Microsoft to Expand Surface Tablet Sales to More Retailers: Analysts

Is Surface headed to big retailers, such as Best Buy? Signs are pointing in that direction.

Microsoft is mulling a change in the way it sells its Surface tablet, according to news reports. Currently, the only way to buy a new Surface tablet is through the software giant’s online store, a few physical Microsoft retail locations and a smattering of pop-up stores.

Microsoft’s meager brick-and-mortar footprint prevents many potential buyers from spending some hands-on time with the tablet during the crucial holiday-shopping season.

Analysts have blamed the restrictive distribution strategy, in part, for relatively slow sales of the device, which was developed and manufactured by the software giant as a showcase for its touch-enabled Windows 8 and RT operating systems.

Despite an encouraging burst of early demand, Surface sales have cooled. Microsoft is expected to sell an estimated 500,000 to 600,000 Surface RT tablets in the current quarter, says the Boston-based brokerage firm Detwiler Fenton. It’s a far cry from the iPad sales that its rival Apple typically posts because Microsoft’s distribution model is in “disarray” according to the brokerage.

New Web-traffic data from Chitika, an online advertising network, supports the notion that Surface sales are sluggish. Chitika claims that Surface tablets make up a mere 0.12 percent of all Web traffic in the U.S. and Canada. For comparison’s sake, the firm notes that the Nexus line of Android tablets generates 0.91 percent of all traffic in these regions.

There is a silver lining: Each Surface sold is hugely profitable for Microsoft. IHS iSuppli claims that Microsoft banks nearly 50 percent of the retail cost of the Surface as profit. IHS iSuppli is also a little more bullish on Surface’s prospects this quarter. The research firm expects Microsoft to sell up to 1.3 million units this quarter, a good showing for a product with such limited distribution.

Nevertheless, it wouldn’t hurt to get Surface into the hands of more consumers.

So Microsoft is letting the Surface play outside of its walled garden, beginning with Australia, according to The Australian Financial Review, marking the first time tablet buyers can evaluate the Surface in person and alongside the competition. The news backs Microsoft watcher Paul Thurrott’s informed prediction last week that Surface would spread its wings in retail “within days.”

The move comes just weeks before Surface with Windows Pro hits the market. The enterprise-friendly, x86-compatible tablet is expected to appeal to business users and corporate buyers because it supports both Windows 8-style apps and legacy Windows software. The ARM processor-based Surface RT only supports Windows 8-style apps (formerly Metro), crimping demand from the enterprise IT market.