Microsoft Store closings signal the future of retail

Microsoft announced today that it will close all of its 83 Microsoft Store retail stores. The company says it will result in a $ 450 million charge to its earnings for the second quarter of 2020. Importantly, what Microsoft is doing is a sign of what we will see in the future for many retailers.

Microsoft closings are not just about having fewer stores or eliminating unprofitable trades. Microsoft says it will operate what it calls “Experience Centers” in London, New York, Sydney, and near its Redmond, Washington, headquarters in the future. He has not explained what he thinks these centers are, but from the name it seems safe to suppose that it is about presenting and showing the brand and the product to consumers. It is precisely that change, from a large number of stores in general to fewer stores that have different purposes than just selling products, which many brands are talking about now.

In recent years, brands and retailers have continued to discuss “omnichannel,” the idea that they have to combine their channels to effectively market to consumers. But now we know that that was wrong. The time for that reflection has passed a long time and there are no different consumers in stores than online. The focus cannot be on the channel, it has to be on the consumer wherever they are. It is not about being online, on the mobile or in a store; Each of those modes has strengths and weaknesses; they are part of a continuum and a customer relationship that must be transparent, consistent, and helpful.

When I speak to CEOs of brands and retailers now, what many of them tell me is that they want fewer stores that are different from their stores in the past. They say they want to use the stores to raise awareness, educate consumers, define identity based on shared values, and develop a partnership. Of course, they also want to sell products, but stores are less critical of that now. There are other ways for sales to happen, and a store can be a catalyst for sales and growth without having to make the sale within the store.

The shutdown has required quick learning by retailers on these trends, and it appears that Microsoft, and many others, are listening. Consumers have discovered how to make all or almost all of their purchases online, and retailers are also discovering how to make all or almost all of their sales online. Shopping by live stream, video dating, chatting, and other technologies has put convenience in the hands of consumers and has facilitated sales while stores are closed. No one knows how long these new habits will continue when the pandemic ends, but it won’t be zero and stores have to adapt.

One of the implications of this change is that store associates who only help pay are no longer enough. Store employees must be knowledgeable about their products and good listeners to help consumers. Chances are, that means paying more for the average sales associate. Making the store economy work will involve evaluating the associate based not only on the sales of four walls in a store, but also on how the sales resulting from their interaction impact wherever transactions occur. That means new metrics will need to be created to measure the performance of store associates.

Joey Zwillinger, CEO of shoe brand Allbirds, says his brand uses stores not only for selling products, but also to raise awareness. Although the brand is very successful, the brand is not as well known as global brands like Microsoft. Allbirds stores are useful for new direct-to-consumer brands to meet newer consumers. And now is an ideal time for store growth because “real estate has dropped in price and we want to be opportunists and take advantage of it,” he said.

The purpose of a store is now very different between brands than ever before. It used to be true that most stores did the same for all brands: selling things. But now that awareness, education, experience, entertainment, relationship, partnership, and many other characteristics are the purpose of a store, each brand has to discover for itself what it needs stores to do. Microsoft’s move is a reflection of the time we are in and how consumer habits have changed. We will see more announcements like what Microsoft said earlier today. And that makes retailing more complicated than ever.