Microsoft Learning Retail Strategy and Distribution

You might remember, when the original round of Surface tablets released, Microsoft made too many and had to take a major write-down for the failed Surface RT units. To get rid of the burgeoning stock, the company resigned to giving the tablets away at its conferences like the World Partner Conference, while selling them cheap at TechEd. But, this wasn't Microsoft's first major hardware failure.

It's easy to forget that Microsoft has been in the hardware retail business for a long time, with its keyboards, mice, webcams, and other peripherals. For those, the company seems to have been successful. When it failed is when it would also occasionally deliver more monumental hardware, designed to compete directly with existing technologies. Who remembers the Zune and the Kin? The Kin was a failure from the start, but the Zune was arguably a much better piece of hardware than the iPod. However, neither could be considered even a mild success.

Even today, we see Microsoft struggling with its Windows Phone hardware. Microsoft's own Lumia brand, with hardware specs that should be leading the industry, is scrapping to find refuge in consumers' hands. Microsoft may lead in the Windows Phone hardware category, but Android and Apple are so far ahead overall, many suggest that the software company should just give up.

Microsoft truly makes great hardware, but consumers rarely get a chance to realize it over the marketing noise of Apple, or the cheap cost of Android devices.

But, something has changed, and recently. Microsoft is learning.

Who knows, really, what has caused the change. It could be simply that Microsoft has finally figured out how to change its public perception. And, that's probably part of it. But, the company has also started showing signs that it finally gets how to be a hardware company.

Take for example, the Microsoft Band. Reports read that the company only released 30k to start. Blame it on the resounding sting of the massive Surface RT disaster, but it seems that Microsoft was more tentative this time. But, what resulted was Microsoft being able to market that the Band was continually "sold out" online and in its brick-and-mortar locations. It was able to test the waters in a market that was already flooded with fitness devices, and if you believe the hype, the test was successful. The Microsoft Band now appears to be a sought-after device, and the company has promised to make more stock available. After realizing it might have a hit on its hands, the company has also expanded its availability to new retailers, Best Buy, Amazon, and others.

And, it keeps learning.

Over the weekend, in an unprecedented move, Microsoft seems to have made a deal with Costco, the wholesale retailer. If you're a paid member of Costco, you will eventually be able to walk into your location and snag a Surface 3 bundle. The low-end, 64GB Surface 3 sells for $499 by itself, with the cover and pen sold separately. But the Costco bundle provides the same model Surface 3, a black Type Cover, and a Surface Pen for just $599. Bump up to the 128GB version and the same bundle is just $699.

This is a very different Microsoft in a number of ways. We see that already. But, under new leadership, it's amazing to watch the company finally learning from past mistakes, particularly in retail.