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Why Google Remains a Contender in the Race to Your Doorstep
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Mobile devices have brought the world to our fingertips much the way the Internet appeared to do at the turn of the century. So now we live in an always-on always-hungry world that continues to ask for not just information but also goods and services all through the night and day. So who’s going to be the one to deliver the stuff? If Amazon (AMZN - Free Report) , Alphabet’s (GOOGL - Free Report) Google or Wal-Mart (WMT - Free Report) had their way, it would be only them.
Is the market big enough for all of them? Probably. So are they going to split it up in some decent way? Of course not. That’s not the way it works.
Amazon got where it has by piggybacking Google’s search engine. But it’s today such a waste of money to keep paying Google, when people have apps, Prime, Dash buttons (and Echo!) to do the job. Amazon just doesn’t need Google anymore. And that is Google’s problem.
For one thing, Amazon is this huge giant of an etailer that no one seems to get enough of. And second, it’s bundling goods, services, music, video and everything else into what it calls a Prime subscription for “free” two-day shipping at $99 a year. Everyone likes an all-you-can-eat offer so people are flocking to the platform. And CEO Jeff Bezos has promised, "We want Prime to be such a good value, you'd be irresponsible not to be a member.”
That’s a very strong statement coming from the CEO and means that a chunk of the product listing ads (PLAs) that Google might have won have been lost forever. So what does Google do?
Google: Contribution to Make
Traditional retailers looking to expand their reach have been selling on Amazon, but there are two problems with this. Since Amazon has effectively become the store front for them, they are losing the advantage of customer interaction and access to sales data, thus limiting their scope for brand building and growth planning.
To make matters worse, Amazon has decided to increase focus on private labels.
True, retailers can (and many already do) have their own apps, but it’s already evident that downloading hundreds of apps on a small screen is not the best customer experience, unless you’re a regular that is.
On the other hand, Google has been a longstanding advertising partner for many. The fact that Google is more interested in ads than product sales, makes Google more attractive for retailers.
For Google, this is a golden opportunity to keep its product search and data collection machinery alive. So it has launched a system called Google Shopping Express (later rebranded Google Express) that allows customers to choose the things they need for same-day or overnight delivery for $95 a year. It also started collating a delivery fleet much like Uber manned by folks ready to go to the retailer site, pack the ordered items in the designated area and take it out to customers.
Google is expanding the service rapidly and also the number of partners. But note that since the business is currently more of a local type at this stage, geographic breadth may not be a deal breaker. On the other hand, selection and the ability to serve in the suburbs (something Google is doing) could be.
Will Customers Bite?
This is the big question, particularly because Amazon can offer so much more, not just of physical goods but also digital stuff. It also has a humongous amount of knowhow in logistics.
Roughly half of U.S. households subscribe to Prime already, so the fight is on for the other half. It will be hard for Google to wean away Prime members at this stage. But the company can and will expand products, customers and locations over time. Moreover, retailers have reason to go with Google, so who knows? We’ll have to wait and see.
Alphabet shares currently have a Zacks Rank #3 (Hold). So safer bets in technology include Extreme Networks (EXTR - Free Report) , Applied Materials (AMAT - Free Report) or Arista Networks (ANET - Free Report) , all of which have a Zacks Rank #1.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
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Why Google Remains a Contender in the Race to Your Doorstep
Mobile devices have brought the world to our fingertips much the way the Internet appeared to do at the turn of the century. So now we live in an always-on always-hungry world that continues to ask for not just information but also goods and services all through the night and day. So who’s going to be the one to deliver the stuff? If Amazon (AMZN - Free Report) , Alphabet’s (GOOGL - Free Report) Google or Wal-Mart (WMT - Free Report) had their way, it would be only them.
Is the market big enough for all of them? Probably. So are they going to split it up in some decent way? Of course not. That’s not the way it works.
Amazon got where it has by piggybacking Google’s search engine. But it’s today such a waste of money to keep paying Google, when people have apps, Prime, Dash buttons (and Echo!) to do the job. Amazon just doesn’t need Google anymore. And that is Google’s problem.
For one thing, Amazon is this huge giant of an etailer that no one seems to get enough of. And second, it’s bundling goods, services, music, video and everything else into what it calls a Prime subscription for “free” two-day shipping at $99 a year. Everyone likes an all-you-can-eat offer so people are flocking to the platform. And CEO Jeff Bezos has promised, "We want Prime to be such a good value, you'd be irresponsible not to be a member.”
That’s a very strong statement coming from the CEO and means that a chunk of the product listing ads (PLAs) that Google might have won have been lost forever. So what does Google do?
Google: Contribution to Make
Traditional retailers looking to expand their reach have been selling on Amazon, but there are two problems with this. Since Amazon has effectively become the store front for them, they are losing the advantage of customer interaction and access to sales data, thus limiting their scope for brand building and growth planning.
To make matters worse, Amazon has decided to increase focus on private labels.
True, retailers can (and many already do) have their own apps, but it’s already evident that downloading hundreds of apps on a small screen is not the best customer experience, unless you’re a regular that is.
On the other hand, Google has been a longstanding advertising partner for many. The fact that Google is more interested in ads than product sales, makes Google more attractive for retailers.
For Google, this is a golden opportunity to keep its product search and data collection machinery alive. So it has launched a system called Google Shopping Express (later rebranded Google Express) that allows customers to choose the things they need for same-day or overnight delivery for $95 a year. It also started collating a delivery fleet much like Uber manned by folks ready to go to the retailer site, pack the ordered items in the designated area and take it out to customers.
Google is expanding the service rapidly and also the number of partners. But note that since the business is currently more of a local type at this stage, geographic breadth may not be a deal breaker. On the other hand, selection and the ability to serve in the suburbs (something Google is doing) could be.
Will Customers Bite?
This is the big question, particularly because Amazon can offer so much more, not just of physical goods but also digital stuff. It also has a humongous amount of knowhow in logistics.
Roughly half of U.S. households subscribe to Prime already, so the fight is on for the other half. It will be hard for Google to wean away Prime members at this stage. But the company can and will expand products, customers and locations over time. Moreover, retailers have reason to go with Google, so who knows? We’ll have to wait and see.
Alphabet shares currently have a Zacks Rank #3 (Hold). So safer bets in technology include Extreme Networks (EXTR - Free Report) , Applied Materials (AMAT - Free Report) or Arista Networks (ANET - Free Report) , all of which have a Zacks Rank #1.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>