For $79 per year, you can get free two-day shipping, instant access to up to 10,000 movies and TV shows, and more than 5,000 books. Amazon
Prime's Instant Video library keeps growing as Amazon inks more and more deals with content providers. The Kindle Owner's Lending Library is another new development, showing up last month as evidence that Amazon still wants to keep adding reasons to sign up.
ShopRunner makes a run for it
Late last year, GSI Commerce, which has since been acquired by eBay
ShopRunner is now part of privately held Kynetic after it was spun off when eBay purchased GSI, although eBay still owns a minority stake. The company recently told Forbes that it is expecting to drive more than $100 million in merchandise sales this year, which has it ranked No. 35 on the Forbes list of America's Most Promising Companies.
Who's stepping up?
The newest entrant into the ring is none other than heavyweight Google
Macy's confirmed it's been approached but said it hasn't made any decisions yet. Google would also need to bring shippers such as United Parcel Service
While ShopRunner has drawn criticism (just take a gander at these comments), Google lugs around so much weight that it could get a lot of partners on board. Even then, I doubt it will be much of a threat to Prime. The centralized experience is a huge benefit for shoppers and Amazon alike, since it's seamless for customers and Amazon can build on economies of scale.
Having disbursed partner retailers adds layers of potential inefficiencies, not to mention tasking Google with balancing everyone's interests to keep them happy. Google's rumored service would tie in to retailer's websites on the back end and once a buyer orders on the retailer's site, Google would step up and make a shipping offer.
A good deal, but for whom?
There have been reports that ShopRunner shuts down people's accounts if they utilize more than $79 worth of shipping, although ShopRunner has denied that. This possibility brings up the issue that a third-party service like ShopRunner or the potential Google service inevitably runs into. If those services lose money up front as members spend more than their fee in shipping for the year, they have no way to recoup that loss. Some members may not rack up $79 annually in shipping costs, which will help subsidize those that do.
Amazon makes money every time you buy something on its site, either through its relatively small margin if it's selling directly to you or through seller's fees. You may note that this is exactly what Amazon is doing with the Kindle Fire. The most recent iSuppli estimate is that the Kindle Fire costs $201.70 (lower than initial estimates of $210 to $250) to manufacture, meaning the $199 price tag is essentially break-even. Amazon will make its green on content sales afterward.
The same is true for Amazon Prime. For those who use Prime shipping heavily, Amazon will make up the loss later, which ShopRunner and Google can't do. Seventy-nine dollars per year is already a steal, even before including Instant Video and Kindle. It's economically unsustainable for Google to come out with a shipping service that undercuts that price and has faster delivery for retail partners' products. If it did, it would undoubtedly be a hit with online shoppers, which just means the service would be put to its limits and become a money-losing proposition for Big G.
While the nitty-gritty details have yet to be revealed, Google supposedly wants to pilot the service in the San Francisco Bay area next year. If and when it does, I'll be there in the background, quietly shaking my head and counting down the days until it joins some of Google's other unsuccessful initiatives.
Add Google and Amazon.com to your watchlist to see their shipping services go head-to-head. Even though Amazon has changed the face of online retail forever, there's still opportunity in physical retail. Get access to this free report on one retail stock that's The Motley Fool's Top Stock for 2012.
