Microsoft store closings bring home the uniqueness of Apple’s retail success

In a way, Microsoft’s (MSFT) plans to close its 83 physical retail stores highlight the uniqueness of what Apple (AAPL) has accomplished with its retail operations.

After all, it’s not that Microsoft’s core hardware companies are in dire straits right now. The Surface PC / Tablet lineup now has an annual revenue execution rate of over $ 5 billion, and has received a recent spike in purchases made to support recently remote workers and students. And while Xbox sales are down right now as the Xbox One cycle is coming to an end, the franchise remains strong and will get a significant sales boost later this year when the Xbox X Series launches. .

However, Microsoft apparently concluded that it was not making enough for a return, either in terms of retail sales or to increase interest in its own hardware and that of OEM partners, to continue to manage its own physical retail stores, rather than by relying on their online stores and external retailers.

It’s safe to assume that Apple has no plans to do something similar for its more than 500 Apple Stores, even at a time when overall retail traffic dropped dramatically (and some Apple Stores are closed) in many large markets due to COVID- 19.

In fiscal year 2019 (ended September 2019), Apple generated around $ 81 billion in revenue (31% of total revenue of $ 260.2 billion) from its physical and online stores. Although Apple does not detail how much of this revenue comes from physical stores compared to e-commerce, both channels are believed to represent substantial portions of it, and multiple third-party studies indicate that Apple is the world’s leading physical retailer in terms of revenue. per square foot.

Also, while this is difficult to quantify, Apple stores seem to have done a lot over the years to convince millions of consumers to buy a second, third, or fourth Apple device, either right away at a store or later Through another retail channel, and by doing so, engage more in Apple’s broader ecosystem. Likewise, with the help of Apple’s investments in store features, such as its Genius Bars and free Today at Apple teaching programs, stores also seem to have done a lot to keep users of an Apple device faithful. particularly when it comes time to update.

There are a few things at stake here. First, Apple is by far the world’s largest provider of consumer electronics / technology hardware in terms of revenue. The global demand that exists collectively for their products means that many of their retail stores (often located in major metropolitan areas) would produce significant revenue even with regular execution, in a way that small consumer electronics retailers’ stores would not have.

Second, Apple has done a lot of things right in terms of making its stores welcome cozy places to test, learn, shop, and get customer support for its hardware. And in the process, he’s been willing to bear the cost of doing things like hiring staff at Apple stores with a massive number of employees and paying to lease premium real estate.

Third, as many readers can probably guarantee, there is a degree of customer engagement with Apple products and the Apple brand that is unique among major consumer / technology hardware vendors. This attachment inevitably generates a lot of casual traffic, that is, the traffic of Apple customers who do not seek to make an immediate purchase, or at least did not do so when they entered a store, in a way that brands that do not generate the same type attachment, they are unlikely to lead to your stores.

Combine these factors and you have a recipe for a one-of-a-kind success story for a consumer hardware / technology company looking to sell its products through its own physical stores. It’s hard to blame Microsoft for failing to replicate this success. No one else really has it on a grand scale, either.

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