According to TechCrunch, Google Inc (NASDAQ:GOOG) is now testing its new same-day delivery service in California’s bay area. The service, called Shopping Express, is currently only available to Google’s employees. But if tests go well, it’s likely that the company will offer it to the public. Should Amazon.com, Inc. (NASDAQ:AMZN) shareholders be concerned?
What is Shopping Express, and when will it be available?
According to the various reports that have leaked out, Shopping Express will be a subscription-based service that will allow consumers to have goods delivered to their home on the same day that they purchase them online.
Rather than run a whole online store, Google will partner with local retailers to supply the goods — Google simply provides the logistical support and Internet purchasing interface. For its bay area test run, Google Inc (NASDAQ:GOOG) is set to partner with Babies R’Us, Nob Hill Foods, and, most notably, Target Corporation (NYSE:TGT).
As for the timetable of when the service will launch, it remains unknown. But given that the Internet search giant has been rumored to be working on it for some time (The Wall Street Journalfirst reported on it over a year ago) it can’t be too far away.
Does it pose a major threat to Amazon?
If executed well, Google Shopping Express could certainly pose a threat to Amazon.com, Inc. (NASDAQ:AMZN). The ability to have same-day delivery is a major advantage over Amazon’s two-day Prime service — ordering on Sunday and getting a box on Tuesday is one thing; ordering on the way into work, and receiving it at home that night is something else entirely.
But Shopping Express won’t wipe out Amazon overnight. There are plenty of ways Amazon will retain an advantage.
First, Amazon.com, Inc. (NASDAQ:AMZN) offers thousands of different goods in a wide variety of product categories. Between Target Corporation (NYSE:TGT), Babies R’Us and Nob Hill Foods, Shopping Express will likely offer a wide variety of products, but it will still pale in comparison to Amazon’s offerings.
Second, Shopping Express seems as though it will be limited to consumers living in urban areas: It will be quite impressive if Google Inc (NASDAQ:GOOG) can deliver a flat panel TV to a consumer in rural Texas on the same day it was ordered.
Lastly, consumers who would will be willing to shell out the price of a subscription to Shopping Express are likely already paying for Amazon Prime. That could mean less Prime subscribers, but Prime offers more than just two-day shipping: it also offers free streaming movies and TV shows, as well as access to the Kindle lending library.
Why is Google doing this?
As I wrote previously, Google is a diverse company involved in all sorts of projects. Its wide variety of businesses has brought it into conflict with other major tech companies such as Microsoft Corporation (NASDAQ:MSFT), Apple Inc. (NASDAQ:AAPL) and Facebook Inc (NASDAQ:FB).
With Shopping Express, Amazon.com, Inc. (NASDAQ:AMZN) can be added to the list of companies Google Inc (NASDAQ:GOOG) is competing against. So why is it taking a shot at yet another tech giant?
It could just be yet another exotic gamble, right up with there with Google fiber, self-driving cars, and plans to mine asteroids for minerals. But there is likely something more complex going on.
Despite these side projects, Google’s core business remains Internet search. The creation of Android (which Google intentionally gives away for free) was a way to protect its search business in the increasingly mobile world.
But not all search results are created equal. Google Inc (NASDAQ:GOOG) makes the most money from people searching for products to buy. As Amazon.com, Inc. (NASDAQ:AMZN) continues to grow larger, dominating Internet shopping, many consumers may go directly to Amazon’s website to search for products, bypassing Google’s search engine entirely, and robbing the company of valuable ad revenue.
Google Shopping Express then, is a way to get back at Amazon, and prevent it from wreaking havoc on the company’s core business.
How will it affect retailers?
If Google Shopping Express flourishes, it could become a way for retailers to experience somewhat of a renaissance.
Target Corporation (NYSE:TGT) might not be the first company that comes to mind when one thinks of retailers threatened by online shopping, but Target has been hostile to Amazon for some time. For example, Target pulled Amazon’s Kindle devices off its shelves last May.
In partnering with Google Inc (NASDAQ:GOOG), Target is elevating that hostility to the next level, competing directly with Amazon for online sales. But it might not just be Amazon’s customers Target would be competing for.
Say a consumer pays the subscription fee for Google Shopping Express, and say they want to purchase standard household goods like shampoo, paper towel and garbage bags. Rather than go to Target Corporation (NYSE:TGT), they might choose to purchase these goods at a rival store like Wal-Mart Stores, Inc. (NYSE:WMT). But with the money already sunk into a subscription for Shopping Express, they opt to buy the goods through Google, and thus Target gets the sale.
In time, partnering with Google Inc (NASDAQ:GOOG) might be a way for retailers to compete against each other.
What does it mean for Amazon shareholders?
Should Amazon shareholders dump their shares because of Shopping Express? Probably not.
But for once, Amazon will face real competition. To be fair, Amazon isn’t the only online shopping website, but it’s certainly the most dominant. To date, the competition Amazon has faced — specialty sites like Newegg, auction sites like eBay Inc (NASDAQ:EBAY) — haven’t had a significant effect on Amazon’s core business. But Google Shopping Express could change that.
Investors in Amazon, Google and major retailers should be aware of the changes taking place. Above all, technology continues to shake up retail — presenting opportunities to create new winners and losers.
The article Google and Target Team Up to Take on Amazon originally appeared on Fool.com and is written by Salvatore “Sam” Mattera.
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