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In the last two weeks there has been a lot of news around Google's same-day delivery service, Google Shopping Express (now called Google Express or GX), and Amazon's Grocery program, Amazon Fresh.
We received a lot of questions about both programs thought it was a good time to compare them and answer the question: Is Google Express a threat to Amazon?
To explore this question, we are going to follow this path across a two part series:
Part I: (you are here)
- Background on each program and the same-day delivery players
- Why Google vs. Amazon?
Part II: (coming soon!)
- We are going to scorecard Amazon and Google on six criteria we call the Marketplace Comparison Framework
- Based on the results, we'll both learn a lot about the programs, marketplaces and answer the question: Is Google Express a threat to Amazon?
Google Express Backgrounder
GX works by marrying four components:
- Local retailers willing to participate in the program.
- A 'ghost' Point-of-Sale (POS) system that Google provides on Android tablets.
- A consumer-facing user interface (UI) that allows consumers to see an aggregation of the local retailers and order from them all in a centralized location (we call this a marketplace). The UI works on desktop and a very nice mobile app. The consumer pays with Google Wallet.
- A network of couriers (today, outsourced to 1-800courier, in the future, driverless robot cars) - Once a consumer orders a product, a courier goes to the local retailer, picks up the product and brings it to the consumer. As you can imagine this is quite expensive.
Highlights of GX's history:
Google Express is only about 18 months old, but has had a lot of activity and investment from Google.
- March 2013 - Google unveiled Google Shopping Express (GSX), their courier +local store based program. We had a first look/deep dive of the user experience here.
- May 2014 - GSX Expands to New York and Los Angeles.
- June 2014 - GSX adds next day to Northern California.
- Oct 2014 - Google announced they are renaming the program to Google Express (GX) and expanding the program to three new metros (Chicago, DC, Boston).
- Oct 2014 - Google also announced the fees for the program - $95/yr.
- Oct 2014 - Google also announced the addition of 16 merchants.
- Oct 2014 - Office Depot, American Eagle Outfitters and Lucky opt-out of GX.
Amazon Fresh and Same-Day Delivery Background
Amazon has two programs now that offer same-day delivery. Amazon Prime has a $5.99 same-day delivery for 13 major metro areas for non-grocery items. Amazon Fresh adds grocery (including refrigerated items, fruits and veggies, meats, etc.) and covers 4 metro areas (Seattle, SFO, LAX, NYC). Here's a brief history with highlights of the program:
Highlights of Amazon's same-day delivery history:
- August 2007 - Amazon starts testing grocery delivery (later branded Fresh) in Seattle.
- October 2009 - Amazon launches same-day delivery in seven metros (NY, Philly, BOS, DC, BWI, Vegas, Seattle).
- June 2013 - After a 6yr Seattle incubation/test period, Fresh expands to LAX.
- December 2013 - Amazon Fresh expands to SFO.
- August 2014 - Amazon expands same-day delivery to six new cities (Boston, Chicago, Phoenix, Indianapolis, Atlanta, DFW).
- October 2014 - Amazon Fresh expands to NYC (Brooklyn).
Other local delivery options
As you can tell from the GX and Amazon timelines, there has been a LOT of activity around these programs in the last two years as each Titan tries to out-invest and out-flank the other. Both Target (Minn, Miami, Boston) and Walmart (Denver, SFO, LAX) are testing same-day delivery in three markets. In 2012, eBay launched eBay Now, which is their same-day delivery market. They started in San Francisco and expanded into 4 metros (SFO, Chicago, NY, DFW).
Finally, there is a start-up called Instacart that has raised ~$55m from top-tier VCs such as Sequoia, A16Z, Sam Altman, Khosla Ventures, etc. Instacart is in 15 metros and focuses on primarily grocery delivery using a network of independent delivery folks (think Uber for groceries). Plus there are persistent rumors that the transportation marketplace companies Uber and Lyft will eventually offer courier/personal shopping services as well as 'people transport'.
This table compares the >3 metro same-day delivery options as they exist today with general pricing:
Why Google vs. Amazon?
For the purposes of this series we are going to focus in on GX vs. Amazon. Google has said they plan on spending $500m on GX and with their massive fulfillment center build out (we track it here) Amazon has spent many times that amount on their infrastructure (over 150 FCs) that supports their entire suite of offerings.
The stakes are extremely high. First, you have the $600b grocery business in the US. Then you have over $3b in advertising spent by consumer product goods companies. Finally, the winner of the local delivery battle could end up owning product search which is turning out to be the crown jewel and holy grail of e-commerce.
According to Forrester and other research firms, when consumers start their online buying process, more than twice as many start on Amazon as Google. Search is Google's cash cow and product search represents ~40% of queries, so Google's primary business counts on success in turning the tide against Amazon.
Google has historically been quiet about this situation, but recently Google Chairman, Eric Schmidt, in a speech in Berlin revealed that, in fact, Google believes that Amazon is their largest competitor:
"Many people think our main competition is Bing or Yahoo. But, really, our biggest search competitor is Amazon. People don’t think of Amazon as search, but if you are looking for something to buy, you are more often than not looking for it on Amazon. They are obviously more focused on the commerce side of the equation, but, at their roots, they are answering users’ questions and searches, just as we are."
In Part II, we'll look at the two programs across six criteria to see how they measure up against each other and see if GX is going to turn the tide against Amazon for Google.
This blog post was written by Scot Wingo, CEO of ChannelAdvisor.