The Significance of Microsoft Closing its Physical stores

Author- | Posted- | Updated: June 28, 2020 |

Microsoft’s Decision to Close All Physical Stores

Microsoft has announced that it is going to close all its physical stores and instead of offering its customers an omnichannel shopping experience, the company will use its online sales channel only for direct sales to customers. The role of physical stores in the sales strategy of Microsoft has slowly and gradually diminished as the sales from online channels continued to grow. An important reason that the company has decided to switch from omnichannel to online is that its product offerings are mainly limited to digital. The company has also enjoyed a lot of success in selling its products online. According to Microsoft Vice President David Porter, the salesforce of Microsoft has experienced considerable success selling to customers beyond physical channels. The company reaches more than 1.2 billion customers across 190 countries every month through its online sales channels. 

The technology industry and market are evolving faster and a large number of companies including retail brands are switching to the use of digital in order to grow sales and provide their customers with an omnichannel experience. In the case of Apple, its physical stores have always been an integral part of its marketing and sales strategies. Moreover, while the number of Apple’s digital offerings (services) has grown in recent years, it is still largely a hardware company that makes most of its money from the sales of iPhone, Mac, and iPad. So, it might be difficult for Apple to do away with its retail stores and move solely to an online experience. The Apple stores do not just drive sales but they play a critical role in the company’s marketing of its products and services as well.

 Microsoft has also started Industry Experience Centers where it showcases technological innovations. These Experience centers mainly showcase market-disrupting technologies brought about by Microsoft and how customers are using them to build growth momentum. In October 2019, the company opened a Microsoft Industry Experience Center at Redmond, Washington. 

Microsoft closing its physical stores
Microsoft Industry Experience Center, Redmond, Washington.

“The 23,000-square-foot center showcases 60 fascinating, real-world examples of customers and partners that are innovating their businesses and disrupting markets with Microsoft technologies.” 

Microsoft News

These experience centers were meant to grow brand recognition, connect people with Microsoft’s technologies, and improve their awareness of these technologies.

Microsoft is ready for a Post Covid World

However, Microsoft’s decision to shut down all retail operations signifies a few other things as well. The company has also planned to reimagine its experience centers for the post-COVID-19 scenario. The retail staff will continue to serve customers from Microsoft Corporate locations. Another stronger reason that the company has moved to a fully online sales format is Covid-19. Simply put, Microsoft is preparing itself for a post-COVID-19 world and its transition to online sales channels signifies that the world will not anymore remain the same.

In other industries too companies are preparing themselves for this transition. They know that in the post-COVID-19 world, the scene is going to be different and people will rely mainly on online channels for information and shopping. Even in the automobile industry, companies have started adopting the home delivery model. Microsoft’s decision paves the way for a full-fledged transition to a post-COVID-19 market that operates largely with the help of digital technology and eliminates the physical touchpoints. People will have grown used to physical distancing and this situation will last long based upon the current scenario around the world. Microsoft had closed its physical store locations in March due to the Covid-19 pandemic. The dependence of small and large businesses on digital technology had grown by the time since most businesses were forced to shut down their physical operations and were relying on digital sales and marketing channels as much as possible to continue operations.

Microsoft’s retail team continued to help small businesses and education customers with their digital transformation even during the pandemic. Its retail team also provided virtual training to hundreds of thousands of enterprise and education customers on remote work and learning software, apart from helping customers with support calls. It hosted more than 14,000 workshops and summer camps as well as 3000 virtual graduations to support communities. According to David Porter, having a diverse store team with unique backgrounds and skills helps a lot in times like these. Microsoft deliberately attracts store talent from diverse backgrounds. The team has been working remotely during the last few months in order to serve a large customer base from various geographic regions. The team speaks more than 120 languages and Microsoft is committed more than ever to grow the diversity of its talent. Apart from serving individual customers, small businesses as well as education and enterprise customers, the team also focuses on building a pipeline of talent with transferable skills. 

Things have changed drastically during the pandemic and the need for digital skills and resources has also suddenly grown a lot for individuals as well as small businesses. A very large number of businesses have been forced to shut down operations and several of them shifted to an online-only model and asked their workforce to work remotely. Companies are using software like Microsoft Teams to manage their teams working remotely.

A very large number of jobs and particularly in industries like aviation, hospitality, education, health, manufacturing, and retail were lost due to the pandemic. The reliance of people on digital skills and resources to remain financially secure has also grown due to this.

In such a scenario when a large part of the market and industry is bleeding, companies like Microsoft have continued to find growth and it will also be the easiest for them to transition to the post-Covid-19 world.  The market cap of Microsoft is approaching $1.5 trillion while Apple’s market cap has remained above the mark for the last several days. Microsoft has achieved impressive sales through digital stores during the pandemic which has also worked as a confidence booster for the company. Moreover, keeping its physical stores operational during this time will not be highly profitable for the company. People are practicing physical distancing and the world will have changed profoundly by the time this crisis is over. To make up for the interactions that used to take place inside the physical stores, the company will be using digital support tools in plenty including  1:1 video chat support, online tutorial videos, and virtual workshops. Apart from this, the company is planning to introduce many more digital support solutions in the near future. Microsoft’s step is well calculated and shows that the company is committed to growth even during this crisis.

However, the transition to a completely digital sales and support model will require a lot of focus on customer support. The company has tried to fill this void through the use of chat and other support solutions. Preparing for a post-Covid-19 world with little to no face to face interaction might require more sophisticated solutions. It only marks the beginning of a new era and like Microsoft, many more companies will start transitioning to a wholly or largely digital business model in order to remain operational and profitable. This move by Microsoft also signifies that businesses would need to be more agile than ever in the face of the crisis to survive and respond faster to changing market dynamics.

A Differentiating Move

The same move can also be seen from a different angle. While Microsoft has proved itself agile and ready to act in the face of a crisis, its move to close physical stores is also an attempt at differentiation. This will make it look very different from Apple or even Amazon. Microsoft’s move shows it is leading the transition to a wholly digital model rather than Amazon, Google, or Apple. Sooner or later, more and more companies will be making similar moves to a certain degree. While all not will move permanently to a wholly digital business model, since many physical businesses cannot afford to completely alter their current operating model. However, Microsoft’s act will make more of its customers feel extra confident if they are planning a similar move in near future. Microsoft’s growth during the crisis could also encourage its customers in the services industry to shift their approach to marketing and sales with extra focus on customer support and the use of technological resources offered by Microsoft to fill the gap. The post-Covid world will not be the same and the more prepared businesses are the faster they would be able to respond once the situation improves. Amid the current ambiguity and uncertainty, Microsoft’s move only seals the future of digital technology and companies that emulate its operating model.

Abhijeet Pratap

Abhijeet has been blogging on educational topics and business research since 2016. He graduated with a Hons. in English literature from BRABU and an MBA from the Asia-Pacific Institute of Management, New Delhi. He likes to blog and share his knowledge and research in business management, marketing, literature and other areas with his readers.