FILE: Microsoft Tech giant, Microsoft, ventured into retail in October 2009 when it opened its first physical store in Arizona. Today, Microsoft globally has 80 full line stores; 34 specialty stores; 19 store in stores; and two flagships. It launched its second flagship – and first outside of the US – in Sydney’s Pitt Street Mall in November 2015. Justin Grey: The Pitt Street flagship has been open for three months now – how is it performing? John Ford: It’s three months old and we’re very, very happy with the things that I’m mostly worried about. I look at this store’s customer traffic – people are in this store, engaging with my employees. I watch the engagement level, I watch the Answer desk and see how busy it is. And we’re seeing the service level pick up all the time. We’re seeing more and more appointments at the [Answer] desk; people are realising that we’re here to help them. If you watch the floor you’ll see customers come in all day long. Our employees’ engagement levels are improving constantly, so I’m very, very happy with those key things that I tend to look at. JG: Sydney is an interesting location for just the second Microsoft flagship after the inaugural flagship in Manhattan. What key elements informed that decision? JF: If you look anywhere in the world, how many great locations can you find on a foot traffic street like Pitt Street, in an iconic city in the middle of the CBD, and on a corner section with glass exposure on both sides? Physically it creates a very strong presence, so the location specifically drove our desire to be here quickly. Because this is a perfect spot. You’d always love to second guess – do you want it bigger, do you want other things – but it’s an amazing location from the view of visibility, and then the foot traffic outside is outstanding. The exposure we get for the brand and for our products has been fantastic. JG: The quality of the Pitt St location notwithstanding, were there other factors that led to Sydney getting the new flagship store? JF: For great retail, the location matters a lot. Certainly when you look at country demographic and you’re researching about why you want to be in a country, you tend to find places where people buy technology and they’re early adaptors and they use the technology. And Australia as an economy has shown that it does really well with purchasing technology overall. And generally when you look at what we’re looking for, it’s a specific location. We have a great history here and we’ve been here for 30 years; our corporate team is very well established, so we know a lot about the environment of the business that we’re stepping into. And when we find a location like this that matches up with that connection to our corporate world, it’s a really great spot for us. JG: It’s quite a warm, welcoming store design, with all the timber finishes, rolling video screens and interactive digital features. Was that an emphasis of the store’s design? JF: It’s something we’ve always loved. There’s been debate around would you or wouldn’t you do something different with the floors. But we love the feel of it. We’ve tested in small format stores other looks, but it’s never come out feeling the same. So we love the way it feels and we like the way that customers feel when they come in. It’s hard to imagine changing it; it’s certainly worked out well for us. JG: How does the Pitt St flagship compare to the original flagship in Manhattan? JF: It’s similar in look and feel. The Manhattan store is a little more narrow and long, and this ceiling is a little bit higher. So the structure is definitely different. [Manhattan] is multiple levels and goes to a third floor, which we don’t have in this store. And the Manhattan store has glass on two sides, so in the New York store there’s a bit more visible exposure to the street. JG: How popular has the theatre space on the second floor of the Pitt St store been with business customers? JF: It’s been constantly busy. It’s been fun. This is new for us – it’s the first time that we’ve ever done a dedicated space like this that we can close off. It’s been fun to do something where we can bring in community groups and business groups and enterprise groups and have discussions around our technology or products and training and teaching all in one spot. JG: You’ve said that Microsoft, “opened our own stores to control our own destiny”. Please expand on that… JF: I think when you’re building a product and you have a physical product like a Surface or a Surface Book, if you’re customers buy it and there’s a problem, they want to come and talk to you about it. And 10 years ago, if you needed to talk to Microsoft, it was hard. You couldn’t necessarily go directly to Microsoft and talk to them. Customers want their problems solved. It’s easy to point fingers, and when they come directly to Microsoft, you can’t [point fingers]. You have to take ownership of that. So we do our best to make sure that we’re serving them, listening to their needs, solving problems for them. But you build a physical store and you can do that. You can build a face for the customer to come in and engage with and talk to, and it’s worked out really well or us. We’re very happy with the direction that we’ve gone with it. The customer feedback has been very positive. JG: What’s your take on suppliers opening their own retail stores? It’s cutting out the middleman, but is there an element of cannibalising the market for other retailers? JF: I’d love to think that there’s enough evidence to show that we’ve been very complementary to the work that they’re [retailers who sell Microsoft products] doing. The exposure for the brand, the exposure for the products, is a very strong thing. If a customer comes in and has a great experience but buys somewhere else, it’s a great win for Microsoft. So for me that’s a very positive attribute. If people see the brand more and it causes them to think about the brand, as an alternative to other things, then that’s fantastic. JG: What’s the differentiation between Microsoft’s full line, specialty, store in store and flagship outlets? JF: The flagships are certainly the premium; each of our two flags are quite unique. Our full line formats are a bit more structured, so you’ll see them look very, very similar as you go from location to location. They’re generally inside of a mall and generally they’re between 500 to 1000 square metres, roughly. They’ll have all the elements that you’ll see in [the Pitt Street Mall store], minus possibly things like the Surface Hub and a few of the large video walls. Then as you go into the specialty stores you shrink the assortment down to a very finite group of things, which is generally a couple of our OEM products, plus XBox, Surface, and our key third-party products. So it really gets you down to a small kiosk-type environment, it could be as much as a small table area or a section of tables – no walls, open area, in the middle of a mall. It gets you great exposure in places where you may not have real estate available. You can step in, come in early to test the market out and make sure you’re doing the right thing and that your products work well in that mall. The store in stores are partnerships with our retail groups in mainland China. They’re located inside of their retail locations. So they sell the product on our behalf and we rep the product in that location. JG: Do you have a focus for the Australian market beyond the Pitt Street store? JF: What I’m focussed on and worried about right now is Pitt Street. My mental space is really focused on making this as best as we can make it. The future, we’ll figure that out someday when we’re ready for that. At this point we’re really, really focused on making this as premium as we possibly can. The mission is to connect community to the stores – the Microsoft stores are not merely here to sell products. Our community events are a good example of things that we do that create that kind of experience. We do some things that most retailers probably wouldn’t want to do because they cost money, but we do it because it’s the right thing for the customer. JG: What’s next for the Pitt Street store in terms of events and community engagement? The bar has been set quite high with the things that have been happening to date… JF: We’ll continue to evolve the events that we’re doing. There’s something about creating an experience that causes people to feel something. When they feel the right thing, they want to come back, and they want to bring someone with them – they want to share that with people. Whether we have Master Chief from the Halo franchise out front of our store taking pictures with customers, that creates energy and a buzz and a feeling that, ‘Maybe I want to come back and bring my kids or my friends and experience the same thing’. It’s fun to watch that engagement level and that creates an experience that you can’t buy or sell. You just have to create a feeling, and then people want to come back and experience it over and over. The NFL experience we had with Jarryd Hayne and almost 400 people coming in was great. And it’s nice to be in a space where you don’t feel like you’re not trying to decipher all the demographics. You’re building a store to meet the community needs, and it’s been fun. We have ability to do fun, energetic things that are non-saleable, so we’re giving back. There’s not a lot that we can’t think of and make happen. JG: What first-hand advice can you pass on to retailers looking to set up stores in China? JF: Be true to your culture. There’s a sense that when you enter an emerging market or a different market, you’ve got to somehow change who you are. And the biggest danger that I saw from companies that were moving into markets like China, is they would become a Chinese version of themselves. And what you want to be is a version of yourself that happens to be in China. And you might modify a few things to be respectful of the country that you’re in. But the general core things that you’re trying to achieve shouldn’t change that much. I think you can maintain the company culture in those environments while still be respectful of the country that you’re in. Want more Inside Retail? Subscribe to Inside Retail Weekly now and get our premium print publication delivered to your door every week.