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Touch system shortages, sales played parts in Surface RT retail expansion

Microsoft's in-house sales strategy wasn't working, analyst argues

December 12, 2012 10:21 AM ET

Computerworld - Microsoft may have accelerated plans to expand the Surface RT's retail footprint because touch-sensitive devices are the only Windows hardware flying off shelves, an analyst said yesterday.

In a shift from its in-house sales strategy, Microsoft announced Tuesday that the tablet will be sold in other retail outlets by mid-month.

In the U.S., Staples will start selling the Surface RT today, as will Best Buy through its online store. Best Buy will kick off in-store sales Sunday.

"We always knew that they would do this eventually," said Steven Baker of the NPD Group in a Tuesday interview, of Microsoft plans to widen distribution. Most experts, however, figured that that wouldn't happen until early 2013.

So what drove the turnaround? Baker said he didn't know, not with certainty, and that everyone, himself included, was guessing.

"You can look at this one of two ways. Either the products are doing well, and they wanted to accelerate their distribution," said Baker, "or the Surface is not doing well, and they decided they had to do something."

Baker said it was impossible to know which was more accurate because Microsoft has not shared Surface RT sales data, even in the most general terms. NPD, which tracks U.S. retail sales, does not have access to Microsoft store or online sales.

"No one has any real knowledge of their sales," Baker said. "But my guess is that [sales] volumes weren't where they wanted them to be."

Baker dismissed recent estimates by analysts, including those at the Boston-based brokerage firm Detwiler Fenton, who pegged Surface RT sales at between 500,000 and 600,000. "I can do a back-of-the-envelope calculation to get a number, too," Baker said.

But that doesn't mean it's accurate.

What the early move means, however, is that Microsoft's initial retailing strategy wasn't cutting it.

"I don't want to say that this is an indictment of the Surface RT, because I don't think it is," said Baker. "But the strategy to pump up the stores only had so many legs. At some point they were going to have to expand the distribution."

By Baker's analysis, Microsoft chose its original retail plan -- sell the Surface RT only in its own stores and online site -- for good reason. "It made sense to me at the time. The Surface was a different product, and Microsoft wanted every customer to have a great experience," he said. "They wanted to control [the customer] experience. Once you put it out in mass retail, you lose some level of control."

Microsoft may also have thought it could use the Surface RT to drive traffic to its stores -- more than half of which are temporary "pop-up" stores open only for the holidays, although that, too, has changed -- and, as Baker put it, "pump up the stores."

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