Apple’s foray into retail was supposed to be a disaster. “I give them two years before they’re turning out the lights on a very painful and expensive mistake,” one critic infamously said in 2001, a comment that would prove slightly prescient considering the number of brick-and-mortar stores that would shutter in the years to come–Gateway, Circuit City, CompUSA. But not Apple. Its hundreds of stores generate billions of dollars in sales annually–more sales than any U.S. retailer by square foot.
Now Apple’s competitors are hoping to repeat Apple’s success in the retail space. This past week we saw a slew of tech giants indicating they might test the retail waters: Microsoft will reportedly open up two stores in the New York area this year; Amazon is said to be launching a store in Seattle; and Google revealed that it’s in the planning stages of a retail store in Dublin. What are all these digital market leaders trying to sell in the physical world?
The answer isn’t primarily physical products. Yes, these companies hope to sell a lot of products, but that’s only a by-product of a more important item they want to sell: their brands.
Take Apple. It made sense for the hardware maker to open up its own shops to sell its own hardware. But Steve Jobs and Ron Johnson designed the stores not around products but around lifestyles. Consumers could go check out the various ways to listen to music or watch movies with Apple products–and through this design, Apple would sell iPods, iPhones, iPads, and Macs. Additionally, Apple used the opportunity to show off its software and services (OS X, iTunes, iCloud), accessories (Jawbone speakers, Beats by Dre), and slick customer experience (gorgeous stores, streamlined checkout, the Genius Bar). The whole experience embodied the Apple brand–and now its stores see more foot traffic than Disney Parks.
Software companies have far fewer reasons to open a retail store–or at least fewer items to fill their shelves. After all, Google doesn’t make much. Sure, it will likely to sell smartphones and tablets running Android, or Chromebooks running Chrome OS, or flat screens running Google TV (or whatever mysterious entertainment devices it might have planned with Motorola Mobility). But it’s not just trying to open another RadioShack.
Google prides itself on being a web company. Some of its biggest products–search, YouTube–are web apps that can’t be manifested in any obvious physical way. (We mocked up a few “products” it could sell, seen from top to bottom: Google Wallet, copies of Zagat, airline tickets through a store-based ITA, Google Maps, and Android’s ice cream sandwich.) Built on top are even more web apps–Gmail, Google Docs, Maps, Books. And the product it’s been pushing most lately, Google+, can’t be sold either. Imagine if Facebook opened a shop to hawk Timeline, or Netflix started a video store, or Amazon a bookstore?
The point here for Google is to bolster its brand, regardless of whether it’s selling products or just using its retail space as a giant billboard to advertise for its services. Microsoft, for example, isn’t necessarily using its stores to sell Office, traditionally one of its best-selling products. But it will use the opportunity to show off Windows 7, Mango on Windows Phones, Microsoft Surface tables, Xbox 360 and Kinect, and soon, Windows 8.
It’s the same reason Amazon might start a brick-and-mortar store–not to sell books but to sell an experience. When Amazon launched the Kindle Fire, Barnes & Noble CEO William Lynch touted the chain’s store-based approach. “If you bought a Kindle Fire, had a question, wanted to talk an expert in person for help, where would you go? Amazon’s headquarters in Seattle?” Lynch quipped.
But soon, Amazon could be just around the corner.