According to a recent article from Bloomberg, Google is preparing to venture into e-commerce.
This is actually not the first time the company has tried to create its own online marketplace. Google attempted to compete with Amazon (AMZN) – Get Amazon.com Inc. Report back in 2013 but never got any expressible results.
Now the search engine company, which is owned by Alphabet (GOOGL) – Get Alphabet Inc. Report, is preparing for a new offensive and is confident it will be able to threaten Amazon’s market share.
Should AMZN shareholders be concerned?
Actually, we believe quite the opposite. In fact, we think it’s a sign that Amazon shareholders should stay invested — and maybe even buy more AMZN stock.
(Read more from Wall Street Memes: Amazon Stock: What to Expect for June 2022)
Google’s E-commerce Strategy
In 2013, Google created its own online retail arm, Shopping Express, through a partnership with retail giants such as Target (TGT) and Walgreens (WBA). The project failed for two main reasons:
- The company wasn’t able to expand its delivery infrastructure to meet demand
- Google’s “Shopping” tab didn’t attract as many visitors as its “Search” tab
This time, Google’s offensive is being headed by executive Prabhakar Raghavan, who was responsible for the creation of the company’s main services. Instead of copying its main rival, Raghavan’s plan is to make Google an “anti-Amazon” by creating a free marketplace for merchants.
Raghavan wants to further differentiate Google’s product by adding features to help customers search for items to purchase. For example, you’ll be able to take a photo of a product that you want with your smartphone camera, then go to the Google app to buy the same product online with one click.
The search engine will also be able to identify discounts and loyalty programs.
Is Google a Threat to Amazon?
If Google succeeds in its venture, it would give Amazon’s third-party sellers another way to conduct their businesses outside Bezos’ behemoth marketplace. That could force Amazon to cut fees or offer discounts for its sellers.
Still, according to Rick Watson, head of RMW Commerce Consulting, those fears are far from becoming reality: “For the past 15 years, Google has been trying to figure out commerce. And they’ve never really executed.”
By adding an e-commerce marketplace to its search website, Google is incurring several risks. It could confuse its own users trying to research items on other sites, rather than buying on Google.
Regulators could also deem it to be a monopoly (this happened with Google Express in Europe in 2015). If that happens, the company could be forced to split its services.
Amazon has an ad business to complement its e-commerce marketplace, while Google is trying to achieve success by doing the opposite. According to Mike Ryan, portfolio strategist for Smarter Ecommerce, “That seems to be working way better for Amazon than it is for Google.”
Why Could This Rivalry Be a Positive Sign for AMZN?
Let’s look at the big picture.
In 2022, macroeconomic headwinds forced Amazon’s stock to lose all of the gains it made during the COVID pandemic. The company even disclosed a loss for its e-commerce business, something investors had not seen since 2015.
Still, the e-commerce market is projected to reach $2.27 trillion in 2025. Not only is Google trying to crack it, but Meta (FB) – Get Meta Platforms Inc. Report and TikTok are also trying to get in on these gains too.
That’s because, as the graph illustrates below, retail can help these companies generate more ad revenue.
Because so many companies are willing to invest in their own e-commerce marketplaces at such a delicate macroeconomic moment, we can’t help but conclude that this is a high-potential market.
Therefore, because Amazon already dominates the e-commerce market and has a growing ad business arm, we think the Seattle-based titan is the company best positioned to profit.
Once the current e-commerce headwinds are over, AMZN shareholders’ patience will — finally — be rewarded.
(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Amazon Maven)