Google Shopping Express

Will Google Shopping Express Help Retailers Fend Off Challenge From Amazon?

The field of players offering same-day delivery of orders placed over the Internet is getting increasingly crowded. But only a handful are likely to succeed in wringing a profit from this high-cost service.

Many of the biggest names in e-commerce have already launched some form of same-day or expedited delivery, including Amazon Fresh, eBay Now, Uber Rush andGoogle Shopping Express. In addition, a number of smaller entities are trying to squeeze into service niches that will allow them to survive among the giants. But size is no guarantee of success. Google Shopping Express might be the product of an Internet behemoth, but it lacks the massive distribution infrastructure of Amazon. Instead, it’s relying on partnerships with retailers whom buyers are accessing through the Google search engine. Participants include Target, Office Depot, Staples, Walgreens and Whole Foods.

One of the questions yet to be answered is whether large numbers of consumers are willing to pay a premium for the same-day option. Many might be satisfied with one- to two-delivery, especially if they’re already paying for a service likeAmazon Prime, which offers two-day shipping. Others are willing to wait a few days more if shipping is free. The same-day model only works if buyers flock to one online marketplace for all grades of service, said Christopher M. O’Brien, executive vice president withNeopost USA Inc., a maker of postage meters and mailroom equipment. In the end, he said, it all comes down to a battle of brands.

Mounting a same-day delivery offering can be prohibitively expensive. “Will the amount of revenue from this type of service support the infrastructure to build that distribution network?” asked O’Brien. “That’s the big question for me.”

On the other hand, Google’s high degree of name recognition is a definite plus. “They’re one of the most recognized brands in the country,” said OBrien. The site stands a good chance of locking up many of the biggest retailers, who could view it as a means of competing with the Amazon juggernaut for online shoppers. Launched in the San Francisco Bay Area in September of 2013, Google Shopping Express expanded into Manhattan and West Los Angeles earlier this year. Even more recently, it began providing overnight service into Northern California, for shoppers who aren’t close to major retail outlets. The move represents an attempt to keep pace with Amazon, which has long offered the overnight option.

Much of the early success of same-day services has centered on grocery items, especially fresh foods. Amazon Fresh is a notable example — recently it expanded the service to San Francisco, Los Angeles and Dallas — but it’s far from the company’s last word in that area. Amazon reportedly is readying a fleet of its own trucks and drivers to provide delivery for a broad range of products purchased through the site.

Amazon and Google’s own delivery services could even carve out some business from FedEx, which is raising some of its parcel rates next year through the introduction of dimensional weight pricing, as well as rival UPS. (UPS has justannounced that it is following FedEx’s rate action by applying dimensional weight pricing calculations to all ground packages.) Both offer a version of same-day delivery, and are said to be interested in boosting their presence in that market. The recent FedEx announcement “forces people to look at alternatives,” said O’Brien. But Google could never take on the volumes of the two dominant parcel handlers.

Some smaller operations that are already up and running hope to challenge both Google and Amazon from the other direction. Deliv is a 2012 startup that contracts with retail malls and stores to deliver local same-day orders with a team of independent drivers carrying GPS-enabled smartphones. The malls provide a central point for consolidation of orders from multiple retailer tenants. A Deliv driver then takes the items directly to any point designated by the buyer.

Currently, Deliv is active in the Bay Area, parts of Los Angeles and outside Chicago. It charges retailers a flat $5 per order, but also plans to employ zone pricing with a charge to the malls of up to $15, according to company founder and chief executive officer Daphne Carmeli. The company can turn a profit on those low fees because it operates with no physical assets, she said. Drivers are independent contractors, duplicating the passenger-transport model of ride-sharing services like Uber and Lyft.

Aimed at omni-channel retailers, Deliv can handle orders placed online, over the phone or at retail stores. As such, it’s another way for traditional retailers to challenge the dominance of Amazon. “Retailers do not want to be disintermediated,” said Carmeli. “I see Google and eBay more as personal shoppers than delivery services…. My model is more like PayPal. I meet you at checkout, and all I do is the delivery.”

Yet another smaller operator in the expedited delivery market is Winder Farms, which delivers fresh groceries under a somewhat different business model. The service requires customers to place recurring standing orders, usually weekly, for dairy, eggs, bakery, produce and related items. Most deliveries take place at night. The minimum order is $10, with a variable delivery charge of less than $5. Winder Farms produces and bottles its own milk, and gets other products from local growers and bakers. It operates six distribution centers, serving Utah, southern Nevada and Orange County, Calif. The company runs some 80 delivery trucks and directly employs its drivers, according to president Scott Tanner.

While Winder Farms doesn’t offer same-day delivery of individual orders, it’s likely to be in the crosshairs of Amazon and others. Tanner admitted that his smaller operation can’t hope to match the latter’s resources. Still, he said, “we have a model that really works. Most of those other companies haven’t figured out a way to make money.”

Tanner is convinced that Winder Farms can scale up operations to additional regions without being crushed by Amazon or Google. One advantage is its ability to operate outside the most-populated urban centers, which appear for the moment to be the only places where same-day delivery is feasible. Still, smaller entities like Winder Farms have to be looking over their shoulders at the growing number of same-day providers in the marketplace. Amazon and its biggest rivals appear ready to lose money for a time, if they can fulfill what they hope is a growing appetite among consumers for immediate gratification.