stores which allowed it to survive the implosion of dedicated computer retailers in the US (CompUSA, ComputerCity, etc…).

Microsoft has exactly the opposite problem.  Consumer can only buy a small subset of it’s product directly.  Microsoft sell most of it’s applications directly to businesses, and it’s operating systems directly to computer and device manufacturers.   Microsoft products are widely available.  So Microsoft’s problem is a about branding not about distribution.

Secondly, while Apple is a great retailer that has pioneered some true innovations in customer experience, they are far from perfect.  There are many elements of their customer experience that are down right annoying.  Further, the shoppers needs are always evolving, so even if Apple does a great job of meeting shopper needs today, they can easily fail to meet them tomorrow (just ask Piggly Wiggly, Woolworths, or A&P).

It would be impossible to propose a strategy or design for Microsoft Retail without knowing what specific pain points Microsoft intends to address with its retail strategy.  But its easy to think of some frequently overlooked elements of the customer that Microsoft could raise the bar on, and own.

So here are some suggestions to Microsoft Retail:

Sensory Branding.  Nordstrom, Tommy Bahamas, and others are starting to effectively use smell in addition to sight as part of the retail brand, but that’s still just the tip of the iceberg.  How can Microsoft weave the smell of a freshly opened X-Box, with the signature sounds of their operating system, and the distinctive tactile feel of a Sidewinder mouse all in a physical space?  If it do it well, they’ll be the first ones to do so.

Converge the in-store and at-home experiences.   Consumers started mixing the two long ago (over 50% of consumers that spend more than $100 in a Best Buy did their research on-line before visiting the store).  How can the physical stores embrace that and take it to the next level?  Can I start a shopping experience in a web browser at home and have my cookies shared with the store?  Can the store make sure they e-mail a custom set-up guide for any products I buy, so that instructions customized to my use-case are waiting for me when I get the product home?  If I make a list of the A/V products I own at home (or take a picture), can the store use the data to sell me the right cable for my X-Box in the store?

Assortment Editing.  This is going to be a potential challenge for Microsoft, but our choices when we go shopping these days are overwhelming.  Too many retailers just throw us to the wolves with a dizzying array of choices.  Apple does a great job of assortment editing with their own products, but they jump the shark as soon as you get into the accessories and third party products “what’s the difference between these eight different headsets?  Can I try them?  No!?!?”. Look at a retailer like REI in terms of doing a great job of assortment editing of third party products.

Exclusivity.  We all want to feel like we have the upper hand over our peers in some way.  Were you the only one of your friends to get to see the new TV Pilot before it came out?  Do you have the only Puma x Yo! limited edition shoes in your circle of friends?  When I go to the trouble to visit your store, reward me by giving me an opportunity to get or experience something unique that I can boast to my friends about.  Even better yet, surprise me with something that I didn’t expect when I came in to the store.  And surprise me with something different every time; create anticipation.  Maybe it’s a custom ring tone from famous artists that I can only download to my Windows Mobile device from the store one day, and the next time it’s a Photographer taking a professional portrait of me to use in my Windows Live! Space.

Social.  Shopping is a social experience, so design a physical space for it.  What can I do in the store with my friends?  What could I have done if I had brought a friend, that will make me want to invite a friend along next time?  If I didn’t bring a friend, can I start a video conference from your store to my friends?  How can I share my shopping experience with the people important to me?

Aspire.  Make we want something that’s hard to get.  Perhaps it’s the dream gaming rig that I can’t afford.  Or maybe it’s the complete collection of weekly free songs I can download for my Zune.   How about allowing me to earn frequent shopper points, that I can eventually redeem for a custom Avatar on X-Box Live?

Solutions not Products. Don’t just sell me a product, sell me a new experience or a new use-case that I want to be able to do.  That experience probably requires me to buy some new things from you, but they need to work with things I already own, and I need to have the knowledge to make it all work together.  This is a HUGE disappointment for most customers “I bought this phone with speech recognition, to be able to use the Bluetooth feature of my new car to call my husband on my way home from work, but I’ve never made it work.”  Be the first retailer to help me get the experience I want (even though it involves products I already own and education that I probably won’t pay for).

Proximity Marketing.  Turn my mobile phone into a wireless physical cookie that lets me share info with the store in exchange for a better shopping experience.  I don’t just want frequent shopper points for purchases, I want them every time I walk in and turn on my phone.  When I talk to a salesperson, I want him to know how I connect to the internet at home, which controllers I have for my X-Box, if I watch videos on my Zune, etc….  All this needs to be completely opt-in of course, and I should always be able to shop anonymously using the stealth mode for the wireless cookie app on my phone.  And DONT make this just for Windows Mobile phones.  Be the first retailer to offer a custom shopping app for the IPhone to enable a unique experience in your store.  Have digital fact tags adjust to my preferences when they detect my presence.

This is fun, exciting stuff!  (yes, I do know that I’m a dork)

But there are also a couple of things I would avoid.

Don’t use cool technology, just because you can and just because it’s “cool.” If you need an example of why this doesn’t work, go visit an AT&T store with Surface in it.  Every element of the store has to add value for the shopper, just being novel isn’t enough (especially if you expect shoppers to visit more than once).

Don’t try to walk in others shoes. If your competition really is Apple, then don’t try to out Apple, Apple.  Figure out what features they “own” and don’t hang your hat on those features.  If they already own distinctive architecture for a retail store, you should still have great architecture (we all should), but don’t try and make that you’re signature element.  There are two many new innovations to be made, to bother walking behind a strong competitor.

I know a lot of people like to see the 800 pound gorilla fail, and many are betting against you, but there is SO MUCH ROOM for our shopping experiences to improve, I’m excited to see a company with Microsoft’s innovation, talent, and resources move the ball forward.

Their first hire, David Potter, is an executive with leadership experience at the most successful retailer in the world (Walmart), and one of the greatest story tellers there is (Pixar); that seems like a great start to me.