Why Microsoft Closed Its Experiential Stores

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Microsoft may have missed the mobile race and traditionally worked in a closed ecosystem, but one revolution which it will certainly not miss out on is the Cloud that is gaining ground in India and around the world. In its announcement, the company said that Microsoft Store physical locations “will result in a pre-tax charge of approximately $450 million,” or $0.05 per share, and will be recorded as part of the fiscal quarter that ended on June 30. The sum is expected to mainly consist of “write-offs and impairments.” In spite of shedding the majority of its dead weight, Microsoft isn’t giving up on physical retail all together. The company confirmed it will keep four “Experience Centers” open: New York City’s Fifth Ave. flagship, London’s Oxford Circus, Westfield Sydney and the Redmond, Wash. Microsoft campus location.

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The big problem was Microsoft’s presence as a more utility-focused software leader, said Sanchit Vir Gogia, chief analyst and CEO of Greyhound Research. “One of the longest standing battles for Microsoft has been an identity crisis in the hardware space,” he explained; despite significantly investment in shiny gadgets through the 1990s and 2000s, the company’s revenue still mostly comes from its software products.

This could end up boding well for the company, as it scales back retail ambitions and shifts focus to e-commerce. Vir Gogia said the idea has always been to use these high-touch stores to “better position products against Apple.” That’s especially important for Xbox, Vir Gogia noted, “an area where Apple has no formidable presence.”

Despite the limited success that Microsoft has had in brick and mortar, the effort did help put a serious stamp on its hardware business ambitions. The stores’ feedback loop and brand awareness could also be credited with pushing design further, said Vir Gogia. In recent years, competing for Apple customers has resulted in successful devices, like the Surface Pro range and its Microsoft Arc.

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<strong>Analyst: Sanchit Vir Gogia</strong>
Analyst: Sanchit Vir Gogia

Sanchit is the Chief Analyst, Founder & CEO of Greyhound Research, a Global, Award-Winning, Digital & Technology Research & Advisory firm.


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