Can Same-Day Delivery of Books Help Google Take on Amazon?

The search giant has added Barnes & Noble as a partner to its Shopping Express service.

Aug 10, 2014 at 12:06PM

While Amazon (NASDAQ:AMZN) has been slowly rolling out same-day delivery in select markets, Google (NASDAQ:GOOG)(NASDAQ:GOOGL) more quietly has been doing the same. Now the online search giant is partnering with Amazon's original rival, Barnes & Noble (NYSE:BKS), to add books to its fledgling Google Shopping Express.

The partnership brings the last major physical bookstore chain into the Google service, joining brands including Costco, Walgreen, Staples, and Target. The combination gives Google a mix of available items that rivals what Amazon can offer, without the expense of building warehouses. The deal could be good for Barnes & Noble, which saw sales slip and 63 stores close last year. Much of that can be attributed to Amazon, which has not only stolen sales from physical Barnes & Noble stores, but has thoroughly dominated the digital book market. The deal with Google offers the beleaguered bookseller a way to match Amazon's ability to offer same-day book delivery without any of the infrastructure costs.

Barnes & Noble CEO Michael P. Huseby told The New York Times that the deal was "a test" that he viewed as a way to increase the bookseller's online reach and improve sales from its physical stores. "It's our attempt to link the digital and physical." 

For Google, the arrangement is just another step toward building a list of retail partners that allow it to offer a comparable, if not better, collection of products for same-day delivery than Amazon. Entering the book market, however, is a symbolic shot across the bow of Amazon, which may have morphed into much more than a book store, but will always have books as a key part of its brand identity.

Why is same-day delivery so important to Amazon?
Reducing delivery times has been a major project for Amazon. The fact that customers don't get instant gratification has been the only negative for those who shop on the platform. For Amazon, same-day service has, in select locations, helped the online giant compete with physical stores that have the advantage of immediacy.

In most cases, if a customer buys something on Amazon, he has to wait at least two days -- unless he pays an added fee for overnight delivery. That might lead a buyer to purchase the item from a brick-and-mortar retailer -- even if the price is higher. Same-day delivery may not be quite as immediate as picking something up off a store shelf, but it's nearly as good, without  the hassle involved with leaving the house.

To accomplish faster and same-day service, Amazon has been pouring resources into a number of projects. The company has built a network of warehouses across the country, made a deal with the United States Postal Service for Sunday delivery, and is testing unmanned drones to offer automated same-day service. The online retailer already has same-day delivery in a slowly expanding group of cities, and it's working to find ways to bring the offering to more markets

If Amazon can figure out how to offer same-day delivery on a cost-effective basis to a decent percentage of the United States, it could make even larger inroads against traditional retailers. That once seemed like an impossible dream, but the company has slowly solved the puzzle, making nationwide same-day service seem if not inevitable, at least plausible. 

What are Google and Barnes & Noble doing?
While Amazon has been building its own distribution network of trucks and warehouses, Google has partnered with retailers that have existing stock in their stores. Instead of using its own trucks, Google has partnered with couriers who pick up the products from the various retailers for delivery to customers. The online giant charges $4.99 per delivery for non-members, while subscribers get free delivery. The company is currently offering new users six free months of membership. In theory, Google will charge for membership at some point, but that pricing has not been made public.

Amazon charges its Prime members -- people who pay $99 a year for free two-day shipping as well as other benefits -- a flat $5.99 per-order shipping fee for its same-day delivery service. The company does not offer the service to non-Prime members.

Both companies only offer same-day delivery in very select markets.

Who will win?
Amazon's efforts squarely target retail, and Google's service gives those retailers a way to fight back. Amazon has tens of millions of Prime subscribers and more than 220 million credit cards on file. It's offering is a logical extension of its current service -- really just another choice at checkout. 

Google's attempt to compete makes sense, and partnering with major brands should allow it to have a competitive selection of merchandise. The challenge is that people are not already shopping on Google, and Shopping Express is not well-integrated into its partners' websites. Barnes & Noble, for example, is not processing orders through the service on its website. Instead, customers who want same-day delivery must order through the Shopping Express website.

Using that approach means that Google will have to build a retail brand and find a way to market to customers. Amazon already has customers, so it clearly has an early, but not insurmountable advantage. 

Amazon's success is baked into its system. People will simply pick same-day delivery if they want or need it. Whether Google succeeds depends upon whether it can get customers to sign up, share credit card information, and use the service. It's not impossible, but Amazon has a much shorter road to travel.

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Daniel Kline has no position in any stocks mentioned. The Motley Fool recommends and Google (C shares). The Motley Fool owns shares of, Barnes & Noble, and Google (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Jun 12, 2015 at 5:01PM

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