Google beefs up same day delivery, closes in on Amazon

Steven Loeb · October 14, 2014 · Short URL:

Now called Google Express, the company added more cities, retailers and a monthly subscription model

Google's same day delivery service, which was always an obvious way for the company to being a true competitor to Amazon Prime, just got a big boost, which means Prime could be  facing some stiff competition really soon.

Google has announced that, beginning on Tuesday, not only will Google Shopping Express now be available in more cities, have more partnerships, and offer a subscription service, but that it it will also have a new name going forward.

Now called, simply, Google Express, the service has expanded to three new cities: Chicago, Boston, and Washington, D.C. which means that 7 million people can now access the service, and almost 12 million people in Northern California can use its next-day service.

In addition, Google revealed that it has added 16 more merchants to Express over the last few months, including 1-800-Flowers, Barnes & Noble, Nine West, PetSmart, Vitamin Shoppe, Sports Authority, Paragon Sports, Vicente Foods, Stop & Shop, Giant Food, Lux Roses, TigerDirect, Treasure Island Foods and Wrigleyville Sports.

The most important piece of news, though, is that it is now offering a annual or monthly membership, its most direct hit on Prime yet.

By paying either $95 a year, or $10 per month, shoppers will get free same-day or overnight delivery on eligible orders over $15, as well as first dibs on delivery windows. They can also share membership with other members of their household.

If they don't want to pay for a membership, users still have the ability to pay $4.99 per eligible order.

"With more cities, more merchants, and more of your favorite items, Google Express is on its way toward making your life easier by helping you get even more errands out of the way," Brian Elliott, Head of Partnerships, Google Shopping, wrote.

Google's same-day delivery service was unveiled back in March, and was initially was only available in certain sections of San Francisco. It allows allow shoppers to purchase items online from local retailers and get their items during a time window of their choosing.

Some of other  retailers Google is working with include Target, Walgreens, Staples, American Eagle, Toys R Us, and Babies R Us, as well as local stores such as San Francisco’s Blue Bottle Coffee, Raley’s Nob Hill Foods, and the Bay Area’s Palo Alto Toy & Sport.

The service seems specifically designed to be a competitor to Amazon's Prime service, and, if it succeeds, it could wind up being a big blow to Amazon, because Prime is actually a veritable revenue generator in itself.

Earlier this year, a report by Morningstar analyst R.J. Hottovy estimated that Amazon had 10 million Prime subscribers by the end of 2012, up from four million at the end of 2011. The Kindle Fire played a big role in that growth, as subscriptions exploded after Amazon began offering the free 30-day trial with each Kindle Fire purchase. And while Prime subscribers only represent about 4% of Amazon’s 182 million active users, they represent 10% of all purchases. Prime subscribers also spend more than non-subscribers: $1,200 versus $500, respectively.

Amazon prime costs $79 annually, of which Amazon pockets $78. It breaks even on shipping and all of the other things it offers Prime subscribers, but that $78 per subscriber works out to make up one-third of Amazon’s consolidated segment operating income in 2012, according to the report.

In short, Prime is a major source of revenue for the company. If Google can take a chunk out of that, it would be a really big deal.

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