Why Would Google Open A Chain? Ask Apple

Written by Frank Hayes
February 20th, 2013

Rumors this week that Google (NASDAQ:GOOG) is on the verge of launching its own chain of brick-and-mortar retail stores mostly seemed to focus on how much better Google is at creating buzz than Microsoft (NASDAQ:MSFT), and how the search giant could give Apple (NASDAQ:AAPL) real competition in the tech-vendor retail-chain sweepstakes. We also liked hearing pundits not insisting, for once, that Amazon (NASDAQ:AMZN) will be the next online retailer to jump into physical stores.

But largely missing from the rumor mill is a blunt reality: Google isn’t actually a retailer at all. It could probably put up a chain of good-looking stores and find things to put in them—Nexus phones and tablets, Chromebook computers, Google Glass electronic glasses, driverless cars. But what, exactly, would Google—which is fundamentally a huge online advertising company—get from opening its own chain?

One possible answer: some actual payments.

That, after all, is currently Google’s biggest embarrassment. Google Wallet was supposed to line up some of the biggest retail chains, outfit them with NFC-based POS systems and get customers paying by phone as quickly as the phones could get into their hands. It didn’t work. Technical glitches and learning curves aside, retailers and customers just haven’t bitten hard on what Google is offering.

Meanwhile, Apple—which doesn’t currently have an actual mobile-payments system running—is the darling of big chains. The iPod Touch and iPad have all but cornered the market on in-store mobile POS devices. Why? Part of it is the Apple Mystique. Part of it is Apple’s early start getting into the market.

But a big part may be the fact that Apple has been running its own chain for more than a decade. With hundreds of stores, Apple doesn’t have to claim its technology works in-store. It doesn’t even have to demonstrate that. Apple just has to use its own gear, and other chains snap it up.

Which means if Apple ever does get around to introducing a mobile wallet for payments, that “one of us” vibe ensures it won’t just have a foot in the door for dealing with big chains. It will have the biggest foot in town.

All that must sound like a dream come true to Google. But it’s still not enough to justify launching its own chain, especially without a real product line of its own to sell.

No, the biggest benefit Google might get from even a small chain is real payments experience involving actual customers. Google knows all about user data, but it doesn’t grasp CRM. It knows how to keep users coming back to its site (just keep returning search results), but it has no experience getting customers to keep coming in the door. And its understanding of key retailer payment issues—interchange, PCI, loyalty-program integration—is completely theoretical.

Apple, on the other hand, understands all those things, including a rip-and-replace experience with a payment system. That may be part of the reason it’s still dragging its feet on a mobile wallet.

Would a Google chain solve Google Wallet’s problems? Almost certainly not. It would definitely be one set of stores that can handle NFC payments, and possibly the only chain that actually encouraged customers to use Google Wallet. But most customers won’t—and that’s exactly where Google would learn the most about why Google Wallet isn’t going anywhere.

As for Google actually launching a U.S. chain this year, that’s a single rumor from a single source. Google hasn’t confirmed it. Nor has any outside evidence, such as zoning approvals or building permits, turned up. But Google did get city approval in January to add a 1,300 sq. ft. retail store to its European headquarters in Dublin, Ireland. That’s not a chain, and it barely qualifies as a broom closet in Apple’s biggest stores. But for learning retail, it’s a start.


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