At the beginning of January, Supply Chain Matters commented on certain signs of supply chain structural changes that were being attempted by noted disruptors Google and Walmart. We specifically observed how Google, having muscled its way into branded smartphones announced that it planned to sell such phones directly to consumers, bypassing major carriers and electronics retailers.  By establishing an online store, Google planned to offer an ‘unlocked version’ of its Nexus One phone for $529 which consumers could purchase and later enable with a wireless carrier of choice.

From the get go, Google experienced multiple issues related to consumer difficulties in purchasing and activating phones.  Google’s worldwide contract manufacturer, HTC of Taiwan, was also placed in a rather difficult position to attempt to support worldwide fulfillment and returns generated from online store purchases.  Now, nearly four months later, the initial results of this attempted disintermediation are presenting themselves.  A recent Financial Times article, Google backtracks on phone strategy, (free preview sign-up or subscription required) indicates that the company has decided to sell the Nexus One in Europe through mobile operators rather than its online store. A Google spokesperson notes: “We have decided that the best and fastest way to get Nexus One into the hands of European consumers is through our partners.” The article further quotes industry analysts as noting that the wireless carriers can make or break a device, and Google is not an exception. One analyst speculated that Google sold just 135,000 units in the first 64 days.  Google is of course, refusing to disclose any sales numbers.

In a related development,  a posting on SiliconValley.com notes that Google indicated that it is dropping plans to produce a version of its Nexus One smartphone for Verizon Wireless, the U.S.’s largest mobile carrier. A Google spokesperson noted that the new Droid Incredible, a smartphone Verizon will begin offering this week with the same Android operating system and made by the same manufacturer as the Nexus One, made production of a Nexus One for Verizon superfluous.

In our view, Google’s ill conceived product marketing strategy coupled with a not well thought out supply chain fulfillment and channel partner strategy have all come home to roost.  I suppose it would not shock readers if I described Google as “arrogant” but attempting to go it alone in worldwide distribution and marketing of smartphones tips arrogance to a new dimension.  Google needs to invest in people who understand all the tenets of responsive global supply chain management vs. just being disruptive for the sake of making a statement.

Bob Ferrari