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Google Scraps Nexus One's Strange Online-Only Sales Model

Google Scraps Nexus One's Strange Online-Only Sales Model

Google has given up on its experiment to sell the Nexus One smartphone only through its online store. Though it was hotly anticipated, the Nexus One did not sell well, an outcome that may have been largely due to the unusual model Google established. Only one carrier -- T-Mobile -- offered a subsidy for the Nexus One with a contract, and even T-Mobile wasn't able to sell it directly.

Roughly four months after it began selling its Nexus One "superphone" online, Google announced on Friday that it would halt Web sales and begin selling it through retail stores instead.

"While the global adoption of the Android platform has exceeded our expectations, the web store has not," Andy Rubin, vice president of engineering, wrote on the company blog. "It's remained a niche channel for early adopters, but it's clear that many customers like a hands-on experience before buying a phone, and they also want a wide range of service plans to chose from."

Accordingly, Google plans to expand its current European model globally and work with partners to offer the Android-based device through existing retail channels. Once the Nexus One is widely available in stores, Google will stop selling the handsets via the Web store; instead, it will use that online space as a virtual store window "to showcase a variety of Android phones available globally," Rubin said.

'Most Like to Touch and Compare'

Following the buildup and the much-anticipated January release of the Nexus One, it soon became clear that Google's online-only sales strategy could be a problem.

"This is not so much a reflection on the device, but on the way the device was sold," telecom and wireless analyst Jeff Kagan told the E-Commerce Times. "Some customers will buy online, but most like to touch and compare in person."

Google is an online business -- "that's how they think," Kagan noted. "They thought this would be an obvious extension. However, the average user is not at that same place -- not yet, anyway."

'Retail and Operator Partners'

Now, Google plans to "work with both retail and operator partners" for distribution of the device, company spokesperson Anthony House told the E-Commerce Times.

In the United States, only T-Mobile offers a pricing plan aimed specifically at the Nexus One, bringing its US$529 price down to $179 for T-Mobile customers willing to sign a two-year contract.

In Europe, Vodafone sells the device in its own stores.

It's not yet clear what effect this latest move will have on pricing or whether other carriers will now choose to get on board. "Pricing is up to partners," House said.

'Suddenly Not That Hot'

As for retailers, Google's "best options would be Best Buy, Wal-Mart or maybe Radio Shack," Mike Morgan, senior analyst for mobile devices with ABI Research, told the E-Commerce Times.

Whether those retailers are interested, however, remains to be seen.

"Since the Nexus One came out, the Droid Incredible came out, and Sprint has its EVDO 4G device coming out," Morgan noted. "Suddenly, the Nexus is not that hot of a handset."

Pricing, moreover, is comparable on some of those more powerful devices, he added.

If Google does manage to secure a deal with one or more of those large retailers, it will help the Nexus One by getting it into consumers' hands, Morgan noted. Then, too, such availability could convince another carrier to subsidize the device.

Still, he concluded, "there are a lot of 'ifs' between here and there."

'This Is Not the End'

Indeed, "I am not sure how many retailers will be interested in carrying the Nexus One," since it would compete with their other Android devices, Kagan pointed out.

"Google will have to make it worth their while," he added. "Then again, if Google is serious, I think they will."

Either way, "this is not the end of Google's superphone," Kagan concluded. "These devices keep getting better and smarter and will continue to do so.

"This is a bloody nose for Google, but it is not the end," he predicted. "It's like any prize fighter -- they get plenty of bloody noses and keep on fighting and eventually winning."


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