Google All but Officially Admits It Wants to Be Amazon

 by Marcus Wohlsen    03.29.13      6:30 AM

      For the past several months, Google has danced coyly around the question of exactly how deep it wants to dip into the world of shopping. But the official confirmation this week of its long-rumored same-day retail delivery service signals a crystal-clear intention: Google wants to be Amazon.
Analysts at Baird Equity Research described the new service, which will be beta-tested in coming months by select San Francisco Bay Area residents, as “consistent with Google’s ambitions to create a larger commerce platform.”
The service, Shopping Express, will also “bring more local product inventory into search” and “counter competition from Amazon and eBay”:
“We still see Google over time expanding toward a more traditional e-commerce marketplace model,” analysts Colin Sebastian and Gregor Schauer wrote.
Google has all the technological infrastructure it could ever need to run an e-commerce service. Already, its paid product listings have helped turn search results into an online storefront missing only a “buy” button.
The only other piece Google would still need is the inventory. For now, that will come from local retailers such as Target and Staples. But it’s hard to imagine the same minds behind Google Glass and self-driving cars aren’t itching to take a harder run at hacking a systems problem as seductive as the global distribution of consumer goods.
Still, they’d have to hurry.
According to researchers at Deutsche Bank, the 40 new mega-warehouses built by Amazon over the past three years (both domestically and abroad) will help make online shopping faster and cheaper than ever.
Getting those warehouses closer to customers means Amazon will have to ship fewer items by air in favor of less expensive options, the report says. Amazon will also be better able to draw on inventory from a single warehouse for multiple-item orders, rather than being forced to pull orders together from warehouses scattered across the country.
Working against Amazon is its own success at promoting its Prime program, which promises unlimited two-day shipping for an annual $79 fee. Meeting that promise means Prime customers result in higher shipping costs per order for Amazon, says Deutsche Bank analyst Ross Sandler. But because Prime customers order so much more than their non-Prime counterparts, they still generate six times the profit per customer for the company.
“The end result of these investments is likely to be improved unit economics from lower shipping costs, better customer service levels and speedier delivery, which is typically the second most important factor in the consumer’s purchase consideration, behind price (where AMZN consistently wins),” Sandler writes.
Google’s efforts to chip away at that dominance despite Amazon’s huge head start will be one of the most popcorn-worthy corporate contests of the next few years. Because if the shareholders who have pushed the company’s stock price above $800 are to be believed, Google is always a contender.