The latest rumor from rumor mill is about Google Retail stores. As reported by Amir Efrati on WSJ, Google Inc. is working on plans to launch retails stores to compete with Apple Inc. and Microsoft. After the Motorola acquisition its a very likely possibility but it may not be a good business decision. Lets look at the this possible decision more closely.
Before evaluating Google’s decision lets understand the reasons for Apple’s move in the first place and the roots of their success.
Apple Inc. decision to open its retail stores was rooted in their strategy and competencies. Traditionally Apple Inc. core competencies is the art of hardware design. And when they invented the new smartphone industry these devices were virtually unknown and they knew about the new product pipeline coming down road based on their core competencies. At that time Apple Inc. was in dire need of an outlet for showing off their innovation both in hardware and in iOS and retail stores were perfect way of executing the strategy.
Microsoft came along the way with their Surface tablet and tried to imitate the retail store model. Unlike Apple Inc. Microsoft didn’t bring much innovation to their showcase. The slapped Windows 8 OS onto Tablet form factor device with little or no additional value. Microsoft stores go pale in comparison to Apple Inc. sales per Sq. ft. By competing with OEM partners, Microsoft is pushing them more towards making Google Chrome OS tablets to hedge their bets. So Microsoft is actually helping Google with retail store and tablet strategy.
Now lets look at Google Inc. plans to start their own retail stores. Traditionally their innovation is in search and software NOT hardware. But Google may think that things changed by Motorola acquisition.Think Again. If Motorola were really good at the art of hardware design they wouldn’t in such bad shape to start with. Given that Android OS is free, Motorola would have survived on their own without Google’s help. But things could change down the line with time and cash infusion to Motorola division. And the change itself could take 1-2 years. And in the meantime stores could showcase Google Glasses and OEM partner devices just like Microsoft but that isn’t going to increase profits from device sales. Given that they already have the largest mobile market share, retail stores aren’t going to help much unless they are going to morph themselves into a hardware company. And that is very unlikely.
In my opinion, retail stores strategy would work for a companies that can innovate continuously in hardware and require customers evaluation at each iteration of the hardware design and for every product introduction. And both Google and Microsoft fail these tests and could end up with the burden of managing and investing in retail stores.