There's a lot at stake for online retailers every holiday season. But 2014 is expected to top them all, with some industry pundits suggesting total online sales will reach as high as $105 billion, up 8% to 11% compared to last year. And that's saying something, considering 2013 online holiday sales jumped more than 8% from the prior year.
U.S. consumers are more comfortable than ever purchasing gifts online, which is why Amazon (NASDAQ:AMZN) and Google (NASDAQ:GOOG) (NASDAQ:GOOGL) are pulling out all the stops to attract shoppers. For Google, becoming more directly involved in online sales is an ongoing mission, and it has recently stepped up efforts to compete with the likes of Amazon. Never one to bow to pressure, particularly after Amazon's dismal third quarter, CEO Jeff Bezos would love nothing more than to have a blowout year-end, regardless of how he goes about it.
Oops, sorry about that
Not surprisingly, the holiday season is far and away Amazon's biggest time of year. In 2013, Amazon generated more than $25 billion of revenue just during the fourth quarter. All that and more was wiped clean recently with a disastrous third quarter, during which expenses continued to spiral out of control, in preparation for today. In Bezos' words, "As we get ready for this upcoming holiday season, we are focused on making the customer experience easier and more stress-free than ever."
Apparently, making the customer experience easier included using Google Play as a gateway to kick-start Amazon's own app-store usage. A couple months ago, Amazon announced it had "updated" its app for Android OS. This was not a huge surprise considering the holidays were fast approaching. To Google's surprise, however, was the hidden access Amazon included in the update to its own app store, a direct competitor to Google Play.
After the update in October, Amazon issued a press release announcing the big news and let slip that the new download included the handy access feature. It didn't take long for Google to get wise to Bezos' game, and the new app was removed from the Play store: so much for the spirit of giving.
Amazon has since uploaded a new version of its app, sans the sneaky app-store functionality. Naturally, Amazon took a "Who . . . me?" stance when confronted, suggesting Google's hazy non-compete clause was to blame.
You want to play hardball?
Google isn't new to the online-buying experience either. It rolled out Shopping in May of 2012. However, the new service was limited as only paying merchant partners were included, and consumers were sent to the retailers' site to complete the purchase. The pseudo-shopping experience wasn't much of a direct competitor to Amazon or any other online retailer. But that could be about to change.
According to a report in the Wall Street Journal, Google is in discussions with some of its merchant partners about instituting a "buy" button, along with a two-day shipping option. This will not only compete directly with Amazon on the Internet commerce front but also halt what's become a disturbing search trend for Google.
Just five years ago, 24% of consumers looking for online items to purchase began their search on Google, while 18% started on Amazon. Today, a whopping 39% of U.S. consumers go to Amazon first, and a mere 11% start their online shopping experience using Google. If Google intends to become a major online retailer, those dynamics need to change, and a "buy" button would be a step in the right direction.
According to a recent study, Amazon has also done a better job gaining the trust of online shoppers -- more than 45% of consumers said they're comfortable sharing payment and personal information with the site -- compared to just 12.9% of buyers on Google. A new study might not be quite so flattering following Amazon's recent snafu in which thousands of items from hundreds of small businesses were priced at a mere penny. Regardless, Google has a lot of catching up to do, both in simplifying the online checkout process and overcoming privacy concerns.
Don't be too quick to count Google out of the fight though. Its financial strength, popularity, and bevy of existing merchant partners positions the company as a serious player, if it opts to go all in. Amazon can try and slip its own app store into Play, and Google can strike back with its own buy button. Why not? 'Tis the season, after all.
Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, Google (A shares), and Google (C shares). The Motley Fool owns shares of Amazon.com, Google (A shares), 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.