Microsoft plunges deeper into retail with flagship New York store

Store opens as Surface Pro 4 and Surface Book ship

Microsoft's flagship Fifth Avenue New York store sports a two-story video tower.
Marc Ferranti

Six years after stepping into the retail market with smaller mall outlets, Microsoft literally took the wraps off its flagship store on Manhattan's Fifth Avenue on Monday, the same day as the general release of its Surface Pro 4 and Surface Book devices.

The new flagship, along with a Sydney store due to open in time for the holiday season, signals a global expansion and renewed commitment to reaching out to customers through retail as key Windows 10 devices ship into a flagging PC market.

The line to get into the new Fifth Avenue flagship stretched around the block Monday, with some people waiting more than six hours for the noon unveiling. Surface chief Panos Panay and Chief Operating Officer Kevin Turner were on hand to cut the ribbon and bring down a curtain that had been strung up on the inside of the glass facade.

For the Fifth Avenue store's grand opening, Microsoft plans deals on Surface devices, the lowest price anywhere for XBox One consoles and accessories, Microsoft Band 2 purchase before the Oct. 30 general availability, a performance by rapper Pitbull at Rockefeller Center in the evening and a "Halo 5: Guardians" midnight launch event.  The new store will also be the only one, for the moment, where consumers can see HoloLens and Surface Hub displayed.

Some people in the crowd to get into the store were hoping to score free merchandise but a good number seemed to be avid Surface Pro users wanting to check out the new Surface devices.

"I've always love the Surface Pro but we haven't seen the new one in action yet," said Sali Ali. "I'm looking for better screen resolution."

The store itself is just a few blocks south of Apple's flagship, the now-iconic giant glass cube encasing the Apple logo.

Overall, Microsoft seems to have emulated the sleek ambiance of the Apple stores. The glass facade of the Fifth Avenue store, erected with minimal structural attachments so as to seem to disappear when you enter, allows light to flood into three floors of retail space, complete with streamlined, Scandinavian-designed type tables and an "Answer Desk," the company's response to Apple's Genius Bar.

Microsoft's fagship Fifth Avenue store in Manhattan Marc Ferranti

The interior of Microsoft's flagship Fifth Avenue store in Manhattan, with the street-facing windows still under wraps right before the grand opening on Oct. 26, 2015.

The Microsoft store at first glance seems to be a bit busier than what you experience in Apple stores -- with possibly more, and smaller, clusters of tables -- but not unpleasantly so. Microsoft has emphasized video displays, placing 198 LCD monitors throughout three floors and a 30-foot, two-story video tower with 36 monitors acting as the store's centerpiece.

"It would be bad to compete directly with Apple," said eMarketer retail analyst Yoram Wurmser. "Apple has had incredible success peddling luxury to consumers in the form of technology products that have become a status symbol."

The large footprint of the new store gives Microsoft a chance to create unique branding that it hasn't been able to in small outlets or with third-party retail partners, Wurmser said.

"Microsoft wants to create an environment stressing its commitment to the Surface and other new products," Wurmser said, adding that retail stores have a multiplier effect on sales for companies that mainly sell via the Web and through channels. Consumers who visit a company's retail outlet tend to spend much more overall on its products than people who never go to one of the business's brick and mortar stores, Wurmser added.

One difference between the Apple and Microsoft stores: you can freely pick up and handle devices in the Microsoft store -- there is nothing tethering the products to the tables. Another big difference is that Microsoft is showcasing third party Windows devices and other products such as Beats headphones (now owned by archrival Apple). This could prove to be a draw.

"They don't force you to buy a certain product," said Ali. "You don't have to buy a Surface -- if another product is better they will sell it to you even if it's cheaper."

Microsoft has established more than 110 stores in the U.S., Canada and Puerto Rico, but the company wanted to wait for the right moment to establish a flagship. "Having a flagship has been a goal of ours since the beginning, but it also was really important for us to have the right location," said Kelly Soligon, general manager for worldwide marketing for Microsoft retail and online stores.

Microsoft's Fifth Avenue store in Manhattan Marc Ferranti

You can build it, but will they come? Waiting for customers at Microsoft's Fifth Avenue store before the grand opening on Oct. 26, 2015.

The size of the store -- Microsoft has leased over 22,000 square feet in the building altogether -- allows the company to do things that it can't in smaller spaces, Soligon said. The store makes the most of the video displays, offering a Culture Wall designed to showcase local landmarks, and a community theater with space for up to 60 people for educational workshops and special events. Through the store, Microsoft also wants to forge ties to community organizations with an emphasis on STEM training, and as part of the grand opening has awarded more than US$3 million in grants to various local cultural and educational groups.

While Microsoft  needs to create its own unique branding, it would do well to emulate Apple's top-notch service, eMarketer's Wurmser said. To that end, Microsoft is employing more than 160 store employees speaking 19 different languages, Soligon said. Part of the multiplier effect of a store in this location is its visibility to thousands of tourists who gather in New York's premier upscale shopping district.

"We wanted to do it right," Soligon said. "We're beyond excited to be in this location."

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