So long, Microsoft Stores.
Microsoft is shutting down its entire physical retail operation and instead will focus on its digital storefronts via Microsoft.com, as well as stores in Xbox and Windows.
The surprise announcement comes amid the COVID-19 pandemic that has forced companies to temporarily or permanently close brick-and-mortar locations. Microsoft closed its stores in March. Apple began re-opening some locations in May but has re-closed stores in areas where the coronavirus cases are spiking.
It isn’t clear how the pandemic affected Microsoft’s decision to shutter its physical store strategy. The company said its retail team members “will continue to serve customers from Microsoft corporate facilities and remotely providing sales, training, and support.”
No layoffs are expected. A Microsoft spokesperson said that “all employees will have the opportunity to stay with Microsoft.”
Microsoft has more than 70 U.S. stores; seven in Canada; and one each in Australia and England. It opened its first location in 2009. The company built a flagship location along New York City’s Fifth Avenue in 2015.
I feel for the Microsoft Store employees finding out the news today. I’ve visited a bunch of stores and the employees have always been very knowledgeable and welcoming. The stores were great for troubleshooting and contributed a lot to the success of the Surface brand
— Tom Warren (@tomwarren) June 26, 2020
The closures will result in a pre-tax charge of approximately $450 million, recorded in the company’s current fiscal quarter ending June 30.
“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,” Microsoft Corporate Vice President David Porter said in a statement. “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.”
The physical stores doubled as a showroom for Microsoft’s hardware products, giving potential buyer hands-on time before purchasing. That could be a downside as Microsoft prepares to release new Surface devices and a new Xbox console later this year.
Porter detailed the new approach in a LinkedIn post.
“We will make our digital storefronts the best place to learn, buy, and receive support across software and hardware,” Porter wrote. “Today we offer tools including virtual customer support from our trusted experts, online tutorial videos, virtual workshops with tips and much more. We will continue to invest in innovative digital solutions, including new services such as 1:1 video sales support.”
It’s a new day for Microsoft Store and while our approach to retail is changing, our talented team is here to serve you with sales, training and support online at https://t.co/barHcq4ppf. Learn more: https://t.co/H2vcEoZ4Tw
— Microsoft Store (@MicrosoftStore) June 26, 2020
Microsoft said it will continue to operate Microsoft Experience Centers at company campuses in London, New York City, Sydney, and Redmond, Wash.
The company entered the brick-and-mortar store business much later than Apple, which now has more than 500 retail locations.
Microsoft’s announcement comes amid a wave of bad news for physical retailers as they grapple with unforeseen challenges associated with operating stores during a pandemic. Earlier this month, bankrupt J.C. Penney announced plans to close 154 stores across the U.S. Gamestop is closing at least 320 stores; Gap, Pier 1, and Victoria’s Secret are also following similar strategies.
With the rise of e-commerce, many physical retailers were already facing challenges prior to the coronavirus outbreak and the pandemic accelerated their business challenges. Microsoft, with its strong balance sheet, certainly could afford to continue operating physical stores. But as Axios tech editor Kyle Daly noted, the decision to end its brick-and-mortar strategy reflects the company’s investment in the enterprise market and “accelerates that retreat from focusing on the consumer market.”