Microsoft has announced it will permanently close all of its physical retail stores and transfer most of its resources to online channels. This comes after the computing giant shuttered the outlets in late March due to the COVID-19 crisis. In what Microsoft is touting as a “new approach to retail,” the company said its retail store employees will be transitioned to its corporate hubs and will provide customers remote sales, training, and support.
The company will focus its efforts on existing digital stores on Microsoft.com and through Windows and Xbox, which have a collective reach of 1.2 billion people globally. Microsoft added that the closures will result in a pre-tax charge of around $ 450 million, which it said consists mostly of asset write-offs and impairments.
The Seattle-based tech titan debuted its first physical retail experience back in 1999 at the Sony-owned Metreon shopping complex in San Francisco, though that closed around a decade later. Microsoft’s first real foray into brick-and-mortar retail was in Scottsdale, Arizona in 2009. This grew to around a hundred similar outlets across the U.S., including its New York flagship, which opened in 2015. The company later went international, opening seven retail stores in Canada, one in Australia, and one in the U.K.
The COVID-19 effect
While Microsoft has tried to put a positive spin on the store closures by touting its “new approach to retail,” the broader retail sector has suffered during the pandemic. Social distancing measures and retail store closures have led to a sizeable uptick in online purchases, and businesses have had to adapt. A number of big-name retailers — including JC Penney — have recently filed for bankruptcy. Apple closed its retail stores in March, only to start opening them again in May, but the company had to reverse that decision in some areas after a surge of COVID-19 cases.
Microsoft’s decision to shutter its stores can be attributed to losses over the previous three months, coupled with signs that foot traffic is unlikely to return to pre-COVID-19 levels anytime soon. But the coronavirus may have simply accelerated the inevitable shift toward online shopping. Indeed, CEO Satya Nadella recently said COVID-19 had resulted in two years’ of digital transformation in just two months.
Microsoft will maintain a limited presence in the physical retail world by continuing to invest in experience centers in London, New York, and Seattle.