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Google Takes Jab At Amazon, Introduces Overnight Shipping In Northern California

Google Takes Jab At Amazon, Introduces Overnight Shipping In Northern California
By: Martin Blanc
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Google Inc. (GOOG) is aiming for a slice of Amazon.com Inc.’s (AMZN) pie in a move that signals the search giant’s quest to become a national retailer. The company yesterday announced that it will start overnight delivery services to customers in Northern California, which encompasses over 14 million people.

The latest announcement marks a rapid extension of Google’s Shopping Express service, just a month after the Californian tech giant said that it was rolling out a same-day delivery service in Manhattan and parts of Los Angeles to compete with Amazon’s Prime service.

 

In details revealed yesterday, Google said it was working with several courier services and ground shipment operators to expand its logistics drive. Customers would have to place orders by 7PM to receive their goods the next day.

Google’s Shopping Express was launched last summer in the San Francisco Bay Area as a veritable jab at Amazon’s might in the retail space. But the service operates a bit differently from that of Amazon. The latter uses massive warehouses and a barrage of logistics vehicles to deliver millions of goods to customers, but Google’s platform only connects shoppers to local retailers with a physical presence. Currently those include such big names as Target (TGT), Staples (SPLS), Toys ‘R’ US, and Walgreen (WAG).

Customers can order goods from the Google-branded service directly, and pay using their preferred method, such as through Google Wallet. The orders are then routed to the retailer’s locations, where the staff packs orders and hands them over to Google – or its shipping subcontractors – for home or office delivery in a matter of hours.

Since its launch, the well-received service has been expanded to several major metropolitan areas, where Google is handling the shipping and logistics with its partners – using dozens of Toyota Prius cars and Ford Transit vans to deliver goods. But the catch is not just limited to fast shipping times; Google is attracting customers through loyalty accounts and integration with mobile payments.

 

Google plans to take the service to a much larger scale, delivering products to customers using its technological prowess to reduce shipping times, and maximize utility and customer satisfaction. Google claims its shipping rates are lower, and that customers who shop with Amazon have to pay extra for the same-day delivery service despite subscribing to Amazon’s Prime service – which itself carries annual fees. Google’s same-day delivery service currently charges $4.99 a delivery.

Amazon, whose popular Prime service offers faster shipping times and other benefits, has recently been under fire for raising its annual subscription rate for the service from $79 to $99.

A successful national roll of the Shopping Express service would also have the effect of increasing traffic on Google’s search engine. Customers who had previously been re-routed to Amazon’s website in search of a particular product would now stay on Google pages. This will boost the internet giant’s revenues, and Google could also capitalize on the fees it charges customers for using Shopping Express.

The company can leverage the technical superiority it enjoys as a result of its talented employees, who are capable of solving real-world problems. The search-engine behemoth is essentially applying that advantage toward solving logistics problems, and may very well succeed, given its history of relentless innovation in everything it pursues.

Shares of Google are down 0.7% in pre-market trading on the Nasdaq, while Amazon's stock price is 0.5% lower in early trading today.

You can also read our investment analyses on Google and on Amazon.

 

What form do you think Amazon’s response will take? Let us know in the comments section, and our analysts will join the discussion.

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