The Wal-Martification of Microsoft
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The Wal-Martification of Microsoft

John Gruber’s analysis of the current state of Windows really struck a chord with me, because it reminded me of an article I read a long time ago about Wal-Mart. (I blogged about it in 2006.) Gruber’s writing about Microsoft’s declining revenue and the recent news that Apple now holds 91% of the retail market for laptops that cost more than $1,000.

Here’s the key bit:

Microsoft is no longer ignoring Apple’s market share gains and successful “Get a Mac” ad campaign. But the crux of these ads from Apple is that Macs are better; Microsoft’s response is a message that everyone already knows — that Windows PCs are cheaper. Their marketing and retail executives publicly espouse the opinion that, now that everyone sees Apple computers as cool, Microsoft has Apple right where they want them.

They’re a software company whose primary platform no longer appeals to people who like computers the most. Their executives are either in denial of, or do not perceive, that there has emerged a consensus — not just among nerds but among a growing number of regular just-plain users — that Windows PCs are second-rate. They still dominate in terms of unit-sale market share, yes, but not because people don’t recognize Windows as second-rate, but because they don’t care, in the same way millions of people buy metric tons of second-rate products from Wal-Mart every hour of every day.

The older article explains why high-end lawnmower manufacturer Snapper stopped selling its products at Wal-Mart. Here’s Snapper’s then-CEO explaining why it was ending the relationship:

“As I look at the three years Snapper has been with you,” he told the vice president, “every year the price has come down. Every year the content of the product has gone up. We’re at a position where, first, it’s still priced where it doesn’t meet the needs of your clientele. For Wal-Mart, it’s still too high-priced. I think you’d agree with that.

“Now, at the price I’m selling to you today, I’m not making any money on it. And if we do what you want next year, I’ll lose money. I could do that and not go out of business. But we have this independent-dealer channel. And 80% of our business is over here with them. And I can’t put them at a competitive disadvantage. If I do that, I lose everything. So this just isn’t a compatible fit.”

The bottom line is that Snapper could not maintain their high quality or their reputation for high quality in a market where price was the main factor in purchase decisions. It doesn’t surprise me that Microsoft’s current Chief Operating Officer came from Wal-Mart.

As I side note, I just went to Apple’s online store and saw that the 17″ MacBook Pro costs $2,499. Then I went to dell.com and built a Dell Precision Workstation M6400 with nearly identical specs — the total was $2,864.

73 thoughts on “The Wal-Martification of Microsoft

  1. I really enjoy the fact that the Apple fanboys forget the fact that when comparing Macs with Windows PC’s, they cannot assign the same accountability for products between the two companies. Microsoft makes the software, their “partners” build the hardware. HP and Dell, the two largest of Microsoft’s partners bear much of the blame when it comes to losing the higher end market. HP and Dell have turned much of the platform into the commodity market it is today. Both manufacturer’s (which collectively sell roughly 50% of PC’s) have produced commodity designs, and make PC’s that are nothing to fawn over. This in turn, has made it’s OS a ‘cheap’ commodity item. In the battle to make razor thin margins on commodity hardware, niether company has brought forth any significant innovation in PC design. The Adamo’s not a bad start, but underpowered and overpriced. The Voodoo Envy series is nice, and a solid machine, but not really worth the premium over a lesser machine. The same could be said for the Sony Vaio series. Nice solid machines, with decent design, but are they really worth the price difference over a lower cost machine? Combine this with Apple making beautiful high design, quality hardware, then the reasoning makes sense.

    Also, stating that Apple has 90% of the marketshare over a thousand dollars also strongly implies that 90% of the market pays less than a thousand dollars for a PC. Without Microsoft, and the commodity PC makers, the internet explosion, and the huge market for web desginers, coders, and other web centric folks would not have a market to sell into. Hate on 90% of all PC’s if you really want to, but the market for all this stuff doesn’t just come form the digirati, it comes from the casual user sitting in front of their $600 Dell, HP, or emachine.

  2. Karl, wow things have really changed. When I was a freshman living in Lechner and a sophomore living in Clements (in 2000 and 2001, respectively), my iMac was one of maybe half a dozen Macs in the entire dorm. They’re up to 40% now?

  3. Setting aside the Mac vs. PC aspect of this thread, the crux is whether or not Wal-mart provides good insight into the MS business model.

    The analogy might break down when you throw Moore’s Law (and its derivatives) into the mix. If WalMart could reliably cut the prices of the same equipment by half every 18 months, it would have a really excellent business model. The problem with Snapper was that it was running out of room to cut prices. I’m not sure computing has the same floor.

    Maybe this doesn’t sink the analogy completely, but it’s worth thinking about.

  4. The way I look at it is — after having built my own PCs since 1995 and having owned a shiny Macbook Pro for nearly a year — the price premium you pay for buying a Mac as an office-and-internet machine is made up for by the lack of stupid tech problems.

    Here in Ottawa Canada minimum wage is nearly $10/h, so it takes less than 1 month of full-time work to make $1000. The base 13″ Macbook Pro is about that much more than a basic Windows laptop. So, if that Windows machine gives you anywhere near one work month of hassle thanks to its maker and OS over its lifespan, you have then lost all the savings of NOT buying the Mac.

  5. There is also a lot of difference between a $200 lawnmower and an $800 lawnmower. The cheap mower has plastic wheel bearings that will eventually deform. The expensive one has metal ball bearings that can last for ages. The cheap engine runs harder and will fail sooner. The expensive engine is designed to last and can be repaired. The adjustment mechanisms on a cheap mower are usually simple metal flatwork. The expensive mower with have levers, cams and slots as necessary for long term smooth operation. Mind you, I bought the cheap mower not having a lot of lawn, but I looked at the high end models as well. If I mowed lawns for a living I wouldn’t think of using a $200 mower. I’d have to buy two and rotate them in and out of the shop.

    Walmart is aimed at delivering value to a large chunk of the population. There are lots of people who find it a bit pricey; they shop at dollar stores and cruise for discards. There are lots of people who find Walmart too cheap; they shop at more expensive stores with better service and often better quality goods. Walmart does not compete with J Crew, Bergdorf Goodman, or Ralph Lauren. (Hell, Ralph Lipschitz could sell a line of his rags at Walmart without cannibalizing his prestige market.)

    The computer market is a bit different. There is a huge enterprise market with lots of customers buying lots of machines. Their goal is standardization and corporate control. They want to know every file on every machine. When a new release of something comes in, they want it installed everywhere. If the mechanisms that let them do this also entail a security and maintenance cost, so be it. Since they are buying in quantity, they want the best price they can get, and will often put the contract up for bid. They are more like Briggs & Stratton or Honda selling lawnmower engines, generally to lawnmower manufacturers.

    The consumer market is an afterthought for Microsoft. It may be a real concern for Dell, HP, Lenovo and the like, but, even for them, the big deal is the enterprise market. This shows in Microsoft’s software. It is perfectly enterprise friendly with lots of back doors, road maps, and enterprise features. Yes, it has consumer features grafted on, but they are grafted on and it shows.

    The consumer market is the primary focus for Apple. They are aiming at the user who is buying, maintaining and using his or her own system, so they spend their time on making it pleasant, easy to reconfigure, standards compliant and flexible. That’s right, consumers want flexible systems. They might not be playing with video now, but they might like to. They might not be doing digital photography now, but they might like to. There’s a whole list of capabilities that Apple provides, and they won’t sell you a system with less.

    Even at the retail level, Microsoft isn’t exactly Walmart. They remind me more of the odd lots companies that would sell manufacturing overruns back in the 60s and 70s. You could get a great, cheap typewriter if you didn’t mind where some corporate logo had been ripped off. Ditto for telescopes, binoculars, institutional sized cans of food, aprons, uniform pants and so on. They were made for particular buyers, but they made too many, so you could get a great deal.

  6. I would argue a form true computer lover is one like me, currently running after effects with 64-bit power, with a box that that has hardware hand picked to last longer, cost less, and has much more power than any preformed apple computer has to offer, I would say true love is knowing how all parts of your computer work together and having control over their relationships, a control apple will never invest in because they want that control and will not give it to the user. Microsoft produces the only OS that let’s me have this kind of love for my computer.

  7. I am buying a Toyota instead of a Porsche Boxer.

    It carries the groceries just as well, and is soooooo sexy.

    I can pick up any honey I want with it (at certain intersections) No viruses yet.

    WOO HOO!

  8. Microsoft and their partners make cheap PCs. Microsoft does the software.

    Apple does not make PCs. Apple makes high-end computers – all of it, the hardware and the software.

    Microsoft and their partners make PCs for cheapskates.

    Apple makes the computers we love and are fanatic about.

  9. Re: build quality Everyone close your laptop lids, pick it up, grasp your laptop on the left and right sides, and twist back and forth as if you’re going to wring out a wet cloth. Did it creak? Did u feel something shift?

    I invite you to do the same with any MacBook or even MacBook pro G4. Macintosh build quality is an order of magnitude higher than PCs.

    Re:software 90% can be done on a pc? The other 10% being creativity suites that apple does so well. Learning curve for iLife is a walk in the park. My kids can do so much more on a mac than a pc right out of the box making their own movies, books, calendars, websites. Happens on a PC? Maybe… But not right out of the box! My “oobe” with a mac is much more enjoyable. Cause what do u do when u break out ur new PC? One word: solitaire. I exaggerate, but u get my point.

    Running windows concurrently on a mac or boot camping it? It’s like buying 2 laptops in one! I still have my PC rig and I play crysis and bf2142 along with L4D…

    i have a $299 netbook #ackintosh to do 90% of what I need to do.

    Point is, if you’re still arguing mac vs pc and price points, you’re not geek enough. Macs just work. PC hardware allow me to have crazy framerates in Crysis. Ubuntu on my dell d410 just so I say I did it and talk to my linux friends. Whatever u choose u’ll still need to buy a productivity suite. Buy what u need ppl. I have both.

    I am not responsible if u damage or destroy your PCs. And if u did damage it, get a mac… Or a toughbook… See how much that sets u back!

  10. Here’s what I know: my iMac has been humming along for a year now without any problems to speak of. In that same span, I’ve spent plenty of long evenings helping friends who got a “great deal” on some Dell or HP box.

  11. Being called “Unix” and being Unix are quite different. Apple’s lousy OS is based on a rock-solid BSD that’s been beaten into a sorry state. Solaris is Unix, SCO Unixware is Unix. Apple just made BSD work sort of like Unix. Not the same.

    You’re all just being silly. Normal people don’t use Windows because they’re sheep or uninformed. The fact is that they like to get things done. They aren’t nerdy people who care what computer codes are running behind the scenes. Firefox runs on all platforms. There are hosts of office sweets for any platform and so on. Moreover, Windows has exponentially more software available for it and while your cherished glowing apple computer can run Windows, you have to restart your machine. Windows users have the benefit of just clicking an icon.

    I mean let’s face it, you’ve all been pressured into buying a glowing apple computer because you want to be apart of some group which you’ve been led to believe is cool and unique while it’s just plain nerdy. Solaris is an alternative operating system and you’d never say a Solaris user was cool.–And we (yes, I use Solaris) have a much better platform (real Unix!) than a gay, err glowing apple user could ever imagine. Clearly each of you only uses the internet on your apple PC because if you really had anything important to get done, you’d be using a Mic or a Sol.

    To the person commenting on the Power platform: don’t be foolish. Power is far superior to our lousy x86 machines. (yes, even my Thinkpad T-series)

    I’m sure i’ll be derided, but apple doesn’t have 91% or premium PCs for any reason other than poor marketing and up-selling from real computer companies. Besides, let’s face it, you bought a computer from a music device company. Grow up sally pants.

  12. i got my 60yr old mom an entry level macbook. after 10 years on windows she said “this is a far better computer” and “its beautiful”. that says more than any mac evangelist’s speech, considering she couldnt tell a mac geek from her own front door.

    mac is a superior product. im saying this after 10 years of trying to get work done on windows machines.

  13. Let’s not make this the most derivative and generic Windows vs Mac flame war, please. If you like Windows, you have my blessing. If you think that over $1,000 is too much to pay for something that you use to check email and surf the Web, you have my blessing. If you have a $5,000 quad processor Mac Pro because it looks good next to your stereo, you have my blessing.

  14. That’s cute how you selectively put up only the comments that you agree with. You’re a sad little man/woman. Obviously, you’re one of the sheep I commented on.

  15. Just hadn’t gotten around to approving everything, Jerrid. I certainly wouldn’t want to be the person who prevents the world from knowing that you think the word “suites” is spelled “sweets.” Although, to be honest, on any other day I’d delete your comment for its use of “gay” as a pejorative.

  16. My mistake. Also, I’m not sure, but I routinely type homoephones instead of the word I intend. Maybe a form of dyslexia?

  17. My mid 2007 spec Macbook Pro is now on its third mainboard, fourth battery and third optical drive. People who bang on about the mythical build quality of Mac’s need to take their head out of the sand and realise Apple use the same materials as every other vendor. They are even built in the same chinese sweatshops.

    Anyway, 91% of the high end retail market in the US alone is the real figure behind that number. I wonder what it would be if you took all sales (companies like Dell/HP/Lenovo who do the majority of their sales online, with little to no high street outlets) from the entire world market.

  18. My mac just works, saves me so much time! I have more time for the rest of my life.

    Lifes to short to try and convince people on forums that Mac’s are better when they have never tried one (for more than a few hours).

  19. This is a great story and it’s good to see people putting quality and customer experience over the all mighty dollar. It’s not about how much you can make. It’s about how many you can successfully serve.

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