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Google's Online Shopping Heats Up: An Amazon Threat?

By Caroline Bennett - Apr 16, 2013 at 11:05AM

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The tech company tries to bridge the gap between search engine and online retail.

You'd think the world's biggest search engine company would have a harder time keeping a secret. There have been hints for a while that Google (GOOGL 4.20%) might be sniffing around's (AMZN 3.66%) online retail territory, but no one could tell whether this was fact or fiction, until now.

According to TechCrunch, Google has begun testing Shopping Express, its same-day delivery service. The service is only available to Google employees in the San Francisco Bay area, but it is still generating buzz throughout the industry. Google is no stranger to trying new products in specific locations only to have them go nowhere fast. Shopping Express could be different, and if it is, it could be a huge boon for a company that's already a juggernaut.

Those lucky Google employees
Is Google starting up its own store with Shopping Express? Technically, no. So far, the service simply provides Google's technical support to a number of retailers, including Target. According to a message from Google's PR department, Shopping Express will be free for one year, as long as you're a member. For non-members, it's $4.99 per delivery, per store. Other sources claim that Google's pricing is still in flux, and will be for some time.

Why it's different this time
Google has dabbled in a number of creative tech ventures lately, and that's not even including Google Glasses. The almighty search engine has tried to get into the connection business with its super-fast service, Google Fiber. It might be an exciting concept, but progress has been slow for Fiber -- so far the service is only available in parts of the Kansas City area, and right now Google only has plans to expand it to other parts of Kansas, and Austin.

So why should Shopping Express be any different? There are two possible reasons. First, Google already has the built-in tech infrastructure necessary to let clients conduct e-commerce, even if it's as extreme as same-day shipping. In contrast, with Fiber, in order to get this service off the ground, Google has an exorbitant amount of installation work to do.

Second, Google needs to work fast or Amazon will be out of its reach. The e-tailer has built 40 enormous warehouses in three years that will help make shipping even faster and easier than before. Even if its margins are whisper-thin, the company made $61 billion in revenue last year, which resulted in $4 billion of cash flow from operations. There's no reason it won't continue to build more warehouses, and make itself more efficient.

Amazon not-so Prime?
Once Google works the kinks out of its pricing, it could have a breakthrough on its hands. A strategic alliance with Target is no small potatoes, and Google is well equipped to handle the heavy-duty shipping concerns for a company of this size, and others. Still, this company may have redefined the search engine, but Amazon redefined what it means to shop. Google's going to have to work pretty hard to do a better job at something Amazon already does exceptionally well: same-day shipping.

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