Big-Box Retailers are Not Helping PC Sales

By Patrick Moorhead - April 30, 2013

Last week, I wrote about the “softer” and arguably some of the more important PC attributes. Toward the end of that column, I threw out there a few examples of how U.S. big-box retail isn't helping market those softer features. I want to dive a bit deeper into that this week as I think U.S. big-box retail shares a large part in the decline in PC sales and outline why I believe that. I will start with a little background.

I've been involved in and around electronics retailing since 1993 when I worked for AT&T Computer Systems then with Compaq in the late 90’s when they were #1 in consumer PCs. Back in those days, U.S. retail for computers looked very different than it does today, primarily a combination of big-box electronics stores, regionals, department stores, and office super stores. Manufacturer stores and online really didn't exist. My how things have changed. E-tail is huge (Amazon), manufacturer store(s) (Apple) are lauded, only one national electronics retailer is still alive (Best Buy), mass merchants have aggressively entered the space, and clubs are as aggressive as ever. And, of course, there’s Microsoft and their stores. What hasn't changed in 20 years is just how poor the PC buying experience is in the big box retailers…… and that poor experience is negatively impacting sales at a time when the industry can least afford it. Big box retail does best when the category has been established and there is minimal change. In the PC world, everything is changing. Windows 8 brought a brand new UI that had not fundamentally changed since DOS. Gestures and PC display touch is new too. Let’s not forget about convertibles and hybrids, all new. How did big-box retail respond? The same way they have for the last 20 years. Big box retailers responded by selling more end-caps to manufacturers, they added more demo days with manufacturer’s reps and did more promotions….. and it’s not working. It’s not working because fundamentally there exists a massive disconnect between what consumers want to and need to know about the latest generation of PCs. I’ll use Windows 8 notebooks and convertibles as an example and drill into that experience. As we all know, Windows 8 brought with it a new, multi-mode UI and a new gesturing system that is used with mice, trackpads, and touch displays. Even Microsoft acknowledged recently it took a few hours for consumers to get comfortable with Metro. Windows 8 also brought instant on when paired with the right hardware. A consumer may even want to try out instant on and even compare certain notebooks. New notebooks are also bringing better battery life with thinner and lighter designs. To gauge how heavy the system is, you would want to pick it up and maybe carry it around. Maybe you would want to compare notebooks and how quickly the Ultrabook boots versus the $299 notebook. How many times have you walked into a big-box retailer and walked down the notebook aisles and saw Windows 8 notebook PCs that:
  • Shells with no electronics inside
  • Turned off
  • Error messages on the screen
  • Not connected to the internet
  • Running a demo loop that required a retail password to interact
  • Had unsavory data visible from a prior consumer
  • Batteries removed to protect from theft
  • Tied down with security wires and could not be lifted
  • Touch display and backlit keyboards not merchandised
I am asking the question rhetorically because I know the answer. We all do. All of us have experienced this. I've heard all the reasons why big-box retail provides this kind of experience for the last 20 years. The reasons typically involve profit margins, security concerns, and the challenges of managing a distributed workforce, etc. Interestingly, I never see the above examples at an Apple store. Never, ever. I can sit at the Apple store there for hours and literally do a test drive like I would a car. I’ll bet Apple would let me download apps if I asked. The unfortunate outcome is that the big-box retail experience is actually playing against increases in Windows 8 sales. The stores just do not provide, for many, the environment that meets the needs of someone trying to buy a new Windows 8 notebook. Consumers need a way to “test drive” Windows 8 and big box retail isn't delivering. I believe one of the consumer reactions is to not buy a new Windows PC because they deem it risky. What do they buy instead? One of the consequences is that it helps nudge the consumer to buy a $199 smartphone or tablet which, when weighed against the big box retail experience, is a much lower perceived risk than buying that new PC.  
Patrick Moorhead
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Patrick founded the firm based on his real-world world technology experiences with the understanding of what he wasn’t getting from analysts and consultants. Ten years later, Patrick is ranked #1 among technology industry analysts in terms of “power” (ARInsights)  in “press citations” (Apollo Research). Moorhead is a contributor at Forbes and frequently appears on CNBC. He is a broad-based analyst covering a wide variety of topics including the cloud, enterprise SaaS, collaboration, client computing, and semiconductors. He has 30 years of experience including 15 years of executive experience at high tech companies (NCR, AT&T, Compaq, now HP, and AMD) leading strategy, product management, product marketing, and corporate marketing, including three industry board appointments.