Windows 8 'Slow Going,' But 2013 Should Be Better, Top Retailer Says

A senior executive at popular retailer NewEgg described the Windows 8 launch so far as not the “explosion” that the company originally planned for, but as slow and steadily improving. 

From a software perspective, however, Windows 8 will probably not take off until about the second quarter of 2013, said Merle McIntosh, the senior vice president of product management of Newegg North America, in an interview.

McIntosh said that while he’s heard stories of retailers planning for discounts of Windows 8 to accelerate sales throughout the holiday season, NewEgg so far has no plans to. On the other hand, the e-tailer will discount televisions, Android tablets and digital cameras. And a newer category, solid-state discs (SSDs), could receive discounts if the supply ramps up as anticipated.

NewEgg ranked 172nd on the Forbes 2011 list of the America’s top private companies, with an estimated $2.5 billion in annual sales. Known for its geeky focus on all sorts of technology products, NewEgg’s chief competition is probably Fry’s Electronics, ranked at 200th on the Forbes list, with an estimated $2 billion in sales.

It’s believable, then, when McIntosh says that NewEgg, along with Microsoft, Intel, and hardware and software manufacturers, have been planning for the Windows 8 launch for some time. Did it go as planned? McIntosh said that the launch sparked debate, even within NewEgg’s offices.

“So we planned with our partners to be prepared for an explosion,” McIntosh said. “Did we really believe there was going to be one? Even within our own building, there were some people that thought that this was going to be the next coming of God, and other people were saying, this will be the next coming of God, but not until next year sometime. What we wanted to make sure with our own customers and our own business is that we were ready for any event. So yes, we were prepared for some pretty big upside on the software side of the equation, and the hardware side of the equation, and it is has been steadily improving. But it did not explode, as I think you know, coming out of the gate.”

McIntosh said that it was important to divide the Windows 8 launch into two areas: sales of the software itself, and sales of the corresponding Windows 8 hardware, such as traditional notebooks, convertible tablets and pure tablet implementations.

“On the software side it has been slow going, and I think it will be that way until the pricing normalizes sometime next year,” McIntosh said, declining to provide actual sales numbers. “But on the hardware side, we’re starting to see some slow but steady increases in notebooks, and as the tablets become available, we’re starting to see some good sides of the tablet part of the equation as well.”

Windows 8 Hardware: Slow and Steady

For its part, Microsoft has pointed to comments made by chief executive Steve Ballmer that describe the sales of its Windows RT tablet, Surface, as “fantastic." But that’s also left hardware partners like Dell and HP scratching their heads a bit, and initially focusing on Windows 8 devices for businesses.

On the hardware side, McIntosh said that NewEgg hoped to be able to sell “well into six figures of units this quarter, [and] we’re hopeful that a significant amount will be Windows 8.” Traditional clamshell notebooks and ultrabooks will be strong sellers, he said. McIntosh didn’t identify any specific Black Friday promotions, but he said the company would be doing “hundreds and hundreds of deals” across various hardware categories.

To date, the majority of the company’s Windows 8 device sales are coming from notebooks and desktop PCs, a spokeswoman said in an email. Sales between these two categories have been pretty evenly split. Tablet sales are growing, and NewEgg expects this trend to continue next year, she said. Unfortunately, NewEgg did not break out which notebook hardware categories - clamshell devices, ultrabooks, convertible tablets or tablets - had seen the strongest actual sales.

NewEgg may get aggressive with older Windows 7-designed ultrabooks and machines that lack touch screens - not because manufacturers are jettisoning older products into the market, “but because we have some aggressive ambitions in market share,” McIntosh said. NewEgg snapped up inventory of Windows 7 hardware from August through October, anticipating healthy demand. And so far, that’s been the case.

“What I do think will happen, generally speaking when we get to Cyber Monday, and the early part of that week - if demand stays strong, that’s one thing. But with even the slightest bit of worry, deals across the board will present themselves,” McIntosh said.

Windows 8 OS Sales Expected to Ramp Next Year

From a software perspective, however, Windows 8 is a different animal. McIntosh said that the Windows 8 launch had been nothing like Windows 7, which, in total, sold more than 100 million copies in six months, and made it Microsoft's fastest-selling operating system. 

“It doesn’t even come close,” McIntosh said. “As you know ... the Windows 7 launch was coming in to solve a Vista problem, and there was lots of lots of pent-up demand for it. And so for the launch - at launch - the Win 8 stuff doesn’t compare, really.”

To date, he said, NewEgg has sold about half the number of Windows 8 copies that it originally stocked, “which is pretty good,” McIntosh said. “My own personal take is that I think it’s great - the software’s great, the touch part of it is great. … I think it will take hold, but I think it’s going to be midway through the first half next year, probably at the end of the first quarter, going into the second quarter, when it really gets some momentum. That’s my opinion.”

Microsoft, of course, was suspiciously quiet about Windows 8 in the weeks leading up to the launch, and hasn’t said much since. That’s a different way of doing things than, say, Apple or Amazon, both of which usually trumpet a massive amount of sales in, say, the opening weekend.

But McIntosh said that NewEgg wasn’t inclined to discount Windows 8 much during the holiday season, although other retailers might.

“From a Windows 8 software perspective, we might be doing some short-burst promotions. ... We’re hearing stories that the $69 package [to upgrade to Windows 8 Pro] is going to get into the $20 range at some point here in the quarter, and we’re just not inclined to play there,” McIntosh said. “We may do some things prior to Black Friday, but we’re not going to go wading into that. We don’t think we need to. 

“Believe it or not, we are selling at full price, although the volume is not as great as we would like,” McIntosh said. “But you know, I’m not inclined to lose a bunch of money when I don’t think we need to.”

 

Image captured from Microsoft Webcast.