Google (GOOG) Becomes a Grocer

Internet search giant Google (GOOG) surprised the market last week after it announced that it was investing in grocery delivery. The project, Google Shopping Express, is currently being tested on a small group of consumers in San Francisco and the Bay Area. Google has stated that if the initial tests go well, then it plans to roll out the service in other markets across the United States. The tests are emphasizing the benefits of local, same-day delivery services, in an attempt to increase consumer dependence on the Internet.

If successful, analysts believe that Google Shopping Express could be disruptive to the business of grocers and superstores that do not offer online options. Daily Chart
As a result, Google Shopping Express could become a new arm of the company's ad revenue machine, which would encourage participating merchants to buy more online ads to gain more customers from the service. Supermarkets might also decrease their own e-commerce initiatives in favor of providing their goods straight through Google's service, and save those e-commerce costs for additional ad purchases. And if Google Shopping Express becomes a major part of the Google ecosystem, along with Gmail, Youtube or Docs, then users from those services will be more likely to use the service. Lastly, the widespread adoption of Android on smartphones and tablets will also drive additional sales, with the inevitable mobile application. Retailers currently signed up with Google Shopping Express include neighborhood, regional and national stores, such as Target (TGT) and Walgreen (WAG). These merchants will sell their items through the central shopping website, which will be delivered by courier services hired by Google. The contracted couriers will drive Google-branded vehicles with Google uniforms, giving the service a more unified appearance. Google has yet to decide on the final consumer costs for its online grocery service, since same-day delivery is relatively expensive. In 2001, online grocer Webvan collapsed because it failed to pass the costs of same-day delivery service onto customers, who were unwilling to pay a high premium for the convenience. During its six-month test period, customers aren't required to pay a surcharge for same-day delivery; merchants pick up the tab instead. It is unclear if currently participating merchants will be willing to uphold this agreement if the service goes nationwide. It's a tough task to expand this kind of service - Wal-Mart (WMT), the nation's largest superstore, only offers same-day delivery services in five markets. To add Google Shopping Express to its ecosystem, the company is shutting down iGoogle, a customized portal page, and Google Reader, which automatically collects and organizes RSS links. Although Google Shopping Express is still in its early phases, it is a project worth keeping an eye on, since Google already has defined long-term uses for it, unlike its driverless car and human powered monorail projects. Other News About GOOG Google to Deliver Goods Quickly to Online Shoppers Is Google evolving into a major e-commerce player? Google Glass Will Be Made in the USA by Foxconn Why Google Glass will now be made in America. Other Stocks in the News Stop Worrying About This Tech Titan! Is Oracle a value play? Three Things I Hate About Google Is Google vulnerable to these three challenges? Copyright 2013 by, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc. No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions. We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA, Inc.) or its employees responsible.

Published on Apr 4, 2013
By Leo Sun
Leo Sun
Leo Sun is a freelance finance writer and position trader. He focuses on a combination of value and momentum investing, with a strong interest in the trading philosophies of Warren Buffett and Peter Lynch. Leo also has experience writing articles to help small business owners acquire loans and manage their finances. He regularly contributes to the Stock of the Day analysis.

Copyrighted 2020. Content published with author's permission.

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