Google has been testing a same-day delivery service in San Francisco for local retailers since February, a move that could allow the company to expand more into the turf of online retailer Amazon.com.
“Google Shopping Express helps local retail stores sell products online and have the items delivered to shoppers the same day,” according to a report by Reuters, which quotes a source who said they are familiar with the service testing. “Google arranges for third parties, such as couriers, to pick the products up from local stores and deliver the items to shoppers. Neither the stores nor Google handle the deliveries, the person explained on condition of anonymity because the service is still in the early development stage.”
The experiment is being run by Tom Fallows, a Google product management director who has an extensive background in e-commerce, the report states.
Google, which is in the search and online advertising business, is always looking for ways to expand its markets, and the retail world is closely aligned with its search services as consumers go to Google to search for products, which they then purchase elsewhere.
The concept of expanding its reach into retail sales could help Google close that gap.
A Google spokesperson had little to say about the report in an email reply to an inquiry from eWEEK. “We are always working to build a delightful shopping experience for users, in close partnership with retailers, and to empower businesses of all sizes to compete effectively,” wrote the spokesperson. “We will continue to work toward providing technology, tools and traffic to help power the retail ecosystem but have nothing to announce at this time.”
For Google, the idea of same-day delivery makes sense, but it may be a very big challenge to take on Amazon and its established customer base, said Gene Alvarez, an analyst with Gartner. The big problem is that Amazon’s Prime service, which costs $79 a year and allows customers to get most of their purchases with two-day shipping at no extra cost, is very established and has a dedicated throng of users who love it, Alvarez said.
Where such a plan could work for Google, however, is to make it faster and easier for buyers to get their online purchases when they are made through a local retailer.
“What’s happening is that people want it now” when they buy online, he said. “The online retailers, especially Amazon, have been doing a good job of having the products and getting them to buyers.”
That’s forced retailers in general to get into this instant marketplace, said Alvarez.
Another competitor in the instant shipping category is Shoprunner.com, which offers free unlimited two-day shipping on a large number of items from a myriad of retailers for $79 a year, according to Alvarez. Some of the retailers include AutoZone, Calvin Klein, NewEgg, PetSmart, Sports Authority and Toys R Us.
Even eBay has been piloting its own eBay Now program, where buyers can order something online and a local delivery person goes out and brings it to the buyer, Alvarez said.
“You can see that there’s a variety of these models now in getting things to you rapidly and predictably,” he said. “I do think this is why Google wants to take on Amazon Prime.”
Google Testing Same-Day Delivery Service in San Francisco: Report
One problem Alvarez sees, however, is that Google may not be able to offer enough to get dedicated Amazon Prime customers to switch to another service after several years of being satisfied with their Prime experiences.
If Google only cuts the price of such a service by only $10 a year, Alvarez doesn’t see it attracting many Amazon customers. “Amazon has this market today,” he said. “If Google wants to do this successfully, it’s going to take more than this. A $10 price break isn’t enough. If I’ve been using Amazon Prime for a while, why am I switching? What’s the candy Google will offer to make me switch over?”
Google certainly has been experimenting with e-commerce for a long time, with its Google Payments, Google Wallet and Google Checkout products. And in February, Google bolstered its online sales capabilities by acquiring a company, Channel Intelligence, that lets consumers buy products directly through product pages on Websites. One of the company’s products, its Buy Now app, allows online retailers to show potential buyers a dynamically updated list of online retailers that have the advertised product in stock, where the consumer can purchase the item instantly with a click.
“It’s a question of can they really make money here?” Alvarez asked about Google. “With Amazon, they live and die as a retailer so they have to so they make it work for them.”
Charles King, principal analyst with Pund-IT, said the report about Google’s same-day delivery aspirations is “actually a pretty interesting model in that Google is pursuing more of a partner model than Amazon” provides.
The big difference in the approach is that many brick-and-mortar retailers are left to try to compete with Amazon, which has been hurting those real-world stores, while the Google model would allow those stores to gain new online customers with Google’s help, said King.
“Amazon has come into retail markets, and their appearance has been challenging with traditional big-box retailers,” he said. “By partnering with them, Google could be providing more of a hand up to them, which would be a benefit to the stores themselves.”
And for Google, a same-day delivery service in partnership with retailers wouldn’t require them to build costly warehouses or have major supply chain needs, said King. “It’s a less aggressive approach, but it also requires far less in the way of risk or investment for Google as well. They’d simply be acting as an intermediary, like using a Visa card.”
In October 2009, Amazon launched same-day delivery services in seven major U.S. cities as it expanded its buying options for its customers.
This is not the first time that Google has dabbled with the idea of same-day delivery. The idea has at least been in discussions since late 2011, when the company began its Google Product Search service.