By some measures, e-commerce is doing very well. This past year, US retail e-commerce hit $186.2 billion, according to comScore. The firm added that Q4 was the first $50 billion quarter, which was also the “ninth consecutive quarter of double-digit growth.”
However, things are not all smiles and good cheer in e-commerce land.
Relatively soon, sales tax for online purchases will be commonplace (as it now is in California), removing one of e-commerce’s key advantages over traditional retail. Taxes are coming because e-commerce is now perceived as relatively stable, strong and mature (no longer in need of “protection”). And states, which have suffered during the recession, are seeking new sources of revenue.
Convenience, which has long been one of the major motivations behind e-commerce buying, will continue to drive online purchases, and so will showrooming. But growth at all but a handful of “etail” pure-play sites will likely slow. It’s a different story for multi-channel retailers.
Amazon founder Jeff Bezos long ago projected that e-commerce would max out at about 10 to 15 percent of total retail sales. Amazon Prime, Amazon lockers and its flirtations with same-day delivery are attempts to add new sex appeal to e-commerce and help it match or approach the immediate gratification of buying something in a store.
Google was previously rumored to be developing its own Amazon Prime competitor with same-day delivery. At least the second part appears to be true as Google last week announced its own same-day delivery service in the San Francisco Bay Area with selected retailers.
Called Google Shopping Express, the service is seeking local residents (and retailers) to participate in the program for beta-testing purposes. It will be free for six months. Google says long-term pricing hasn’t been worked out. Participating stores are Target, Walgreens, Staples, American Eagle, Toys“R”Us/Babies“R”Us, Blue Bottle Coffee, Palo Alto Toy & Sport and local grocery chain Raley’s Nob Hill Foods.
Same day delivery will likely succeed or fail based on volume: number of retailers, number of shoppers participating and number of transactions. From a consumer standpoint, pricing is a key variable, and I wouldn’t be surprised if Google offered a Prime-like program to users. I’m sure Google has modeled all this out to the “nth degree.”
As an aside, Google Shopping Express is part of an increasing blurring of online and offline commerce and services.
By the same token, retail and grocery delivery services are as old as those industries; and in cities such as New York, delivery services are quite common. The question here is can Google scale this and make the economics work? Google is a very ambitious company with the resources to really make a go of same-day delivery.
If Google Shopping Express were to succeed, Google would get invaluable data about consumer buying and product demand. Undoubtedly, it would be able to integrate mobile and Google Wallet. And surely, there would be additional ways for Google to benefit from or exploit the service.
My instinct tells me that ultimately, Google will not be willing to make the massive commitment required to make Google Shopping Express a national success. It would, however, be a valuable service for consumers, so I’d love to see them prove me wrong.
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