In the build-up to its battle with Amazon.com for a place in the consumers’ pockets, Google Inc. has begun broadening its delivery service apart from introducing a membership fee.
This week onwards, for orders exceeding $15 for unlimited same day or overnight delivery, Google’s charges will be $10 per month, or $95 per annum, reports The Wall Street Journal. Per order, non-members will shell out $4.99, or $7.99 if the order does not touch $15. The deliveries were free till now.
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Begun as Google Shopping Express, but later changed to just Google Express, the service allows online orders to be placed for products sold by brick-and-mortar retailers, such as Staples Inc., Costco Wholesale Corp. and Walgreen Co.
Earlier serving New York, San Francisco Bay Area and Los Angeles, Google plans to encompass Boston, Chicago and Washington, D.C., from October 14, 2014 onwards, while including retailers such as PetSmart Inc., Sports Authority Inc. and Vitamin Shoppe Industries Inc. It has also started delivering fresh food to San Francisco.
Google Express’ launch is a deliberate response to curtail Amazon’s online market presence. The rivalry appears fiercer as Amazon began faster delivery of products in many cities, along with increasing its grocery business, AmazonFresh.
The $99 per annum Prime programme of Amazon includes unlimited, two-day delivery. Amazon’s $299 per annum Prime Fresh grocery-delivery service membership involves unlimited same-day or next-day delivery for a minimum order of $35.
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By GlobalDataGoogle executive chairman Eric Schimdt said: “Many people think our main competition is Bing or Yahoo; but, really, our biggest search competitor is Amazon.”
Google’s vice-president of shopping Sameer Samat envisions long-term profitability for Google Express because of the new fee structure and more deliveries per trip.
However, WSJ says that retailers have to pay Google a commission, which may not correspond with the wages paid for packing the orders and also to external couriers that deliver the products in Google vans.
In an estimate by Ken Sena, Evercore analyst, Google would incur a cost of around $3bn per annum or almost 10% of its 2015 forecast earnings, before interest and tax, to cover the 100 largest U.S. metropolitan areas, which is an expensive proposition.
With most of the retailers exhibiting guarded optimism, Costco CFO, Richard Galanti, averred that Costco customers who buy at their stores as well as through Google Express, have begun to spend more, but this has limited store visits, putting a damper on impulse buying.
At this stage, three early dropouts have already been noticed in the form of Office Depot Inc., American Eagle Outfitters Inc. and grocery store chain Lucky.
On top of this, grocery chain Whole Foods market Inc. and Target Corp. are not following Google to Boston, Chicago and Washington, D.C. Fresh food delivery startup, Instacart, has worked out a deal with Whole Foods to cover a lot more Whole Foods outlets than Google Express.
