Microsoft’s Channel Problem Hurts Holiday Sales of Surface Tablets

The jury is still out when looking at Surface RT sales, as Microsoft itself hasn't even given the world at large a hint beyond Steve Ballmer's "modest" quote. All the while, the company has come clean with numbers surrounding Windows 8 licenses sold and Xbox units sold during Black Friday, giving pundits plenty of reason to believe that sales of the new slates haven't been spectacular. But, really, should anyone be surprised? Despite spending huge, huge amounts of money on marketing, including full wall ads inside NYC subways, it's relatively difficult to find and buy a Surface RT. You have to be near one of only ~100 Microsoft Stores, or willing to buy one online without ever trying it out. Compare that to Apple -- with a much more vast retail scheme -- or Lenovo, which has plenty of shelf space in places like Walmart and Best Buy.

Detwiler Fenton, a Boston-based brokerage firm, said that the company is expected to only have sold around half a million Surface RTs in the December quarter, which would be much less than the 1-2 million Microsoft was hoping for. Of course, that's just speculation for now, but there's no denying that the Surface RT distribution strategy is in "disarray." The firm feels that "lack of distribution is killing the product," but mixed reviews haven't helped matters. Pricing hasn't helped, either. While it's true that Microsoft isn't doing an outstanding job getting the Surface RT into the hands of potential buyers, one needs to only look back at Amazon's early efforts to see a similar trend. The original Kindle didn't have much of a retail footprint, either. In fact, Amazon started as an online-only retailer of e-reader hardware, but the pricing made it attractive. In time, retailers began clamoring to help distribute Amazon's Kindle line, but it started with nothing. Microsoft is in something of a similar spot, but things don't look as rosy. The issue here is that the Surface RT has more competition than the original Kindle did in its space. And the Surface RT simply isn't price competitive.

We'll be eager to see what the first quarter of Surface RT sales actually are, but one thing remains clear: they won't be nearly as good unless Microsoft can get these things into more stores, or on sale for much less.