Wal-Mart and Google Get Creative with Product Delivery

Michael Teague  |

Bloomberg reported on Thursday that Google Inc. (GOOG), in tandem with an array of partners such as Target (TGT), Walgreens (WAG), Staples (SPLS) and American Eagle Outfitters Inc. (AEO), will be initiating an online/same-day delivery shopping service in San Francisco.  The pilot program will also include some of that city’s excellent local businesses such as Blue Bottle Coffee and Nob Hill Foods.

In the past few months, Google has made two acquisitions in order to help it with this new endeavor: BufferBox Inc., a service involved in the delivery of items purchased online to physical drop off locations, as well as Channel Intelligence Inc., a web service used by retailers to increase internet sales.

The move is seen as yet another front in Google’s multi-layered competition with online retail monolith Amazon.com (AMZN).  But Google is not the only company that is trying to create opportunities to chip away at some of Amazon’s share of that market.

Discount retail leader Wal-Mart is also doing its part, albeit in a more experimental form.  The company has hatched a plan to use store customers to deliver products to its online buyers.  As has been noted elsewhere, this would mark the company’s entry into the fray of the “crowd-sourcing” phenomenon.

Currently, the company uses Federal Express (FDX) for deliveries, and in five cities a pilot program with its own trucks called “Walmart to Go” for same-day deliveries.

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The company hopes that at least some of the legion of customers who visit its stores every day will be interested in signing up to drop off packages to online shoppers who might be on or near their routes home.  In return, the customer would get a discount on his or her shopping bill to cover for the cost of gas, according to Wal-Mart’s U.S. chief executive Joel Andersen.

There is perhaps something a bit incongruous about a mega company like Wal-Mart using a lo-fi/underdog small-business tactic to help it compete with other mega-companies.  Either way, not much can be said about this until there are some actual results against which the relative merits of such a program can be gauged.

There has been no indication as to how much of a discount participating customers will receive, or how such a discount would be calculated.  Still, it is not hard to imagine that at least some shoppers would be more than happy to see a smaller total on their receipts, especially if this comes at little inconvenience to them.

But the Wal-Mart scheme has prohibitive legal and insurance liabilities built in that might make it suitable only to large metropolitan population centers.

Whatever their respective reasons, there is no question that Google and Wal-Mart stepping up their online retail efforts must be seen in the context of how both companies perceive their competition with Amazon.

For Wal-Mart, this is more directly related to the very basis of their business, namely selling products to people.  Like other brick-and-mortar retailers, it has been hit hard by Amazon’s lower prices, better selection, used offerings, free shipping, and so on.

For Google, the question is perhaps more of a strategic one.  Most of its profits come from the advertising space it sells through its free web search service.  Meanwhile, there is plenty of indication that Amazon is finally trying to take advantage of some of the considerable range of motion it has in this area, in a way that could be a serious threat to Google, to the extent that Google’s own Android platform would not be safe.

Thus, for Google, the delivery service may simply be a way of diversifying its revenue streams, but it could just as well have to do with giving one of its biggest rivals one more thing to have to worry about.  Given that 2013 is the year during which Amazon is slated to shift most of its e-commerce to third-party sellers, after a 2012 during which it vastly expanded its warehouses and shipping centers, it should be interesting to see how this plays out.

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