Author(s): Peter Bryer
This is the tangent point between the online and physical worlds. As Internet titans Google and Amazon battle for the ASAP transport of consumer goods like cheese, washcloths and stereo speakers, big box stores such as Wal-Mart need to shake up their legacies by treating their online presence as equal. However, it's not often that companies can successfully disrupt themselves. Big changes are ahead.
On Monday, Google Express expanded its same-day delivery service to include Boston, Chicago, and Washington, DC. Google Express had been available in Manhattan, San Francisco, Los Angeles and several other areas in California. Google Express, previously called Google Shopping Express, began as a trial service in 2013, but now Google's intention of making this a serious part of its business development plan is becoming clear. Amazon really is a key competitor.
Consumers can subscribe to an all-you-can-eat version of Google Express, providing unlimited free deliveries for $95 per year. The price is a clear attempt to undercut the $99 fee for Amazon Prime, but Google's service differs significantly from Amazon's. Rather than stocking physical goods, Google is becoming the consumer face for a series of partner retailers including Barnes & Noble, PetSmart, Sports Authority, Staples, Target, Toys R Us, Walgreens and Whole Foods. Google manages the search, payment (using Google Wallet) and delivery of orders placed through the Google Express Web site or through dedicated mobile apps. The process will provide Google will more real-world facts about its audience, enabling more targeted advertising.
Google Express should help Google to recapture the product searches that had been shifting directly to Amazon's site. Amazon Prime is estimated to have more than 25 million subscribers, and Amazon is likely to have become the first stop for product searches for some households. Unlike Google Express, Prime is a two-day service, though Amazon will arrange same-day delivery for an added $6 per order in some markets. It seems reasonable, but that fee could make Google Express an attractive service for frequent shoppers.
In the physical world, Wal-Mart has been testing same-day delivery services for groceries and other merchandise in several locations in the US including Denver, Colorado and the San Francisco area. Delivery fees range between $3 and $10. It's still a very small part of Wal-Mart's business, but the company acknowledges that big changes are happening in retail. Yesterday, Wal-Mart cut its sales forecast for this quarter and reported a slowdown in foot traffic at its stores. This change in consumer behaviour has led to a decision to scale back on retail footage expansion. Its brick-and-mortar growth will be supplanted by an online presence — at least, that's the plan. Such a transition could be even more rapid in countries with high population density and a relatively small land mass (like the UK), and retailers such as Tesco should worry about Amazon and Google just as much as large US firms like Walmart are.
It's difficult to predict the long-term ramifications of super search and near-magic delivery. Business models differ so greatly between the major players that it seems some real disruptions are ahead. Logistic limitations are likely to restrict same-day delivery services to a few geographic areas, but retailers are looking to work more closely with postal services and delivery firms to make wider, same-day roll-outs a reality. It's odd to picture Wal-Mart and Google as fierce rivals, but easy to envision the entry of other players including Alibaba, Apple and Facebook. Companies with consumer attention can learn to deliver.