Google reportedly committing up to $500M to challenge Amazon

Jul. 07, 2014 11:41 AM ETAlphabet Inc. (GOOG)GOOGBy: Eric Jhonsa, SA News Editor25 Comments
  • Google (GOOG -0.2%) has set aside up to $500M to bring its Shopping Express local/same-day delivery service nationwide, re/code reports.
  • Google hasn't confirmed the number,  but is open about its willingness to spend heavily on Shopping Express. "You can very much expect that we are putting a lot of money into this" says exec Tom Fallows.
  • Last month, Google expanded Shopping Express' reach to include overnight delivery for the whole of Northern California. Fallows says Google hasn't settled on pricing for the service, but says a sub-$100/year price wouldn't be surprising.
  • Amazon (AMZN -1.2%) charges $299/year for its Prime Fresh same-day service (currently in 3 cities, includes groceries). It also offers standard Prime subs in 12 cities same-day delivery for some products for a $5.99 flat fee.
  • Whereas Google is relying on retail partners such as Target, Whole Foods, and Staples to handle warehousing - Google's trucks pick items up from stores for delivery - Amazon is opting for a go-it-alone approach that's initially more costly/time-consuming, but could also be more efficient over the long run.
  • Among Google's apparent goals: Boosting sales of product listing ads by (in Fallows' words) "closing the loop on locally available items," and obtaining data on consumer buying activity that could be later offered to marketers,
  • Google and Amazon already have a growing ad rivalry. Amazon, whose users are more likely to go directly to its site/apps to place an order (and thus bypass Google) than other online retailers, is stepping up its efforts to use its mountains of customer data to deliver targeted ads. Google, meanwhile, is expanding its arsenal of tools and services for e-commerce firms.
  • eBay, meanwhile, is backtracking on plans to aggressively expand its Now same-day service.

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