According to a recent TechCrunch story, Google is set to go after Amazon’s Prime Service that for $79 annually, gives Amazon customers unlimited movie and TV streaming, (free) access to the Kindle Owners’ Lending Library, and free two-day shipping on most everything bought on Amazon. While the unlimited movie and TV streaming along with access to the Kindle library are ‘nice to haves’, it’s the free two-day shipping (with no minimum purchase) that clearly drives customers’ willingness to fork out the $79 annual fee.
Here’s the story:
Google is stealthily preparing to launch an Amazon Prime competitor called “Google Shopping Express.” According to one source the service will be $10 or $15 cheaper than Amazon Prime, so $69 or $64 a year and offer same-day delivery from brick-and-mortar stores like Target, Walmart, Walgreens and Safeway (though no specifics were mentioned by our sources).
When and if it launches, the product will be a competitor to Amazon Prime, eBay Now, Postmates’ “Get It Now” and even smaller startups like Instacart.
We’re hearing that the project is being run by Tom Fallows, an e-commerce product manager at Google, and is an effort to focus Google’s e-commerce initiatives. Google Wallet and Google Shopping need a focal point, and serving as a “store shelf” to big-name retailers could be that in. Google has been scrambling for a way to capitalize on its advantages in the space — the fact that it’s arguably one of the first places people visit when they want to find a product — for a while.
If the Google Shopping Express service debuts publicly, and we have no reason to think that it won’t, this would mean that the company could capitalize on its recent acquisitions of both BufferBox and Channel Intelligence to dominate the online-to-offline retail market. Google could possibly use its BufferBox delivery lockers to facilitate the ease of shipment — like what Amazon has been testing in Seattle, New York and the UK. It could use Channel Intelligence’s data-management platform to coordinate sales and delivery.
We believe Google employees may already be dogfooding the service, but we have little information as to how partnerships are handled and how subscribing works.
So if Google Shopping Express does enter the space, the question is how will Amazon react? I’m not sure they will do anything. Shopping Express is positioned as a similar service with a lower price point, but I don’t think Amazon will view it as such. For Amazon, their Prime service is much more than just providing free two-day shipping (and other extras) for an annual $79 fee.
The reality is that Amazon Prime is more like a hyper-growth customer loyalty program. By some estimates, members typically increase their purchases 150% after joining the program. And these same Prime members account for only 4% of Amazon’s users, but account for almost 20% of overall sales…all the while paying $79 each year to belong. Now that’s customer loyalty!
So my view is that until Amazon views Google’s Shopping Express as more than just a ‘free shipping’ offer, don’t expect a reaction from Jeff Bezos and crew..
