Photo: John R. Coughlin/CNNMoney

Google is pouring money into local delivery service to cash-in on multi-billion dollar retail and ad market.

By Laura Lorenzetti
July 7, 2014

Google is bulking up its shopping delivery service to go head-to-head with Amazon — but making sales is only half its goal.

The Internet giant dominates search in almost all areas except shopping. That’s been Amazon’s strength up until now.

When shoppers go online to look for products, they choose whether to search directly on Amazon AMZN or enter a query on Google. A search on Amazon not only costs Google a sale (through their Google Wallet and Google Checkout payment services), but more importantly it also costs Google a set of eyes and the associated ad sales.

To gain a bigger share of the nearly $3.5 billion in consumer product and electronic advertising this year, Google is investing in online retail services to woo customers to search and buy directly on its site. That also gives it access to the $600 billion U.S. grocery market on top of advertising income.

Executives at the company have set aside as much as $500 million to expand retail services nationwide, which covers building up a fleet of delivery vehicles and a workforce to pack-up goods in stores and get them to shoppers’ doorsteps.

Google has long provided information about products that are available at nearby stores. But up until now, shoppers haven’t had a way to get that product delivered immediately, the head of Google Shopping Express Tom Fallows told Recode.

Google GOOG doesn’t operate its own warehouses but fulfills orders through nearby retail stores, positioning itself to complement and not compete against retailers like Target. The company already delivers groceries, clothing and electronics from select retailers in areas around San Francisco, Los Angeles and New York City. When it will expand the service other cities is unclear. But given the size of the planned investment, Google has some big ambitions.

Essentially, Google is looking to close the loop for both shoppers and advertisers. Shoppers can get local products delivered quickly, while advertisers can more properly target those buyers — all through one, contained Google-built ecosystem.

SPONSORED FINANCIAL CONTENT

You May Like