The Microsoft Store Closes Permanently in Sudden Exit from Retail Channel

The Microsoft Store will remain closed permanently with the software giant’s decision to shift its retail operations to digital channels.

Microsoft today announced the immediate shuttering of all 116 retail stores that it operated. The company will take a $450 million charge this quarter in costs associated with the closing of the Microsoft Store.

Like all nonessential retailers, Microsoft closed its stores in March as the COVID-19 pandemic started spreading in the United States.

When the U.S. quarantine began, the Microsoft store employees started providing sales, training and support remotely. Now that the Microsoft store locations will remain closed, employees will continue in those roles, remotely or from corporate locations.

In place of the retail stores, Microsoft said it will continue to expand the digital store on its website. Also, the company plans to redesign its Microsoft Experience Centers in London, New York, Sydney and its Redmond, Wash. headquarters.

Microsoft’s David Porter

“We are grateful to our Microsoft Store customers and we look forward to continuing to serve them online and with our retail sales team at Microsoft corporate locations,” said David Porter, corporate vice president for Microsoft Retail in today’s announcement.

Closings Were Unexpected

Microsoft’s sudden exit from retail was unexpected. “I was shocked,” said Jeffrey Goldstein, managing director of Queue Associates, a Dynamics 365 partner.

Queue Associates’ Jeffrey Goldstein

As recently as last year, Goldstein said it appeared Microsoft was increasing its investments in the Microsoft Store. Last summer, Microsoft opened its first store in Europe with an elaborate flagship location in London. “What a facility they built there,” said Goldstein, who attended several events there.

While the Microsoft Store primarily attracted consumers, Goldstein said it served partners as a good source for leads and meetings. Goldstein said business specialists at many of the stores collaborated with the International Association of Microsoft Channel Partners (IAMCP).

Many chapters held meetings at the stores, which also provided referrals. Likewise, some partners would bring or send clients to the stores if they needed hardware or wanted a demonstration.

“If someone came into a store and needed Dynamics, they would refer them to the IAMCP,” said Goldstein, who is immediate past president of the IAMCP’s U.S. chapter. “It was a really good vehicle for promoting Microsoft and Microsoft products and it helped get people out of their offices.”

Despite the closing of the physical stores, Goldstein is hopeful that the team will continue to work with partners. “The business sales specialists are still there and still dealing with the local businesses,” he said. “They just don’t have the physical brick and mortar store.”

A Different Era

The sudden announcement was unexpected, but not entirely surprising. The pandemic has hastened the use of digital channels that are making physical retail stores less strategic.

But the mindset was quite different back in Oct. 2009, when Microsoft opened its first retail store in Scottsdale, Ariz. At the time, the Microsoft Store was an effort to compete against the ubiquitous Apple Store.

Microsoft conspicuously opened stores near Apple Stores, typically in upscale malls and urban districts. For example, Microsoft’s flagship New York City store opened in 2016 just blocks away from an Apple Store. Through the years, Microsoft incrementally opened new stores. Most of the retail stores were in North America.

While the Microsoft Store lacked the cache of Apple Stores, the company entered the retail arena during a different era. Microsoft had just launched Windows 7 and was on the cusp of launching its ill-fated Windows Phone. It was also pushing hard on its still popular Xbox gaming business.

It occasionally held events for major launches, such as the release of new Surface devices. The stores drew their largest crowds five years ago with the launch of Windows 10.

Retail Decline

Microsoft’s Porter underscored the shifts to digital, accelerated by the COVID-19 pandemic. “Our sales have grown online as our product portfolio has evolved to largely digital offerings, and our talented team has…

…proven success serving customers beyond any physical location,” he noted.

Besides COVID-19, Microsoft’s business has since changed, as has its need for retail as a marketing and sales channel.

Forrester’s Jay McBain

“The retail landscape continues to shift, and COVID-19 has added a new calculus for technology companies, said” Forrester Research principal analyst Jay McBain. “From a B2B perspective, Microsoft continues to leverage a robust network of hundreds of thousands of channel partners around the world and is growing that number faster than any company in any industry. There are larger ramifications for the retail/consumer side here, but the community that has been built around gaming and consumer devices should support the shift to digital.”

Robert Spinger, president of IT services provider Business Tech Team recalls attending some IAMCP meetings in New Jersey. But he didn’t make use of the Microsoft Store for his own business.

“I know they offered opportunities to use the store for presentations,” Springer said. “I wasn’t active with the store, but I occasionally took a couple of people there to look at some products.”