A Microsoft store in San Diego, one of 14 already in operation in the U.S. The tech powerhouse is eyeing a retail outlet in Canada.
Microsoft is plotting its first physical store in Canada, playing catch-up to archrival Apple Inc. in a race that mirrors the one for smartphone supremacy.
With only 14 stores in the U.S., Microsoft is making a big push to expand its chain, emulating a strategy Apple tapped into more than a decade ago. Today, Apple runs more than 360 outlets globally – mostly in the U.S. – to showcase its brand and draw consumers. In addition to generating revenue, the often boldly designed storefronts tend to function as a form of marketing.
Now Microsoft is betting that it too can become a magnet for gadget-hungry shoppers in the mall, in the process shrinking Apple's lead in the pivotally important mobile device space, where the iPad and the iPhone still generate the biggest single source of industry profit.
"It's a hard one – Apple has such an enormous lead," said Kaan Yigit, president of consultancy Solutions Research Group. "Microsoft is late into the tablet and smartphone game, but they're not out of it yet."
The sparring between the two tech giants has heated up as Microsoft rushes to follow in Apple's path by developing an operating system for smartphones and tablet computers. Unlike Apple, Microsoft doesn't manufacture its own mobile hardware – instead, the company takes the same approach it used with the Windows operating system, letting third parties build the hardware on which Microsoft software runs.
Even as Apple has spearheaded the virtual storefront movement with its iTunes software and app store, the company has also invested in its iconic retail outlets all over the world.
Last summer, Microsoft chief operating officer Kevin Turner said Microsoft plans to open 75 stores in the next two to three years.
In most respects, Microsoft stores largely mirror Apple's retail outlets in look and feel. Microsoft's open-concept spaces feature hardware and software products, as well as technical specialists to help customers buy and fix their products. Unlike Apple, however, Microsoft also devotes a significant portion of its shelf space to products built by outside partners such as Hewlett-Packard.
Microsoft's Canada store would be only its first outside the U.S. – raising the question of whether it can roll them out fast enough to overtake its key competitor.
The challenge is all the more striking because of Apple's retail sales muscle. Its stores generate about $4,000 in sales per square foot, roughly 10 times more than the average at U.S. malls, estimated Neil Stern, senior partner at retail consultancy McMillanDoolittle LLP in Chicago. In some Apple stores, sales-per-square-foot are believed to be as high as $6,500, he calculated.
"The numbers are like nothing like we've ever seen in retail," Mr. Stern said. "The Microsoft stores I'm in – there is traffic in the store. But the sales-per-square-foot are fractional to Apple. The Microsoft stores are still in the business of selling an experience to customers, not necessarily selling a lot of product."
Now Microsoft is borrowing from Apple's playbook to try to create its own mall footprint. While Microsoft officials would not comment, industry sources said the company is close to a deal for a store in Canada. Some said that the outlet will be at Yorkdale Shopping Mall in Toronto, which already has an Apple store.
Anthony Casalanguida, general manager of Yorkdale, said he couldn't confirm or deny the information, but said he has visited other Microsoft stores in U.S. malls to check them out. They are often close to an Apple store, and are similar in look and service-oriented concept. "If we're successful enough to get them into Toronto and Yorkdale, I think it would be a tremendous asset to the property," he said.