Amazon.com (NASDAQ:AMZN) may lead the way in online retail, but the company faces competition from three major players.
Target (NYSE:TGT), Wal-Mart (NYSE:WMT), and Google (NASDAQ:GOOG) (NASDAQ:GOOGL) are all increasing their focus on digital sales. The companies are interestingly all attempting to do that in a different way, but all could break off a bigger piece of the digital pie.
It's no surprise that the biggest challenge to the established market leader is not just other pure digital plays, but two traditional retailers. This makes sense because the largest brick and mortar chains have the physical infrastructure to grow their web businesses.
They already have supply chains, warehousing, and brand recognition. They also have relationships with vendors and the leverage to secure good prices from them. Traditional retail success by no means guarantees a successful transfer to the web, but it removes some of the barriers to entry.
Google's presence on this list is a bit surprising but the search giant has found a unique way to throw itself into Internet retail without ever having to stock a single item.
Each of the methods being taken by these three companies presents risks, but all of the companies stand a decent chance of growing the Internet retail part of their business.
Google partners with retail
Google has decided to take on Amazon by partnering with a number of major traditional retail chains to offer same-day delivery on select products in limited markets. Called Google Express, the service allows customers to shop from multiple stores (the selection varies based on location) at the same time. Users simply fill their cart, select a delivery window, and check out with Google Wallet. Items are then delivered during the selected time period by courier.
Customers can either pay $4.99 per order or join the service for $95 a year and receive free delivery. Members also get priority in selecting shipping windows. Currently the service is only available in parts of New York and Los Angeles as well as limited other markets. Launch partners include Costco, Guitar Center, Staples, Target, Toys"R"Us/Babies"R"Us, and Walgreens.
The search leader is essentially just putting a toe in the retail waters, but it's offering a differentiated product. It's not only offering same-day delivery -- which Amazon does in select markets -- it's bringing in name retailers. It's also making it possible to get your groceries, a new outfit for your baby, and some guitar strings in the same order.
Wal-Mart knocks off Amazon Prime
If you can't beat 'em join 'em.
Wal-Mart is working on a program that will rival the unlimited two-day shipping Amazon offers to Prime members, according to USA Today. The program would cost $50 a year -- half Prime's price -- that would offer delivery in under three days.
"We've heard from customers that they want shipping that's predictable and they want it to be affordable," Wal-Mart spokesperson Ravi Jariwala told the paper.
Offering a membership service makes sense because it ties customers into buying with you. Since Wal-Mart already has a reputation for low prices, it should be able to steal some business from other online retailers if it makes the process easy. The chain also has the ability to leverage the foot traffic in its physical stores to sign people up for the online service.
Target to invest in online sales
While it's cutting spending overall, Target told investors and analysts on a March 2015 call that it planned to increase its investment in its digital business. During the call Chief Strategy Officer Casey Carl said that the company had been making large gains in mobile. He noted that mobile conversion rates increased 69% year over year in 2014 while mobile traffic grew 44%.
"Almost everything begins on mobile," he said. "98% of Target guests shop digitally and the vast majority of that shopping comes using a mobile device."
The company plans to put some of its investment in digital into melding the in-store shopping experience with the mobile. This includes putting Apple's (NASDAQ:AAPL) iBeacons in strategic locations within its stores. These devices allow the company to offer personalized mobile offers to customers based on their shopping behavior.
"Today's consumer expects to receive relevant personal offers and experiences," CEO Brian Cornell said. "We're investing to build digital capabilities to make Target a leader in this space."
Daniel Kline has no position in any stocks mentioned. He is pretty sure Amazon is the only company mentioned above where has made an online purchase from. The Motley Fool recommends Amazon.com, Costco Wholesale, Google (A shares), and Google (C shares). The Motley Fool owns shares of Amazon.com, Costco Wholesale, Google (A shares), Google (C shares), and Staples. 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.