Google taps online retail

1 April 2013

NEW YORK: Google, the online giant, is seeking to enhance its ecommerce capabilities by testing a same-day delivery service, a move putting it in competition with operators like Amazon and eBay.

A trial programme for Google Shopping Express has recently been launched in San Francisco, offering same-day delivery from stores like Target, Staples, American Eagle, Walgreens and Toys 'R' Us.

"It's a local delivery service that we hope will make it possible for you to get the items you order online the same day, and at a low cost," Tom Fallows, product management director of Google Shopping Express, wrote on an official blog.

"We're still working out our long-term pricing plan but early testers will get six months of free, unlimited same-day delivery."

Colin Sebastian and Gregor Schauer, two analysts at Baird Equity Research, suggested this scheme will "bring more local product inventory into search" and "counter competition from Amazon and eBay".

Such a move is also "consistent with Google's ambitions to create a larger commerce platform," they added, as reported by Wired. "We still see Google over time expanding toward a more traditional ecommerce marketplace model."

Elsewhere, Ross Sandler, an analyst at Deutsche Bank, asserted that Amazon's Prime service may come under pressure from the development of a growing number of same-day delivery offerings.

Prime gives members unlimited two-day shipping for $79 a year, and subscribers are six times more profitable than Amazon's regular clientele.

However, Sandler also reported that Amazon's spending on several "mega-warehouses" in the US left it well-placed to move forward if the market begins to change.

"The end result of these investments is likely to be improved unit economics from lower shipping costs, better customer service levels and speedier delivery, which is typically the second most important factor in the consumer's purchase consideration, behind price (where Amazon consistently wins)," he wrote.

PayPal, a unit of eBay specialising in digital payments, is also building a diverse range of mobile apps covering everything from loyalty schemes and targeted offers to "click and collect" tools, thus fusing the physical and the digital.

"Commerce is no longer about location, location, location," Don Kingsborough, PayPal's vice president of retail, told the Financial Times. "New commerce is about engagement, engagement, engagement."

Data sourced from Google/Wired/Financial Times; additional content by Warc staff