Microsoft opens first retail store in Europe – just down the street from Apple

Microsoft will open its first retail store in Europe on Thursday as the software giant looks to boost its physical presence and compete with other tech companies offering unique in-store experiences for customers.

The 21,932 square-foot Microsoft store will be located on Oxford Circus in the center of London's famous shopping district – just down the street from Apple's flagship Regent Street location. London will be Microsoft's third flagship destination, along with Sydney and New York City.

Inside Microsoft's flagship London store

CNBC | Benjamin Hall

"This is our very first foray into Europe, and we couldn't be more pleased to be in London," Microsoft CMO Chris Capossela said in an interview Tuesday.

Microsoft is among a growing list of tech companies expanding their physical presence to complement online sales. Amazon is reportedly planning to open up to 3,000 cashier-less grocery stores by 2021. Chinese tech giant Xiaomi told CNBC in February it plans to triple its European store count by the end of the year.

Richard Lim, CEO of research firm Retail Economics, said tech companies are looking to generate buzz and loyalty in their brands by offering new in-store experiences.

"Primary locations like Oxford Street, where there's sustainable levels of footfall, where the experience is much more than retail, is one of the crucial ingredients for success," Lim said.

A McLaren inside Microsoft's London store

CNBC | Benjamin Hall

Microsoft's 3-floor store includes an Xbox gaming room, a customized McLaren, meeting rooms for enterprise clients and a digital classroom where students can learn how to code. Cindy Rose, CEO of Microsoft U.K., said the store appeals to general consumers, as well as the company's more targeted customers like businesses and gamers.

The store also highlights Microsoft's Surface computers and tablets, which have helped the software titan grow its hardware business. Sales of Surface devices increased 21 percent year-on-year last quarter.

"The Surface hardware that you see all throughout the store, that's going to be a big big seller," Capossela said. "There's no doubt that a physical store is actually very good for choosing physical products and that's part of why we're here."

Microsoft Surface Book on display in London flagship store

CNBC | Benjamin Hall

The store opening puts Microsoft is a rare group of companies that can afford to expand into brick-and-mortar in the U.K. A record net 2,481 stores disappeared from Britain's top 500 high streets in 2018 as consumers opted to shop online instead, according to research from PwC.

"As more stores close up and down high streets across the U.K., that will drive more sales online," Retail Economics' Lim said.

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