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Microsoft needs to spend its Windows budget wisely in the US

Column It should subsidise devices, not the advertising industry
Fri Jan 04 2013, 15:43

WHILE WANDERING AROUND some of Southern California's computer retailers it is easy to see why Microsoft is having such a hard time shifting Windows 8.

California is blessed with many things including nice beaches, usually good weather and stunning produce, but what really interested me is the way brick and mortar retailers are trying to flog Windows 8 and Windows 8 devices. My specific interest in California is not only is the state one of the biggest economies in the world (despite being bankrupt) but unlike the US East Coast states, California has the legendary Fry's Electronics chain of stores, which - along with Tokyo's Akihabara shopping district - should be on every technology enthusiasts' list of stores to visit.

Brick and mortar stores are always a good indicator of the wider consumer perception of a product because unlike online, only popular products - those that are more likely to sell - get put in areas with high foot traffic. Some product manufacturers pay stores to put products in high traffic areas but for high volume retailers the products that keep the tills ringing will always win because they provide opportunities to flog needless accessories and upsell warranties to bump up the overall profit per sale.

Fry's isn't the only major electronics retailer, with Best Buy also having a broad retail presence, but whichever store Californians choose, they will find it hard to get enthused about Microsoft's latest offerings and it is neither retailer's fault. One of the Best Buy stores I visited had Nokia's Lumia 920 and HTC's 8X smartphones within five metres of the front door along with Microsoft's Surface RT tablet and a couple of other nondescript and forgettable Windows 8 devices.

Having visited a number of Best Buy and Fry's Electronics stores, I couldn't see any shortage of machines running Windows 8 but there was a distinct shortage of machines that make you stop in the aisle. Microsoft said it worked with OEMs for months to get Windows 8 to work well on their devices, but what it really needed to do was spend months with vendors like Dell, HP and Gateway, the brands that are well known by consumers who don't follow the PC technology news.

Sure Lenovo has its Yoga and Sony has its Duo 11 but walking around the dozens of tablets available at considerably lower prices than high-end Windows 8 devices and sporting those glossy screens presenting Android or IOS makes Windows 8 a pretty hard sell no matter how much retail floor space is thrown at it.

As for Microsoft's retail efforts with Windows Phone 8, once again the problem isn't visibility, with the firm's media blitz inside and outside the stores making Windows Phone 8 hard to miss. Rather Microsoft's problem is the price of its devices, which are priced at parity with Apple's iPhone and high-end Android smartphones.

Brick and mortar stores rarely have the best prices, nevertheless Microsoft should be ordering those stores to offer Windows Phone 8 devices without contracts to undercut the prices of high profile smartphones by at least 30 to 40 per cent in order to sway customers that generally have their minds set on buying an iPhone or Android smartphone even before they see what they can do. Instead I found that a contract-free Nokia Lumia 920 is priced at about $100 less than a Galaxy S3, a price difference of 15 percent that barely reflects the significant difference in hardware specifications.

The vast majority of mobile phone users obtain their smartphones with contracts and when you look at some of the prices offered by popular US mobile operators it seems foolish of Microsoft to spend millions to advertise Windows Phone 8 only for users to see that they can get an iPhone 5 for the same price. AT&T offers the Nokia Lumia 920 for $100, exactly the same price as an Apple iPhone 4S, while a 16GB HTC 8X costs the same as an 16GB iPhone 5.

Given that T-Mobile and Verizon have similar price comparisons between high-end Android devices and iPhones, one has to wonder why Microsoft isn't following the lead of Huawei and ZTE and helping its handset partners flood the market with cheap handsets to gain market share. I was expecting that Microsoft would do a lot more to try to win business in its home market, much in the same way it did with the Xbox games console, where it aggressively took on Sony's market dominance with price cuts and first entry in the seventh generation games console wars against the Sony PlayStation 3 and Nintendo Wii.

Microsoft has often been seen as flat footed with tablets and designing an operating system that made good use of touchscreens, and consequently its failings led to its poor market share. The firm's latest desktop and mobile operating systems are far from its best work, but the problem isn't the operating systems but rather not having machines and devices that both capture interest and provide enough monetary incentive not to look at the superior alternatives.

If Microsoft subsidised the cost of Windows Phone 8 handsets and worked on creating a clutch of showpiece devices then it really wouldn't need to spend tens of millions on trying to shove its operating systems down consumers' throats. But instead Microsoft continues to follow the same strategy it used with previous desktop operating systems, the same strategy that has left it on the sidelines of the web and mobile industries.

As for my enthusiasm about Fry's Electronics, it doesn't quite beat the sensory overload of Akihabara, however this is how electronics should be sold. Forget PC World or even Maplins, Fry's is a store where one can buy not only consumer electronics such as tablets and digital cameras but also real electronic components such as resistors, circuit boards and test equipment such as oscilloscopes and multimeters and everything in between.

Back in Blighty there are mail order firms such as RS Components that offer far bigger ranges of electronics components, and then there's Maplins, which frankly seems like an electronics bric-a-brac outfit in comparison. But a store like Fry's gives every punter the chance to look at and handle such components, which could result in more children getting interested in actual electronics rather than merely using consumer electronics devices to access Apple's App Store. µ


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