Google Shakes Up Retail Market

The search giant's Google Base starts a rumble in the online retail jungle.

Download the authoritative guide:

Online retailers are not known for rapid fire, high-profile business moves.

But that has not been the case lately. In the last few months, two leading companies have made major acquisitions, and two others began the process of raising capital, signaling that investing sprees may continue in 2006.

Why so much activity in a market sector that typically churns away unnoticed? Some say its Google Inc.s doing.

Googles financial and business clout is such that it can introduce a new business venture, then sit back and watch the market incumbents scramble to adjust.

Thats apparently now the case for companies that serve as online stores, comparison shopping sites and other peripheral services.

In May, Google unveiled Google Base, a free classified service with overtones of an eBay-like online store. The company has also been leaving clues of an online payment system, known as Google Wallet and/or Google Automat, thats now under construction.

/zimages/3/28571.gifClick here to read more about Googles automat.

The combination of Googles retailing projects and its huge user base would be an instant challenge to eBay Inc., the online auction pioneer, Amazon Inc. or more community focused retailing sites like Craigslist, said analysts.

Google is motivated because total online retail sales, excluding travel bookings, are surging. They will increase 22.0 percent this year to $172.4 billion, while online sales excluding travel are expected to reach $109.6 billion, according to a recent study conducted by Forrester Research.

According to comScore Networks, online retailing growth has been above 25 percent in each of the last two years.

"This is another potential blockbuster product for Google," UBS Investment Research analyst Benjamin Schachter wrote earlier of Googles retailing intentions.

A Google representative did not return a call seeking comment.

Since the introduction of Google Base, eBay bought peer-to-peer, Internet phone service provider Skype Technologies SA for more than $2 billion, and it has begun incorporating Skypes tens of millions of users into eBay environs.

/zimages/3/28571.gifClick here to read commentary on eBays Skype hype.

A few weeks later, Britains GUS Plc., a retail outfitter, bought shopping site for $500 million.

Google Base and its ominous overtones is a major reason why Chicago-based auctioneer Inc. plans an $80 million public offering, scheduled for sometime in early January, said an executive with the company, speaking on condition of anonymity., based in Aliso Viejo, Calif., also plans to raise financing with an initial public offering.

Whats more, some venture capital managers believe Google will inevitably make an acquisition to catch up to eBay, which has a commanding share of the online retail market.

"Who knows, these guys sometimes lie to you. But regardless, its not wise to sit still when you see Google coming at you," said a executive, speaking on condition of anonymity so as not to spoil his working relationship with the fund managers. "

/zimages/3/28571.gifCheck out eWEEK.coms for the latest news, views and analysis on technologys impact on retail.