Is Google gearing up to battle Amazon head-on?
The Google e-commerce rumor mill continued churning this week. Alexia Tsotsis reported at TechCrunch that Google is “stealthily preparing to launch an Amazon Prime competitor called ‘Google Shopping Express.’” Her sources indicated the service would undercut Amazon Prime’s annual fee of $79 by $10 to $15 and offer same-day delivery from local retail stores such as Target, Walgreens and Walmart. Tsotsis speculates that in launching this service, Google could make use of its recent purchases — BufferBox and Channel Intelligence — to corner the online-to-offline retail market.
Paulo Santos noted in a post at SeekingAlpha that if and when Google launches this service, Amazon will most likely match the annual price. He said estimates on the number of Amazon Prime members vary widely, but if the 7 to 10 million number is accurate, price matching would be a $70- to $150-million hit to Amazon’s bottom line. Santos concluded, “The move is a positive for Google, mild negative for eBay and strong negative for Amazon.com.”
Giving consumers what they want requires knowing what they want
Looking at how the race for same-day delivery is going to affect retail, Ad Age’s Lauren Sherman said the real threat is to the corner store and that indie retailers are going to have to change their marketing tactics to compete.
Sherman outlined three points made by Jeffrey Cole, director of the Center for the Digital Future at USC Annenberg, on how retailers are going to have to change their businesses to accommodate the change in consumer shopping behaviors. Cole highlighted mom and pop stores, arguing that local drugstores and convenience stores are going to have to offer the same convenient services as the major online retailers, such as same-day delivery, in order to survive. He also said universal free shipping will need to be offered by everyone and that retailers will need to offer more and bigger in-store deals, ala Black Friday door-buster deals.
In related news, results from a survey by The Boston Consulting Group (BCG) were released this week indicating same-day delivery might not be the holy grail online commerce giants think it is. Thad Rueter reported at Internet Retailer that only 9% of the 1,500 consumers surveyed said same-day delivery was “a top factor that would improve the online shopping experience,” compared to 74% who said free delivery was a top factor, 50% who cited lower prices, and 35% who cited free returns. Survey participants could select up to three “top factors”; same-day delivery didn’t come close to making the top three.
The press release summarizing the survey results stated that “[e]conomics dictate that retailers should offer same-day delivery for only a select number of products that are small and light and that carry high margins,” and pointed to electronics, office supplies and apparel as examples. In the release, BCG partner Rob Souza called same-day delivery a “niche service” and said it’s “unlikely to generate significant revenues for either retailers or carriers.”
The real mobile payments battle is to create a functional ecosystem
Mobile payments company PayOne filed a patent infringement lawsuit against Home Depot this week. The press release stated: “PayOne asserts that The Home Depot retail store deployment and use of PayPal’s in-store checkout infringes on multiple PayOne patents, including the use of a mobile phone number and a PIN (personal identification number) to complete the checkout process and payment at point of sale.”
In a post at The Motley Fool, Justin Loiseau quoted a statement PayOne president and CEO Joe Lynam made regarding the lawsuit:
“Since 2000, PayOne has invested significant time and money developing its proprietary mobile payment technologies designed to simplify the checkout process and the PayOne systems have been deployed by digital merchants across the globe. The ‘mobile wallet wars’ have moved beyond the digital world into point of sale, but now face adoption challenges and substantial friction with consumer setup requirements, security concerns and lack of merchant required NFC infrastructure. PayOne’s technology solves these challenges by enabling an ‘instant wallet’ capability that can be extended to the retail and physical world for billions of consumers worldwide, with no pre-registration or friction at point of sale, and no NFC infrastructure required.”
Lisa Ward noted at the Silicon Valley Business Journal that this isn’t PayOne’s first trip to court — in 2011, PayOne filed a lawsuit against PayPal that is still in court. Ward also reported that “PayOne has already sent patent infringement notices to several other retailers, including Jamba Juice, RadioShack and Barnes & Noble, but Home Depot is the only PayPal partner to have legal action taken against it so far.”
In a loosely related post at InformationWeek, Fritz Nelson shared some insights he gleaned last week at Mobile World Congress. Nelson noted that mobile payments discussions tend to “devolve into debates” about the efficacy of various mobile payments technologies — mobile wallets, NFC, QR codes, authentication systems — or on who will lead the way in setting payments standards or “run the payment rails.” He said he’s now convinced those are bits and pieces of the bigger picture — the race isn’t who can make the best digital wallet, but who can create the ecosystem that will allow for a “frictionless consumer experience.” You can read Nelson’s post at InformationWeek.
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