Edited by Vani Rao
Google bets on experiential retailing; opens six ‘Winter Wonderlab’ showrooms
Google Inc. (NASDAQ: GOOG) is gearing up for the most important holiday season of the year. The company is opening its pop-up stores called ‘Winter Wonderlabs’ in six US cities: New York, Washington, Chicago, Los Angeles, Sacramento, and New Jersey, to promote some of its latest products. The stores will feature products such as its Nexus 7 tablets, Chromebook computers, and Chromecast video-streaming devices. Consumers can order these gadgets online in the stores or at home after getting a feel of these products.
Play, Create, Chill
Google is offering consumers an experiential retailing experience as compared to traditional stores through its Winter Wonderlabs, which will feature a large snow globe creating the illusion of falling snow. The stores will also offer customers the option to create, receive, and share videos/photographs of themselves in this make-believe snowy environment. In addition, the Winter Wonderlabs website will feature a gallery with selected slow-motion videos of visitors in the snow globe.
The search engine’s pop-up store initiative might be a way to create a buzz for its floating showrooms in barges in the Francisco Bay and on the coast of Port Maine, which will showcase and promote its steadily growing tech collection gears, but the much touted Google Glass is missing from these stores.
Dipping Toes in Brick and Mortar Waters!
The emergence of online shopping has driven most traditional retail businesses to migrate from brick-and-mortar to online stores. Google is doing the opposite; however, this is not the first time that Google is taking a leap into the retail space. The company had opened its ChromeZone stores inside PC World/Curries in the UK in 2011, apart from pop-up shops in Virgin America airport terminals in the US, where customer can experience its latest Chrome products.
Google is testing waters by following the footsteps of Apple and Microsoft, which have become models for tech companies managing their own stores. The Apple stores are hugely popular and successful with astonishing revenue of $50 million per store. Tech stores are seen as a surefire way of enhancing user experience and creating brand loyalty with well-trained staff that create a brand image with good know-how about the products and sell customer centric products and services.
This temporary channel provides immense opportunities to test market a new product or brand to get a first-hand feedback and push companies’ products during the busiest shopping period of the year. Tech companies like Google and Intel are among the numerous companies that plan to open pop-up stores in a run-up to the Christmas season this year. A few years ago, eBay opened a temporary store in London during the Christmas season. This shows that tech brands are increasingly focusing on physical experience to showcase their brands.
Most companies do not make profits from pop-up stores; instead, they incur huge costs. However, the emphasis is on creating brand awareness and promoting products to get a first-hand feedback within a limited time. Most importantly, pop-up stores enable companies to capture vital data about their products and services.
An interesting point to note is the location that Google has chosen for its pop-up stores. For the Washington area, it has chosen Annapolis, which provides a different demography compared to the trendy urban neighborhoods like Georgetown, Penn Quarter, Bethesda, or Tysons.
With the exception of the New York City location, which is in Manhattan, all the other stores are at Westfield’s malls. The Chicago store is located at a mall in Aurora (40 miles away from Chicago centre) and the LA store is in Canoga Park (28 miles away). Even the Sacramento store is 20 miles away from town.
By keeping its pop-up stores away from the central business district, Google might want to educate and target the not-so-tech-savvy crowds for its products. In the same vein, Google has positioned these products not at the higher end of the market. However Google’s product like the Chromebook relies heavily on the internet and is without many of the essential features compared to traditional laptop. It will remain to be seen whether the products will be a hit among household consumers.
Would it Retail Alone?
After the pop-up store experiment, Google might be planning to open its brick-and-mortar store in the near future as the next logical step. This is because the hands-on experience with a smart device such as a tablet or a smartphone is an integral factor to convert a prospective consumer into an actual buyer. The personal experience will definitely help sell products such as the Google Glass (priced at $500-1,500) to attract regular customers and not just the hardcore tech geeks, since many consumers are hesitant to order online without knowing how.
Having an exclusive space to test out Google products would be beneficial for sales and garnering feedback. It will also connect Google in a way that it cannot do by having only an online presence. It makes sense for Google to sell its apparel and other Google-branded merchandise. In the future, Google driverless cars and other ambitious tech wizardry can be displayed at these brick-and-mortar outlets.
Should it Retail Alone?
Google has become synonymous with the internet and has revolutionized the way people study, communicate, find places, or connect. That said, why should it want to set up offline stores?
Whilethe inherent value of Google Glass can be hard to recognize without experiencing it first-hand at a retail store, it would be more practical for Google to leverage its existing relationships. Google has a fair number of ChromeZone experience areas already accessible at retailers’ physical stores like Best Buy and PC World. Google might be required to better train and compensate the staff to ‘sell’ the experience to customers; it would still be less expensive than venturing alone in the retail space. Running a physical store requires a considerable amount of investments in terms of fixed costs such as rent and utilities, training and staffing, interior design, and supply chain costs. While Google does have the ability to invest in such stores, the real question is whether Google should do it.
Google might want to follow Apple in controlling the end-to-end experience, but it may face difficulty in positioned itself as the ultimate luxury brand like Apple does. Moreover, Apple has the highest industry product margins, enabling it to earn average revenues of $50 million per store with a bill of $10 million. Instead, Google could follow the Amazon model where its devices like the Nexus smart phones and tablets or its Chromebook are sold with thin margins.
In recent years, Google has spent billions in disruptive innovation like driverless cars, Google Glass or the Loon Project, which are yet to make profits. It remains to be seen how far Google will stretch its endless reserves for its retail venture. Looking at this from ROI (Return on Investment) and ROE (Return on Effort) perspective, a big retail push seems like a very dicey decision.
In conclusion, we are excited about Google’s new venture of wanting to connect to consumers in a fun way rather than targeting them in terms of direct sales. This strategy can help create a favorable brand image and reap benefits in the near future as it translates into sales and most importantly, it would fill a major gap in Google’s product infrastructure a public face. It will be even more interesting to see if Google decides to venture into a standalone retail chain, which will be a different ball game altogether; but after all, this is Google, who knows!
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