Google is planning to invest $500 million to attack Amazon with Google Shopping Express, its own delivery service for local retailers.



Google is the undisputed king of search in all but one lucrative and vital category: Product searches.

Over the past decade, Amazon has transformed itself from a seller of books online to the place Americans turn to when they want to search and buy just about anything — from diapers to flat-screen TVs. In some cities, Amazon has started delivering fresh groceries. With each product search that starts on Amazon instead of Google, the search giant’s main business of selling ads alongside search results weakens.

Though Google over the years had experimented with letting consumers buy goods with the help of services such as Google Wallet and Google Checkout, it accelerated this strategy in 2013 with Shopping Express. The service lets shoppers buy things from local retail stores through Google, which then delivers them to consumers from the physical retail store on the same or next day.

A source familiar with the company’s plans says senior Google execs have set aside as much as $500 million to expand the service nationwide. Google declined to comment on the size of the investment but made no secret of its ambition.

“You can very much expect that we are putting a lot of money into this and we’re excited and willing to sustain that investment over time as this gets going,” said Tom Fallows, head of Google Shopping Express.

Investment so far has gone toward the marketing of the service in each new city and the buildup of a fleet of delivery vehicles, as well as toward paying for a network of couriers and workers to pack up the goods in stores and deliver packages to shoppers’ doorsteps.

The service gives Google a crack at the $600 billion grocery market. Also at stake is a large piece of the $3.5 billion in so-called direct-response digital ads that research firm eMarketer expects consumer package goods companies and electronics brands to spend in the U.S. in 2014. This category of ads, which includes search ads, is meant to influence online shoppers to perform specific tasks, such as signing up for email newsletters or making an online purchase.

“Google can’t give up on product search and this is another pathway to closing the loop for advertisers,” said Keith Anderson, a vice president at the consulting firm RetailNet Group. “They failed on the payments side in stores, but if they can use expedited delivery as a way to get it then they’ll keep on being willing to spend.”

Google, Ally

Google’s Fallows said a major goal of the initiative is to add more utility to product search advertisements on On Amazon, you search for a product and can buy it immediately. On Google, that hasn’t been the case.

“We have been displaying to shoppers information about locally available listings for five years,” he said. “And throughout that time shoppers had really interesting feedback: ‘Thanks, Google, but now you’re not helping me do anything about getting that product today.’”

Google is now trying to provide that help. “We think that helping close the loop on locally available items is a really important part of making sure Google is the best place to shop,” Fallows said. Eventually, Google may include some type of notification on product search ads letting shoppers know that a given product is available for same-day delivery, Fallows said.

Unlike Amazon, Google does not operate its own giant warehouses or store inventory for more than a few hours. Instead, it fulfills customer orders by picking up items from nearby retail stores. So rather than compete directly against retailers like Amazon does, Google is attempting to position itself as an ally.

Shoppers in cities where the service is available — mainly areas around San Francisco, Los Angeles and New York City for now — visit a dedicated Google Shopping Express website where they can choose to buy goods like groceries, cameras and clothing from a selection of retail partners.


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