Microsoft Corp.'s new retail store in Toronto's Yorkdale mall – the first such store outside the United States – is a retail space that's less about selling products and more about selling an image.
On the heels of the company's newest operating system – Windows 8 – and the launch of its new Surface tablet, Microsoft's new Canadian store opens Friday in a flurry of fanfare. The rock band Train will play in the shopping mall parking lot, Wayne Gretzky has been brought in to play video games with a few lucky fans, and Microsoft has gone all-out in an attempt to turn the opening into a spectacle. But even after the initial frenzy dies down, Microsoft's retail location will serve one purpose above all else: Convincing customers that the brand they mostly associate with humdrum software is actually cool.
"It's not just about showing off Office," said Microsoft's Eastern U.S. market manager, Peter Harrington. "We have technology, we have cool stuff – they go hand in hand."
A quick look around the 6,800-square-foot retail space reveals an obvious focus on branding. Massive touchscreens run along the edges of the walls. In fact, virtually all the screens in the store, from laptops to tablets to the wall-mounted units, are touch-sensitive, part of a strategy to give the space a sense of interactivity. Prime showroom space in the centre of the store is reserved for the company's recently released Surface tablet, a device Microsoft is pushing with a massive advertising campaign. On either side of the Surface shelves, the company is showcasing similar devices made by third-parties such as ASUS – companies that are at once Microsoft allies and, with the launch of the Surface, competitors.
The overall feel of the store – with its 72 specially trained employees and its focus on letting visitors get a hands-on feel of the products – immediately prompts comparisons to Apple Inc.'s retail strategy. Indeed, Microsoft isn't the only company that began investing more heavily into retail locations after Apple's worldwide success. Samsung Electronics Co. Ltd.– perhaps Apple's biggest competitor in the mobile space – has also taken similar steps.
"It's the current strategy du jour," said Colin Gillis, senior technology analyst for BGC Financial. "I'm just waiting for the Google store."
There are myriad benefits for Microsoft in having a retail location, and few of them have anything to do with in-store sales (the company doesn't break out sales figures from its 30 U.S. stores). Besides showcasing certain devices, it gets to control the user experience, making sure customers are comfortable with what they're buying. The store also gives Microsoft a foothold in the community, something the company is trying to highlight with grants to various charitable organizations and a social space in the back of the store (which comes with a 103-inch touchscreen) that it lets community groups use for free.
As Mr. Gillis notes, retail spaces offer companies such as Microsoft the chance to focus attention on so-called "hero" devices, such as the Surface. Indeed, as Microsoft plans to build more non-U.S. stores in the future, it is likely the company will also focus on building more hardware in the future to put in those stores (a large section of the Toronto store is reserved for what is perhaps Microsoft's most successful foray into hardware, the Xbox gaming system).
But the strategy is not without risks. Many tech firms have embraced online retailing precisely because, unlike retail stores, it is a flexible medium. However, the money Microsoft, Apple and others put into brick and mortar stores is a little more difficult to take out.
"People talk about Apple's retail success, and that's a fair point," Mr. Gillis said. "But if the company's products prove to be less popular in the future, having those expensive monuments to them is going to be a drag on income statements."