Microsoft closes bricks-and-mortar stores in China as US tech giant slashes retail network

Microsoft Corp has closed its authorised bricks-and-mortar stores in mainland China, according to three local distributors, as the US technology giant restructures its retail operations in the world's second-largest economy.

The company on Monday told local media that it decided to "integrate [all distribution] channels in mainland China", although consumers can continue buying products and services through its website and certain retail partners. The company also runs online storefronts on Taobao and JD.com.

The operators of authorised bricks-and-mortar Microsoft Stores on the mainland earlier received a notice from the company that their contracts had been terminated and that their shops must shut down by June 30, according to the three local distributors who declined to be identified.

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While Apple operates its own bricks-and-mortar stores in China and maintains ties with local resellers across the country, Microsoft had relied solely on independent third-party retailers to set up a network of branded franchise shops on the mainland. It is not known how many such local partners are affected.

Microsoft did not immediately respond to a request for comment on Monday.

Microsoft's consumer sales in mainland China will now be solely conducted via the company's website and other online retail platforms. Photo: Shutterstock alt=Microsoft's consumer sales in mainland China will now be solely conducted via the company's website and other online retail platforms. Photo: Shutterstock>

A Beijing-based distributor of Microsoft products, Qian Feng, said the retail landscape on the mainland has changed, with authorised stores losing relevance.

"The Chinese market is too small for Microsoft," Qian said. "If they keep all the stores, they will lose money."

The exit of bricks-and-mortar Microsoft Stores on the mainland reflects the strategic change in retail operations that the Redmond, Washington-based company had announced on June 26, 2020.

The software giant said at the time that it will only keep Microsoft Experience Centres in London, New York City, Sydney and at its Redmond campus. The closing of Microsoft Store physical locations resulted in a pre-tax charge, including asset write-offs and impairments, of about US$450 million that was recorded in the quarter ended June 30, 2020.

Its China-based retail network was not affected at the time because the mainland Microsoft Stores operated under a franchise business model.

Microsoft vice-chairman and president Brad Smith speaks during a hearing in Washington, DC, on June 13, 2024. Photo: Bloomberg alt=Microsoft vice-chairman and president Brad Smith speaks during a hearing in Washington, DC, on June 13, 2024. Photo: Bloomberg>

At a US congressional hearing last month, Microsoft vice-chairman and president Brad Smith said that China only accounted for around 1.5 per cent of the company's global revenue.

Smith also confirmed that Microsoft is offering to relocate overseas its 700 to 800 employees in China. The Post reported in May that some Microsoft employees on the mainland, including those from its Azure cloud computing unit, were offered the option to move overseas to the US, Australia and Ireland.

Some distributors in China expect to maintain their status as third-party independent retailers for Microsoft based on the domestic operations they have built up over the years.

Authorised Lenovo Group distributor Steven Li, who had served as a manager for a Microsoft Store in Shenzhen, said he will continue to sell Microsoft laptops and tablets with after-sales services. He said the only difference is that he can no longer promote his business as an "authorised retailer" for Microsoft, and this could drive some customers away.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.

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