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