Consumer Electronics

Google Eyes Apple Stores and Considers Retail


Apple Inc. employees cheer as the doors open at the company's store in Sydney, Australia

Photograph by Ian Waldie/Bloomberg

Apple Inc. employees cheer as the doors open at the company's store in Sydney, Australia

As malls close, big-box stores try to shrink, and the overall prospects of physical retail range from stagnant to apocalyptic, one sector of the market is enjoying an unlikely growth spurt: stores opened by the big technology companies. Apple has spawned about 400 Apple (APPL) Stores in the last decade, Microsoft (MSFT) is opening new locations, and now—according to tech blog and news reports—Google (GOOG) is developing plans to open showrooms in the U.S. to highlight its devices running the Android and Chrome operating systems.

Far be it from us to cast aspersions on the retail ambitions of big technology companies. (“I give them two years before they’re turning out the lights on a very painful and expensive mistake,” one retail expert told us of Apple back in 2001.) Google’s doing just fine without the hassle of being a merchandiser: It has the most-trafficked real estate on the Web and enjoys healthy distribution at electronics outlets like Best Buy (BBY). It also has close relationships with its carrier partners, such as Verizon (VZ) and AT&T (T), which have their own ubiquitous stores.

But over the past few years, Google has been making more of its own hardware, and it can use additional help reaching customers. It started selling many of its Nexus smartphones and Nexus 7 small tablets itself, primarily online. These devices have been modest successes, but as Apple has shown, having a direct channel to the customer can help immeasurably. “Historically, Google has had trouble selling stuff directly to customers online,” says Greg Sterling, a senior analyst at Opus Research. “Apple is obviously a model of enormous success with its retail strategy, and if Google wants to do it right and invest in it, it can be a big boost for the brand.”

Google is now making even more of its own hardware, via its Motorola, Android, and Chrome divisions; a physical store would cast those devices in the best possible light. The company has already been experimenting with temporary pop-up stores in airports and store-within-a-store configurations in Best Buys.

The best reason to open stores may be all the secret projects still gestating at Google’s far-out think tank, Google X. Google Glass, the Internet-connected eyewear being touted by co-founder Sergey Brin, is the most obvious example. The eyeglasses place a tiny voice-controlled computer screen in the corner of the wearer’s periphery. Customers will need to test this slice of the future to believe it’s even possible–and worth the inevitable look-at-that-dork reactions from people in the real world. By opening its own stores, Google will be able to control the demo experience for Glass rather than relying in Best Buy blue-shirts in noisy box stores.

Sterling says that one day Google might even use these locations to offer customer service to small and medium-size business owners on advertising products like Adwords. “There’s a lot of stuff they can do with stores, a physical presence, that would extend beyond selling handsets,” he says. This is a company known for experimentation. One can do a lot of that with nearly $50 billion in cash, which Google has, including short-term investments. This morning, GOOG topped $800 a share for the first time.

For now, Google is likely looking at case studies from rivals whose physical locations didn’t quite work out. PC maker Gateway (GWAY) flubbed with its line of stores a decade ago; Sony (SNE) has more recently been closing Sony Style stores. Both of those companies suffered in part from lackluster products. That’s the real bottom line: If Google builds devices worth checking out, customers will flock.

Stone_190
Stone is a senior writer for Bloomberg Businessweek in San Francisco. He is the author of The Everything Store: Jeff Bezos and the Age of Amazon (Little, Brown; October 2013). Follow him on Twitter @BradStone.

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