Thursday, December 1, 2011

Google expands into e-commerce to protect its search volume

Launch of Amazon prime is hitting hard at Google's search volume. Consumers are now searching directly on Amazon to find products rather than using Google. This is also posing a threat to traditional retailers whose online offerings and shipping times could not match Prime's offerings and shipping times.

In order to deal with this challenge Google is planning to launch a service that lets consumers shop for goods on the Web and receive orders within a day for a low fee. Numerous retailers have expressed interest in signing on to the Google initiative. Google has pitched the project to retailers with whom it struck recent partnerships in other areas, a group that includes Macy's Inc., Gap Inc. and OfficeMax Inc.

Google can certainly offer the same services as Amazon does at cheaper prices because this is the subsidy side of business for Google, the real money would be from ads & search. This service would be a significant competitor to Amazon Prime in the coming days.




4 comments:

  1. Interesting strategy, especially tapping into the 2-sided network approach by subsidizing the buyer's shipping in order to drive search/ad traffic. I wonder how successful this will be. Google has had it's hand in e-commerce for a while, at least from a search perspective, with froogle.com and other shopping aggregation, but I've always been a little skeptical of buying from these searches given Google's openness and fear of getting scammed. I think partnering with big retailers could really help, but Amazon does have the benefit of the seller rating system and their trusted vendor service.

    The good news is that we the consumer should benefit in the end. Whether it's with free 2-day shipping, or a long-term reduced price on Amazon Prime. I'm paying $39/year now for Prime, I bet I'll never have to pay much more than that if Google is successful at challenging the e-commerce leader.

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  2. It makes sense for Google to get into this given that a lot of search volume has a shopping intent behind it, so if people ultimately migrate to Amazon for searching for products, then it might hurt Google.

    This initiative seems very huge on part of Google as its trying to do something which is not its core competency. Google is after all not a logistic company. Amazon is, in a sense, not really a retail company but to an extend both a technology and logistic company. It took years for Amazon to perfect its logistic handling system. It might make sense for Google to contract out the shipping to someone like UPS/Fedex or other courier companies but then would it be more efficient than Amazon at managing the entire chain without actually owning all parts of it?

    Other thing to notice is that prime is not only about shipping alone now. Its about the lock in to shopping, shipping, and buying media and content through a device like Kindle. For all we know, Google might be working towards launching a notebook through its acquisition of Motorola and pushing its media content through it and this shipping venture might be to push people to start looking at Google as one that can provide quality products through a reliable shipping service.

    It is interesting for me to see where all this goes. But surely to Derek's point, hopefully at the end it would be beneficial for the end consumers!!

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  3. It will be very interesting to see what patterns of relationships emerge in this sector.

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  4. I am still puzzled about Prime. I am a member, and I don't know how do they make money out of it. If they don't, then what is the game play? What are they ultimately after? Let's say for a minute that $79 does not cover for the actual cost of transport (plus now the free content). Is the increase in traffic, and the lock up of the customer with Amazon, enough to cover the cost of the program? Maybe it is, if I am paying $79 for Prime, then I will never buy anything outside Prime and Amazon will become the internet, at least with regards to buying (I know I have not bought anything outside Prime for at least 10 months)

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