Google's Next Big Move: Storefront Retail?
Rumor has it Google (NAS: GOOG) is contemplating a move into storefront retailing. With the enormous success Apple (NAS: AAPL) has had with its retail stores, it's easy to see why Google might be thinking similarly. Here's what a limited foray into storefront retailing might look like for the search giant, and why it might be the company's next logical step.
Guinness and Google
The rumor has its origins in Dublin, Ireland. Of late, the city has become a tech center and European headquarters for many big American Internet companies, including Google, LinkedIn, Zynga, and Facebook.
Google is currently in the process of renovating an entire city block for its use in the "docklands" section of the city, until recently a down-on-its-luck area, now cheerily referred to as "Silicon Docks." Financial Times is reporting that in the official planning application there's an option for storefront retail space.
Advice is free, but the pen's gonna cost you
Right now, Google is refuting any notion the company will open an Apple-style retail location in Dublin. "We already have an online store selling things like Google T-shirts and pens," a company spokesperson told Financial Times. "We have the option of a small space doing the same in our Dublin office, but we've not made any decisions. It's simply a planning application."
It's certainly possible that's all the company is thinking about. But consider that Google has already tried its hand at bricks-and-mortar retailing in Europe with what it calls "pop-up shops," which are essentially Google stands in big consumer-electronics stores where Chrome OS advice is freely dispensed and product demos given.
So no matter what the company is saying now, a traditional storefront seems like a logical move to me. Here's what it might look like.
Get real, Google
Google just purchased Motorola Mobility (NYS: MMI) , ostensibly for its considerable patent holdings, but who's to say for sure whether Google will start hawking Android-loaded Motorola (or Google-branded) smartphones of its own design and manufacture someday?
Apple has had obvious success with the integrated hardware/software model, and something similar could easily be in the works for Google. If so, having your own chic retail space in one of the most up-and-coming parts of Dublin in which to showcase it is a nice option.
At the very least, there are Chromebooks to shill and apps and operating systems to demo. A series of flagship shops like this (theoretical) one in Dublin -- one in each of the big cities in Europe, Asia, and the U.S. -- wouldn't put Google out too much financially. And assuming the stores were done stylishly, the brand could benefit; Google would quite literally come out of "the cloud" and become more real to consumers, as happened with Apple when it opened its retail stores.
But don't get too real
There are benefits to staying virtual, though. Once you're out of the cloud and on the ground, many new challenges present themselves. You have to rent or buy space, and then keep it up. You also have to deal with a whole other type of employee, one making minimum wage or just a bit beyond and not tied into the day-to-day, rah-rah corporate life of someplace like the Googleplex.
And store expansion has to be carefully managed as well. Many a retail operation has opened stores too quickly and then had to pull back, which is not only expensive, but also potentially damaging to the brand's image. Starbucks (NAS: SBUX) is a good case in point. One of the first things Starbucks founder Howard Schultz in 2008 did when he took back the reins of the then-struggling coffee company was to close a large number of stores. Luckily, the company's image did fully recover, and Starbucks is now thriving again ... but it's better not to learn that lesson the hard way.
Microsoft (NAS: MSFT) has actually gotten into the storefront retail game recently, and seems to want a large presence in the space. The company already has 16 locations and is planning another 75 in the next two to three years. That's an aggressive pace, and investors will want to keep a close eye on whether the company is getting its money's worth.
An optimum balance
For the time being, until the company has more physical items to sell, a limited set of flagship stores would be the optimum balance between Google touching down on Earth and staying comfortably above the storefront-retail fray. We'll have to wait to see exactly what the Internet giant does with its Dublin storefront option, but a limited, thoughtfully executed foray would be a next logical step in the company's evolution and would bode well for investors.
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At the time this article was published Fool contributorJohn Grgurichkeeps his head as firmly ensconced in the clouds as adult life allows him to, and owns no shares of any of the companies mentioned in this column. Follow him on Twitter @TMFGrgurich.The Motley Fool owns shares of Microsoft, Apple, Google, and Starbucks. Motley Fool newsletter services have recommended buying shares of Apple, Google, Starbucks, and Microsoft; writing covered calls in Starbucks; creating a bull call spread position in Microsoft; and creating a bull call spread position in Apple. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has a perfectly scintillatingdisclosure policy.
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