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Apple may not be Microsoft's biggest retail challenge

Microsoft's retail and hardware partnerships may hinder its expansion into the retail space, as it seeks to compete with Apple's brick-and-mortar locations.

In a new report Wednesday, Nick Wingfield of The Wall Street Journal, wrote that Microsoft's retail venture is a more difficult proposition for the Windows maker than Apple faced when it opened its first stores. In addition to upsetting retail partners, Microsoft's hardware partners could also prove unhappy over which products are selected or neglected to be featured in the stores.

"While Apple had fewer potential business conflicts because it had such weak support from retailers when it opened its first store in 2001," the report said, "Microsoft depends on existing partners in the retail business that could be threatened by the company's expansion into their turf."

However, some believe that worries about retail and hardware conflicts are being overblown.

"Everybody is in everybody's space," Steven Baker, an analyst with NPD Group Inc., told the Journal.

Microsoft is pulling no punches in its quest to directly compete with Apple in the retail space, going so far as to poach Apple Store staff and managers and hiring former Apple retail executive George Blankenship who played an instrumental part in the growth and popularization of the Apple retail outlets.

Microsoft has made no attempt to hide the fact that they are gunning directly for Apple's market share. Company executive Kevin Turner reportedly said several months ago that Microsoft intends to open stores next door to Apple.

Microsoft plans to mirror many aspects of Apple's retail outlets, including using "Microsoft Gurus" for tech support and demos much like the Apple store "Geniuses."

These steps are all indications that Microsoft considers Apple to be a credible threat to its market share. Mac sales saw double-digit growth in the third quarter of 2009.

In a separate piece, Wingfield wrote that while poor initial reviews of Microsoft's retail plan have surfaced, Apple too had to deal with doubts and criticism during the rollout of their first retail stores.

So far, Apple's response to Microsoft's retail plans is simple: renew, remodel, and advertise. The Apple store located inside The Shops at Mission Viejo, Calif. - located in the same complex where one of Microsoft's first retail outlets will open has been boarded up with a sign reading "Coming soon. The all-new Apple Store." Apple also plans on running ads in response to the Windows 7 debut which will mock the upgrade process from Windows XP and highlight the benefits of switching to a Mac.

The first Microsoft store slated to open is located in Scottsdale, Arizona and is expected to open its doors "on or within days of the launch" of Windows 7, reported Wingfield.