Google (GOOG) Retail Stores a Positive, SunTrust's Peck Says
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Rating Summary:
41 Buy, 6 Hold, 1 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 15 | Down: 10 | New: 13
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News that Google (NASDAQ: GOOG) may open retail stores makes sense to SunTrust Robinson Humphrey analyst Robert Peck. In fact, Peck presented the idea that both Google and Amazon (NASDAQ: AMZN) should open retail stores in a note to clients back on January 27, 2014.
Peck cited 5 reasons the two should open retail stores: : 1) Enabling product familiarity, 2) Omni-channel presence, 3) Local delivery & service, 4) Infinite inventory, and 5) Payments and Data.
Elaborating on each point, Peck said:
1) Owning Stores Enables Product Familiarity – As we stated above, we think a physical location allows the companies to demo their products AND services. As both companies continue in the direction of offering a full suite of connected and integrated products the hands- on opportunity for consumers can be a key selling point.
2) Omni-Channel Presence – Much like how eBay is trying to be an omni-channel provider of selling tools, Google and Amazon stores would enable consumers to have immediate gratification in buying something tangible while also offering depth of product online.
3) Local Delivery & Service - Google and Amazon are already global, but by having a physical presence in certain cities, they could be local too. Being local could amplify other capabilities too, like same day delivery, returns, and customer service. Also, recall that Amazon recently signed a deal with the US Postal Service to deliver products on Sundays and they recently file a patent for "anticipatory package shipping." Lastly, being local can help build consumer loyalty and trust as well. There is a large component of brand identity with Apple that partially stems or is enhanced by its stores.
4) Infinite Inventory – Another possibility would be to have smaller but efficient stores (i.e., RadioShack), where consumers could walk in, play with the technology, and immediately order a product to have Amazon deliver it the same day / next day. This would enable the concept of "infinite inventory" within each store. For Amazon, this could also apply to more product categories than just Amazon branded hardware like Kindles. Consider the potentail of showroom stores offering large selection of demo SKUs accross many categories along with access to Amazon's global inventory, further helping change the way consumers shop.
5) Payments and Data – Both companies have payments ambitions (Amazon Payments / Google Wallet) and by having a physical store, they could facilitate the adoption of these services, helping sell consumers on why they’d want to use them. The companies could even sell stored value "Google Cards" and credit cards (Amazon has this online). While the stores would help accelerate their payments, maybe the biggest benefit would be both companies favorite asset: data. They would be able to accumulate data on shopping behavior, consumer traffic patterns, and preferences. It would also close the loop in some cases on brand marketing, where Google could show from click to purchase of partner items. Lastly, as the companies sell more and more of their devices (think Android phones and Glass), they can create broad scale sensor networks that provide even more data on consumer motion, patterns and behavior which has wide reaching potential.
Peck cited 5 reasons the two should open retail stores: : 1) Enabling product familiarity, 2) Omni-channel presence, 3) Local delivery & service, 4) Infinite inventory, and 5) Payments and Data.
Elaborating on each point, Peck said:
1) Owning Stores Enables Product Familiarity – As we stated above, we think a physical location allows the companies to demo their products AND services. As both companies continue in the direction of offering a full suite of connected and integrated products the hands- on opportunity for consumers can be a key selling point.
2) Omni-Channel Presence – Much like how eBay is trying to be an omni-channel provider of selling tools, Google and Amazon stores would enable consumers to have immediate gratification in buying something tangible while also offering depth of product online.
3) Local Delivery & Service - Google and Amazon are already global, but by having a physical presence in certain cities, they could be local too. Being local could amplify other capabilities too, like same day delivery, returns, and customer service. Also, recall that Amazon recently signed a deal with the US Postal Service to deliver products on Sundays and they recently file a patent for "anticipatory package shipping." Lastly, being local can help build consumer loyalty and trust as well. There is a large component of brand identity with Apple that partially stems or is enhanced by its stores.
4) Infinite Inventory – Another possibility would be to have smaller but efficient stores (i.e., RadioShack), where consumers could walk in, play with the technology, and immediately order a product to have Amazon deliver it the same day / next day. This would enable the concept of "infinite inventory" within each store. For Amazon, this could also apply to more product categories than just Amazon branded hardware like Kindles. Consider the potentail of showroom stores offering large selection of demo SKUs accross many categories along with access to Amazon's global inventory, further helping change the way consumers shop.
5) Payments and Data – Both companies have payments ambitions (Amazon Payments / Google Wallet) and by having a physical store, they could facilitate the adoption of these services, helping sell consumers on why they’d want to use them. The companies could even sell stored value "Google Cards" and credit cards (Amazon has this online). While the stores would help accelerate their payments, maybe the biggest benefit would be both companies favorite asset: data. They would be able to accumulate data on shopping behavior, consumer traffic patterns, and preferences. It would also close the loop in some cases on brand marketing, where Google could show from click to purchase of partner items. Lastly, as the companies sell more and more of their devices (think Android phones and Glass), they can create broad scale sensor networks that provide even more data on consumer motion, patterns and behavior which has wide reaching potential.
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