The empire strikes back: Google arms itself against Amazon
Why is the provider of search engine and web technology considering offering a logistics service? Because that’s exactly how its biggest competitor is winning among online sellers. Google is taking action in the battle to win over online sellers and online shoppers.
Why Google wants to become a logistics provider.
According to media reports, the strategists at Google are considering offering a same-day delivery service for Google Shopping. The Wall Street Journal reports that the search engine giant is looking for a strong retailer with whom it can create a delivery service similar to Amazon Prime. The publication claims that discussions have already been held with GAP, Macy’s and OfficeMax.
For Google, this step is logical and necessary. There are two main reasons for this:
- Google’s influence on the e-commerce value creation chain ends at the retailers. Despite its Checkout, Google does not yet have its foot in the door in one of the central business areas of e-commerce: logistics and shipping. Amazon is well-equipped here thanks to its fulfilment services.
- When looking for products, Internet users tend to turn to Amazon rather than Google as a search engine. It’s argued that, as a result, many retailers generate more traffic via Amazon than via Google.
Google is said to have been inspired by Amazon’s Prime service. For an one-off annual fee of £49 in the UKor $79 in the USA, the customer gets fast delivery from Amazon Prime with no minimum order value.
The pilot is due to be launched soon in the San Francisco region.
Google must react
For Martin Groß-Albenhausen, head of e-commerce at the German E-Commerce and Distance Selling Trade Association (bvh), Google’s approach comes as no surprise:
It is because Amazon has become the one-stop shop and that is particularly due to its expensive Prime service. As Amazon has secured itself the best price advantage and offers excellent service – and so has perfected the dirty day-to-day distance selling work -, many Internet users now search for products on Amazon first. Google loses out on these searches, precisely because it is no longer enough to just compare prices if it makes placing the order too tedious.
What’s more, Groß-Albenhausen believes Google will be faced with a further major challenge in future: the increasing omission of display screens for searches. This is being caused by virtual agents who react to speech, such as Siri.
Google will be forced to develop its own Android product to compete with Apple’s Siri. This means some things will have to change, as Google will need to move its sources of revenue away from ads. Siri does not read aloud any advertising texts that the user then activates. The user also no longer goes back and forth in the search, which would produce multiple views and clicks.
The alternative to Amazon
Not all retailers are happy to get more turnover traffic via Amazon than via Google, as the commission at Amazon is considerable. What’s more, many online sellers must always fear the online shop giant as a potential competitor.
However, a partnership with Google within the new project would only be possible if Google takes over more and more of the customer contact work itself as part of the transaction, i.e. addresses, credit checks, handling payments, etc. This would mean the retailers no longer gain new customers, but instead become “upstream suppliers”, unless Google then passes on the information to the retailers for subsequent use, which is certain to have its price. Otherwise, there will be further distance between retailers and customers.
Google will have to combine a high level of availability with a consistent level of service if the scheme is to be a success. Google is really only strong at the front-end, whereas Amazon is strong in every area.
