Saturday, December 3, 2011

Report: Google Treading Into Amazon's E-Commerce Waters

Never content to rest on its search-engine dominance alone, Google is reportedly moving into yet another industry giant's space. This time, it's Amazon that may have to look over its shoulder.

The Wall Street Journal is reporting that Google plans to challenge the throne of the e-commerce legend, which has itself branched out into manufacturing products. Google is reportedly in talks with major retailers and shippers about developing a new service that would let consumers shop for clothes, electronics and other consumer goods online and get their order within a day.

Google's move is a direct assault against one of Amazon's competitive advantages: Amazon Prime. Amazon Prime is a membership program that gives Amazon customers unlimited fast shipping, such as free two-day shipping and one-day shipping for $3.99 per item. The annual fee is $79.

What Would Amazon Do?

"The fact that Google is getting in on the retail and shipping business Relevant Products/Services is an indicator that it's a service people are willing to pay for but it's also something that they expect," said Charles King, principal analyst at Pund-IT. "Offering to deliver goods within a day keeps Google in the ballpark as a direct competitor with Amazon, but it also brings up the subject of what is Amazon doing next to stay ahead of the game."

King makes a valid point. In the early days of e-commerce, Amazon differentiated itself by offering lower prices than bookstores. Amazon later aggregated similar products from various sellers and allowed consumers to choose from various price options. Amazon also gained market advantages with one-click shopping, which allows customers to make online purchases with a single click.

"As more retailers got on the bandwagon, you saw Amazon making some interesting moves in order to stay ahead of the pack. First they offered Super Saver free shipping and then later the offered Amazon Prime," King said. "The e-commerce market is a pretty lively and constantly changing one."

What's at Stake?

Constantly changing is a true assessment, especially when the likes of Google enters the mix. The Wall Street Journal reports that Google is talking with Macy's, OfficeMax and UPS. Google was not immediately available for comment. The Journal reported Macy's confirmed that Google approached it with the concept. Gap and Office Max declined to comment to the Journal.

"In a way, Google is trying to step up as knowledgeable partner for retailers and help them compete more effectively with disruptive first movers like Amazon," King said. "Working with a partner like Google may be a better model for some retailers to pursue than to try to create their own online commerce sites. The vast majority of those traditional big box Relevant Products/Services retailers haven't done very well."

One thing is certain: there is plenty at stake. Forrester Research estimates the online retail industry will grow 12 percent, to a whopping $197 billion in 2011. Amazon is the industry giant. If The Wall Street Journal report is true, Google is vying for a piece of that growing pie.

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