Due to irreconcilable business differences, retail juggernaut Harvey Norman will not stock Xbox, Microsoft's first foray into the gaming console market, when it is launched on March 14.
Harvey Norman is the only dealer named in an ARN investigation three weeks ago that will not become an authorised retail partner for Xbox. Microsoft was looking to bypass the majority of independent dealers and retailers in favour of several large retail chains, such as Toys R' Us, Myer Grace Bros, Kmart, Target, Big W, and Electronic Boutique.
Harvey Norman's replacement in this line-up appears to be David Jones and the Powerhouse outlets of Dick Smith Electronics.
"Harvey Norman is a valued long-term partner. [But] we weren't able to get our business models to fit together," said Alan Bowman, the regional director for Xbox. "We just weren't in a position to deal with them."
However, Bowman was quick to point out that Harvey Norman will continue to be an important Microsoft partner and the pair will be working on an agreement to sell the Xbox console after the "launch period". In an interview with ARN three weeks ago, Bowman said the launch period would be defined as the first year of the product's release.
Bowman dismissed reports from a source in contact with ARN that Harvey Norman was upset by Microsoft's choice of distribution partner, Australia Post. It was alleged that Australia Post would only supply a retailer's products to a central location, after which each authorised partner would be required to supply its own stores. Harvey Norman has a decentralised distribution policy, where product is shipped directly to individual stores, and was reportedly unhappy with the situation, the source claimed.
However, "the issue was between Harvey Norman and Microsoft", Bowman said. "It had nothing to do with Australia Post."
Harvey Norman's general manager for computers and communications, John Slack-Smith, was unavailable for comment at press time.
Although it is a controlled launch, Bowman said the authorised retail partners capture a customer base exceeding 85 per cent of the current console market coverage.
Microsoft has also recruited the TMD Approach arm of The Marketing Group to provide the in-store merchandising and training teams to support the launch.
Bowman would not be drawn on how much Microsoft is investing in the launch of Xbox other than to say "a lot", given the amount of merchandising and display material that is currently being installed in stores throughout the country.
The merchandising includes an interactive display enabling customers to trial the "Xbox experience" before deciding to purchase. "It's nothing like Sony or Nintendo have ever been able to do," Bowman said.
TMD Approach has orchestrated launches and in-store displays for the likes of The Smiths Snackfood company and Kellogg's. Bowman said the company has been working on a "whole new brand, look and feel" for Xbox unlike anything Microsoft has done in the past.
"This is an unprecedented distribution event for us, so we have developed with our partners a team system, which we think will provide maximum customer satisfaction," he said.
Bowman also said the Xbox gaming console will ship with broadband capability for online gaming, but it will be some time before Microsoft develops the back-end systems to offer online gaming services in Australia.