Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Can Google Inc (GOOG) Succeed in Retail?

Of all the Internet companies that could potentially open up brick-and-mortar retail stores, search giant Google Inc (NASDAQ:GOOG) is probably among the last to come to mind. 9to5Google is reporting that this is exactly what’s in the works and that Big G is shooting to open up a handful of Google Stores in major metropolitan areas by year’s end.

The step out of cyberspace would be geared toward selling Google hardware and giving prospective buyers a chance to try out devices before taking the plunge. Recently, Google has begun to improve its direct-sales execution after fumbling its first foray in 2010 with the Nexus One. Nexus devices can now be purchased directly from the company through its Google Play storefront.

Google Inc (NASDAQ:GOOG)Everyone’s doing it
Rivals Apple Inc. (NASDAQ:AAPL) and Microsoft Corporation (NASDAQ:MSFT) both operate their own retail storefronts.

Apple Stores have become a pillar of retail success over the past decade, as they allow the Mac maker to exert control over the entire purchase experience. Apple CEO Tim Cook even said recently that he didn’t think the iPad would have been as successful without retail stores, since allowing customers to experience the device first goes a long way in convincing them that they want one.

In Microsoft’s broader push to be more like Apple, the software giant has not only launched its own first-party Surface tablet, but also erected a network of Microsoft stores that bear an uncanny resemblance to Apple Stores, too. Microsoft also used its stores as the first retail outlet to launch the Surface RT models in October.

However, there’s a big difference in how Google approaches hardware sales that has implications on any potential retail strategy.

What will it cost?
Google’s hardware strategy is much like, Inc. (NASDAQ:AMZN)‘s in that both companies sell devices at cost in order to feed users back into their respective core businesses of search advertising and e-commerce. This lack of margin means that the company has no hopes of profiting directly from a retail initiative and will need to eat the costs of operating stores.

For example, Apple spent $865 million building up retail stores last fiscal year, and expects to spend another $850 million in fiscal 2013 to open between 30 and 35 new stores. However, Apple’s global retail network is quite mature at this point, after the company first opened retail stores in 2001, and Google’s retail operating expenses wouldn’t be anywhere near this much. Still, all of those costs would have to be absorbed and other parts of the business will have to foot the bill.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.