The Optimal Customer Journey Is Profitable, Too

Friday is typically the day to flush out bad corporate news, and right now any news that doesn’t specifically include the words “pandemic”, “surge”, or “vaccine” is hardly going to make headlines anyway. So last Friday was a great day to put an end to Microsoft Stores.

And by “Stores” I don’t mean some desktop application, like a clever version of Microsoft Bob, which would have been something completely different than Microsoft Bob, the widely mocked user interface of the mid ‘90s. No, this is bricks and mortar, gone forever. Pretty soon we will be asking ourselves: Remember everything we loved about Microsoft retail? No? Me neither.

Except Microsoft today isn’t the butt of jokes (more’s the pity) that it was a decade ago. Then, I would have suggested that Microsoft should board up its physical windows like a huge blue screen of death. Now that would be funny, but Microsoft isn’t that company anymore. It’s a powerhouse. This is an exceptionally well-run business. Its transition to the cloud has put it in a competitive position with Amazon (AWS) and, while not quite as feared as it was in the late 90’s, Microsoft is perhaps more respected. More importantly for us, it’s not delivering the customer experience of the 90’s either.

It’s tempting to draw comparisons with Apple, and inevitably there will be those who point out that Apple built one of the highest turnover-per-square-foot businesses in the history of retail. That the “genius bar” – physical technical support – was, in fact, genius. No other comparable company came close to the economics, or experience of Apple in retail and in some ways it still mystifies. Technology products cry out for online sales, since after all, they are “technology” products, not fashion. Or perhaps that’s the point about Apple, they transcend the technology with their brand.

Nevertheless, the shuttering of Microsoft Stores should remind us that we are gearing up for the great distribution fight of the next 20 years. In one corner, the digital natives, sweeping everything in their path in a click-efficient, logistical excellence vision of humans in their home cocoon being ferried everything from cookware to AI–recommended tank tops. On the other, the ancients: stores with great heritage and traditions of service like Macy’s and Nordstrom. Even the names evoke a different, pre-internet era. Shopping experiences we will tell wide-eyed grandchildren about: Some “old fashioned gentleman” in suit helping fold your sweater and put it in a bag! Did you live at Downton Abbey?

But the future is more nuanced. Barring society being permanently banned from social gathering, customers will seek and be served by complex combinations of service models; telephone, online, offshore/onshore and yes, retail. The right solution will vary based on the customer segments being targeted, competition, product/service offering and type of interaction. Basically, all the elements we should be naturally considering in the optimization of customer experience, mapped against the economics of the business.

The winners will not be the companies that execute a particular strategy, but those that understand their strategy for their target customer and build the optimized strategy for their business. That’s what Apple did, at a time when nobody in their industry thought retail could work. They looked to their own, integrated experience design for the demographic they sought to conquer.

But Apple is an overused example. Take an unheralded success story: Best Buy. In 2012 Best Buy was the easy one–way bet everyone wanted to make; Amazon was going to crush them. Hubert Joly, the new CEO faced a formidable challenge: at the time, Best Buy was asking customers who price shopped in the store using mobile devices to leave the premises. As one senior leader quipped at the time, generally retailers worked hard to get customers into stores, not throw them out.

Best Buy recognized that customers didn’t always want an online experience; it was dependent on the nature of the product and the reason for purchase. Sometimes, in–person service was decisive. This didn’t extend to an opportunity to premium price; while there was some advantage to being able to take a purchase home, being out of price position was simply taking the business out of consideration. No, price competitiveness was a given, but Best Buy discovered that there were segments and journeys that it could compete successfully to own.

Ironically, some 8 years later, Amazon is pushing into physical retail operations and just about every retailer has established a robust online operation. For some, it’s been the slow response to the change in consumer habits that have hurt them the most. For others, it’s the ability to think about customers in a multi-modal universe that’s been a new skill. The emerging reality for all businesses is that building a winning experience around the customer often requires an ability to think like the customer, in terms of journeys, jobs-to-be-done, or as in the case of Best Buy, life experience that drive purchase. It’s those skills, and the data and systems that support them, that drive success.

It may be that Microsoft’s call on closing stores is the right one after all. For their customers, with their products, perhaps the optimal journey doesn’t run through an unprofitable shopping mall operation. Knowing that, the current crisis gave them the perfect air cover to focus on serving customers optimally, and exit a business that wasn’t contributing to either financials or customer experience.