Microsoft Launching 600 Windows Stores Inside Best Buy

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In its latest move to capture a larger slice of the consumer technology market, Microsoft announced it will launch full-fledged Windows Stores inside 600 Best Buy locations in the U.S. and Canada. In doing so, it's ostensibly stepping in to run personal computing sales at those locations.

"Unlike a lot of store-within-a-store concepts, this will actually be a department-level takeover within Best Buy stores," said Microsoft CMO Chris Capossela in a blog post. "[The Windows Stores] will be massive in size, up to 2,200 square feet in some locations."

The deal's reach extends well beyond PCs: "It also means we will have a great Windows tablet table inside the Best Buy Tablet Department, Windows Phones in their Phone Department, and lots of space for Xbox in their Gaming and Home Theater Departments," he said. "So there will be a big Windows experience where we bring everything together, but we’ll also look great in the other departments where people go." The new Windows Stores also will have an online counterpart, according to Capossela.

[ What can users expect from Microsoft's next Windows update? Read Windows 8: Microsoft Makes 6 Big Bets. ]

Techaisle analyst Anurag Agrawal sees plenty of potential for Microsoft in the deal, particularly as the company seeks new ways to convince consumers why they should buy Windows 8 -- and soon, Windows 8.1 -- devices. It also gives Microsoft a way to increase its branded retail presence tenfold -- the company operates 68 Microsoft Stores in North America -- without a major capital outlay.

"In a crowded and very competitive market, the strategy will provide a level of focus to help differentiate Microsoft’s brand and thereby increase sales," Agrawal wrote in an email to InformationWeek. "It gives Microsoft the benefits of having its own stores but without the associated cost and complexity of opening and managing its own stores."

The launch of the new Windows Stores won't affect standalone Microsoft Stores, according to Capossela. Rather, Microsoft will apply some lessons learned from its solo retail initiative in the Best Buy partnership. "We’re committed to our Microsoft Stores," Capossela said.

Forrester analyst JP Gownder praised the strategy in a blog post, but said it's long overdue and less ambitious than it could have been. He noted several key challenges facing the Windows Stores. The opportunities for Microsoft, however, outnumber the risks, he said. If successful, Windows Stores will help Microsoft address two Achilles' heels in its consumer strategy. First, the current consumer technology retail experience stinks, according to Gownder, unless you're shopping in an Apple Store. Second, people are flat-out confused by the explosion of new devices that arrived with Windows 8.

The deal is something of a no-brainer for Best Buy, according to Agrawal, who said the retail chain will benefit from Microsoft's sales and marketing muscle. Likewise, Forrester's Gownder said Best Buy didn't have much choice but to welcome Microsoft with open arms: "Beset by showrooming, the retailer entered a race to the bottom with its recent price guarantee," he wrote. "A spiral of disappearing margins has made direct investment in improving its stores challenging."

"Showrooming" refers to the customer habit of browsing and testing products in a physical store and then buying them elsewhere, usually online. Big-box retailers like Best Buy are hampered by it, but Microsoft could actually benefit from the practice in Windows Stores. "Even if showrooming behaviors persist, Microsoft can upgrade consumers’ understanding of its brand and products, which will reinforce its platforms," Gownder said.

The Windows Stores will add 1,200 additional employees in those Best Buy locations "to provide a great customer experience, whether it’s choosing the right PC or showing consumers how to stream Xbox music through their Surface," Capossela said. While in theory a good thing -- a retail battalion devoted to selling Windows gear -- Forrester's Gownder noted a considerable downside. Most of that staff will be trained, not employed, by Microsoft.

"Can these non-Microsoft employees live up to necessary quality standards?" he asked.

Likewise,Techaisle's Agrawal listed that as a deep pitfall for the Windows Stores: "[If] Microsoft does not spend enough time and money in extensive training, [Windows Stores] will then not provide the deep experience that customers want," he said.

The store-within-a-store concept isn't new. Forrester's Gownder pointed out that Microsoft is taking a page from Samsung's playbook; the latter also has its own locations inside Best Buy stores. If the trend continues long term, that could be a problem, according to Techaisle's Agrawal.

"Within Best Buy, there could be a greater number of branded stores and each will compete with the other for attention," Agrawal said. "It will not be any different than going to a shopping mall."