While Microsoft is increasing its AI PC market, its channels in the Chinese market are experiencing contraction and adjustment.
In the past two days, Weibo blogger "Microsoft Faith Center" and Xiaohongshu blogger "Microsoft Zhengzhou David City fugitive" have successively revealed that Microsoft will close all offline authorized stores in China from the end of June or today (July 1), only retaining the official website and JD's self operated online channels, which has attracted public attention for a while.
In response, Microsoft China's public relations agent relayed the views of a Microsoft spokesman to the reporter of China Business Daily, saying: "Microsoft has constantly evaluated its retail strategy to meet the changing needs of customers. Microsoft has decided to integrate channels in the Chinese Mainland market. Customers can still access Microsoft's comprehensive consumer products and services through retail partners and Microsoft.com."
"How will Microsoft adjust its market channels in Chinese Mainland?" Microsoft did not respond further to reporters' questions.
The reporter learned that the Xiaohongshu blogger "Microsoft Zhengzhou David City fugitive" is an employee of a Microsoft authorized store in Zhengzhou. After this incident sparked attention, the above-mentioned Xiaohongshu blogger has deleted the relevant disclosure content and changed the Xiaohongshu user nickname. However, he told reporters that his store has been evacuated.
On May 20th of this year, Microsoft launched Copilot+PC with AI as its core capability, and also launched two AI PC hardware models, Surface Pro 11th edition and Surface Laptop 7th edition. However, currently consumers find it difficult to see two new products in the offline market.
The Xiaohongshu blogger stated that due to Microsoft's closure of authorized offline stores nationwide, the new product launch did not allow dealers nationwide to purchase display machines, which is also the reason why many consumers inquire about the lack of Pro11 and Laptop7 prototypes in offline stores.
The reporter also called a Microsoft experience store in Chengdu MixC Shundian, and the staff said that there was no experience or sale of Surface Pro 11th edition and Laptop 7 prototype in the store. However, the staff of this Microsoft experience store located in Shundian, MixC, Chengdu, stated that they have not received any notice of closure and are still operating normally.
A Microsoft channel offline source told reporters that the store withdrawal this time is related to the adjustment of Microsoft's sales channels, as the offline investment is too large and sales are not satisfactory. After the store is evacuated, the equipment in the store will be provided to other channels.
The reporter learned that Microsoft authorized stores need to complete a procurement task of $160000 to $200000 (approximately RMB 1.16 to 1.45 million) in a quarter in order to continue using the authorization.
At present, the "Find Store" on the official website of Microsoft's official store in China shows that there are 51 stores in Chinese Mainland, only a few of which are authorized stores, and most of the others are Shundian Microsoft Experience Zone and Xbox retail experience stores.
In fact, for Microsoft, the market performance of Surface in recent years has not been satisfactory, and the hardware business has also been lukewarm.
Microsoft has three major businesses, namely Intelligent Cloud Business, Productivity and Business Process Business, and More Personal Computing Business. More personal computing businesses include Windows, devices, Xbox content and services, search and news advertising businesses (excluding traffic import costs).
According to Microsoft's financial report for the third quarter of the 2024 fiscal year (the first quarter of the 2024 calendar year), the device business (including Surface and Xbox game consoles) decreased by 17% compared to the same period last year. Excluding the impact of exchange rate changes, it decreased by 16% year-on-year, making it the only segment of Microsoft's revenue that declined in the fiscal quarter.
In terms of market share performance among manufacturers, data provided by Canalys analyst Ye Maosheng to reporters shows that in 2022 and 2023, Surface's global market share (including desktops, laptops, and tablets) was only 1.41% and 1.42%, respectively.
Ye Maosheng analyzed the reporter that the proportion of offline sales of Surface is very low, and this adjustment of market channel strategy in Chinese Mainland may be related to the adjustment of cost strategy.
In fact, Microsoft announced the closure of its global direct stores four years ago. In June 2020, Microsoft announced the permanent closure of nearly a hundred Microsoft Store physical retail stores worldwide. Microsoft stated that as its product portfolio has developed into digital products including Microsoft 365, gaming, and entertainment, the company's hardware and software sales continue to shift online. At that time, Microsoft had about 460 offline stores in the Chinese market, all of which were authorized stores rather than official direct operated stores, so they were not affected.