Google Product Search to Compete With Amazon Prime

Google (NASDAQ:GOOG) is reportedly working on an alternative to Amazon’s (NASDAQ:AMZN) Prime two-day, shipping service that would let people shop for goods online and get their orders shipped to their doors within a day for a fee, according to The Wall Street Journal.

Amazon Prime is a popular program that lets consumers pay $79 a year for unlimited, free two-day shipping. The service added thousands of free Amazon Instant Video titles earlier this year.

Google is working on an extension to its Product Search comparison service that would let retailers such as Macy’s, Gap and OfficeMax include their goods for speedy shipping. Product Search, which was recently refined to accelerate consumers’ search experience, also lets users determine if local stores have a product in stock.

The Journal said that under the new service, expected to launch in 2012, consumers ordering goods from participating retailer Websites would be offered the option for same-day or next-day delivery. Google hopes to lure more users to Product Search, which has come under regulatory scrutiny, with free or low-cost shipping.

Such a service would certainly ratchet up the rivalry between Google and Amazon, both of which declined to comment on the service.

Google has been reaching deeper into Amazon’s cozy e-commerce market, offering an online bookstore that competes with Amazon’s popular Kindle Store and courting major brands for its Google Offers and Google Wallet mobile payment service.

Amazon has leveraged Google’s Android platform to build the Kindle Fire tablet designed to undercut existing Android slates in the market. The e-commerce giant complements its tablet with its Android Appstore, an application market that competes with Google’s own Android Market.

Such a service would also be something of a gamble-as deep as Google’s pockets are from its $30 billion a year advertising business, analysts believe. Forrester Research analyst Sucharita Mulpuru told The Journal Google’s move would be “ridiculously expensive,” because Google would have to subsidize shipping costs.

Piper Jaffray analyst Gene Munster, who has calculated that Amazon spends $90 for each of its Amazon Prime customers who pay $79 a year, said a Google delivery service is unlikely to have much of an impact on Amazon’s sales.

Munster said in a Dec. 2 research note that while Google might be able to nail the convenience factor of getting goods to consumers quickly, Amazon can offer all the products in a single shopping cart. Google’s service would include shopping carts for each retailer.