While Google Inc (NASDAQ:GOOG) (NASDAQ:GOOGL)’s core business remains search and the ad revenues it generates, the company is a massive company and knows virtually no bounds when it comes to new ways of making a buck. Despite its place on the top of search mountain, it trails Amazon in one key area, product searches.
Google vs Amazon: Big money for expansion
There is almost nothing that Amazon.com, Inc. (NASDAQ:AMZN) won’t sell and is expanding both its same day deliveries as well as its fresh grocery service, Amazon Fresh. But Google wants in on it and the company has accelerated its Shopping Express service that it launched last year with an understanding that the company has earmarked $500 million to expand its offerings. Shopping Express has Google pairing up with Target Corporation (NYSE:TGT), Toys R Us, Whole Foods Market, Inc. (NASDAQ:WFM) and Costco Wholesale Corporation (NASDAQ:COST) among other retailers to provide customers with same day or next day delivery of their products in the hope of taking a piece from the $60 billion grocery market.
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“You can very much expect that we are putting a lot of money into this and we’re excited and willing to sustain that investment over time as this gets going,” said Tom Fallows, head of Google Shopping Express.
Presently, that money is going to the marketing of the service in New York, San Francisco, and Los Angeles as well building a fleet of delivery vehicles.
“Google can’t give up on product search and this is another pathway to closing the loop for advertisers,” said Keith Anderson, a vice president at the consulting firm RetailNet Group. “They failed on the payments side in stores, but if they can use expedited delivery as a way to get it then they’ll keep on being willing to spend.”
“We have been displaying to shoppers information about locally available listings for five years,” says Fallows. “And throughout that time shoppers had really interesting feedback: ‘Thanks, Google, but now you’re not helping me do anything about getting that product today.’”
But that is about to change. “We think that helping close the loop on locally available items is a really important part of making sure Google is the best place to shop,” Fallows said.
Ally rather than competitor
This strategy is quite unlike Amazon’s business model. While Amazon.com, Inc. (NASDAQ:AMZN) is direct competition to retailers, Google hopes to be an ally.
Rather than spending billions of dollars on inventories and warehouses nationwide, Google Inc (NASDAQ:GOOG) (NASDAQ:GOOGL) dispatches couriers to its retail partners to pick up the items and then puts the orders together from the different retailers before sending them to customers’ homes.
Google takes a single-digital percentage cut from each retailer and charges $4.99 for each retailer visited. However, when it launched the service in New York City its waived the delivery fees for the first six months and according to Fallows, Google ultimately hopes to offer a flat-rate annually fee not unlike Amazon Prime subscriptions.
“We intend this to be an affordable service that as many people as possible can adopt,” he said. “We are trying to democratize the world of same-day delivery.”