Google Inc (GOOG) Tries On a New Hat

The Amazon Goliath has more or less dominated the online purchasing world, both with its own products and others. Millions of convenience-seekers just find a few clicks of the mouse a better alternative to gallons of gas, crowded aisles and indifferent cashiers. For Amazon, the only drawback from online to store is the problem of overhead. The cost involved in ‘keeping the lights on’ in a brick and mortar store might negatively impact its other competitive advantages – namely price points.

The key to Google’s success is already underway – steady planning, research, and appropriate implementation. It cannot rush into gobbling up real estate and suffer the same fate as companies that grew too fast and were left holding the bag when business slowed. The costs it will incur is absorbed by constant revenue from other online sources.

What will happen

My prediction is that after the novelty wears off, people will retreat back to their online shopping sanctuary where power lies in a few simple clicks and home delivery. Even so, I don’t see Google suffering from this, as it has proven to be even-handed in its approach to adapting to consumer trends. While Google shares hold steady at around $800, my prediction is that as preparations increase, more will jump into the stock and we will see a rise. However, new costs will most likely offset new sales in their stores and compress margins.  Stores will require significant working capital, even if the company pursues sale-leasebacks for its physical buildings.

Even so, I still see this as more attractive than the future of retailers like Wal-Mart and Best Buy. In particular, the days of specialized big boxes like Best Buy are coming to an end. As numbers prove, consumers opt for all they need under one roof, rather than one stop for groceries, one stop for clothes, one for electronics, etc.

Summary

Google is still a great buy. I think the strategic and planned approach to its new venture will show great returns. I applaud Google’s leadership and wisdom in the exhaustive testing and the patience displayed in its roll out strategy.

The article Google Tries On a New Hat originally appeared on Fool.com and is written by Maxwell Fisher.

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