Google Express on Head-on Collision Course with Amazon Prime Now

Google Express takes Amazon Prime Now head-on

It is completely understandable that Alphabet, Google’s parent company, would want to be a player in the payments market, first with Google Checkouts, then Google Wallet and now Android Pay. After all, they have the number one mobile operating system in the world in terms of user base – Android.

But why on earth does a company whose bread and butter comes through the search engine highway want to be a player in the “let us deliver it to your home” space. Isn’t that the retail/e-tail players’ turf? Let’s dive into Google Express and see why a search engine company would be interested in delivering groceries and other things to our homes.

The Ecosystem that Google Built around Its Search Engine

The answer to that question lies in the search engine highway itself. The core of Google’s heart is its search engine, but the company is where it is today because of the advertising revenue it makes from its dominant position in the search engine market. Everything that Google has touched that is successful today has a road running back towards its search engine – whether it’s YouTube – a search engine in its own right – or whether it’s Android or even its own Pixel smartphones, everything stems from their dominant position in the online search world.

Take Android for example, as a mobile operating system of choice for device manufacturers around the world, Google made sure that its browser became the de-facto browser of choice. And the list of such products goes on – Google Maps, videos, news and so on and so forth. By having a strong ecosystem of applications and products around its search engine, Google has managed to keep users engaged within that ecosystem and its core search capabilities.

But now, Google wants to deviate from that formula and expand Google Express, its product delivery platform. Basically, you can order from a variety of stores and Google will have it delivered to your home. That is in direct competition with Amazon’s Prime Now service that offers same-day delivery and two-hour delivery in several cities. Google apparently wants to get their first, and has just announced that it is expanding to more cities in the Southeast and Northwest United States.

Launched in 2013, earlier this year Google Express expanded to 16 cities, and then another 13 cities before this new announcement. The company says it is looking to cover the entire country by the end of this year, so we’re sure to see more expansion plans very soon.

Amazon – the Spark that Set Google’s Tail on Fire

Again, why is Google getting into the retail and delivery business? Is it their expertise that draws them to it? Hardly. In fact, it’s the future threat of Amazon that has most likely prompted Google into acting quickly.

How is Amazon responsible for Google Express? First of all, Amazon Prime is one of the fastest growing membership programs around. In addition, Prime Now is picking up speed in several cities, and the company is bound to keep expanding its reach with the same-day and two-hour deliveries. Google knows that once people are inside Amazon’s ecosystem, it’s hard to get them out. And Amazon, for its part, is getting into nearly every aspect of retail – including automobiles.

As a result, when the bulk of shoppers sign up with Amazon, advertisers are going to want to be right there alongside them. And that is a direct threat to Google’s core revenues from online advertising.

Facebook is already threatening to breathe down Google’s neck in a few years’ time, and now Amazon poses a unique but equally disruptive danger to Google. And let’s not forget Verizon with its relatively new content empire that controls a significant portion of online advertising.

With multiple threats to its bread and butter, Google wants to ensure that shoppers come to their own portal instead of Amazon. But it’s doing it differently. By tieing up with major retailers like Costco, Wholefoods, PetSmart, Payless ShoeSource and so on, Google is bringing home the retailers that people already love. It’s a smart way to compete with Amazon because Google doesn’t have the expertise to run retail operations.

Google Express – A Unique e-Commerce Model

However, it doesn’t have the expertise for delivery either, which is why it’s critical that Google get this right the first time. For an annual fee of $95, Google Express promises free delivery on anything you purchase. There’s a free trial period of three months, and customers can also opt for a pay-as-you-go version, but they’ll have to bear a $4.99 delivery charge per order.

With the current expansion, sources say that Google has already covered 90% of the country. Unfortunately, as with most of their other financials and user information, Google is tight-lipped about the coverage and the actual size of the Google Express user base.

In a way, Google is helping retail companies – especially the ones that don’t have a proper delivery mechanism in place – which, if you think about it, is everyone except Amazon! By putting its weight behind physical retailers, Google is killing two birds with one stone. On the one hand they’re helping brick and mortar retailers fight the Amazon threat, and on the other, they’re responding to a threat to their own revenues far into the future. Three birds, actually, if you count the fact that Google has zero expertise in this space and is, therefore, depending on physical retailers for the actual merchandise.

As such, Google wants to make sure that people start using Google Express for their online shopping needs instead of choosing Amazon. Where the money is, there the advertisers will be, and Google is definitely not going to let its multibillion-dollar advertising business go to Amazon.

In the next article in this series, we’ll dig into their current coverage and reach, the list of retailers on-board and any other information we can find about Google Express.

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