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Google and Amazon Duke It Out in the Grocery Aisle

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Google will invest up to $500 million to wrest back its share of product search.

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Google (NASDAQ:GOOG) has a new strategy for online shopping.
 
Yes, we've heard this before. Google's online shopping strategy is a rare but glaring failure for the Web search giant. Its periodic attempts to breathe life into its Google Shopping section have come to naught.
 
Frankly, you've got to wonder why it bothers. Why not just pour all those billions of bucks into expanding Google Fiber in order to bring every American the quality of Internet service that Latvians now enjoy. Let Amazon (NASDAQ:AMZN) schlep the groceries.
 
Well, that's the problem. Amazon isn't just the dominant power in online shopping. It's becoming the default search engine for product search. And that hits Google where it hurts -- in its core search-related advertising business.
 
So, Google is now working on same-day delivery of groceries and other everyday household products. It figures it needs to do more than find the product for the consumer. It must pick it up and deliver it, too. Boy, does Google have its work cut out for it.

Amazon spent more than a decade and maybe $14 billion (in Bloomberg News' estimate) building a national distribution network. That enabled the company to efficiently and quickly package and ship products via a third-party delivery service.
 
Now, Amazon is gradually taking on the next challenge, direct same-day delivery to homes. It's known as "the last mile," and it's the toughest and costliest one.
 
Google is virtually starting from scratch, with a major expansion of its test service, Google Shopping Express. It is partnering with some of the retail names that have struggled to keep up with Amazon, including Costco (NASDAQ:COST), Staples (NASDAQ:SPLS), Target (NYSE:TGT), and Walgreen (NYSE:WAG).
 
Re/Code.net reports that Google plans to spend as much as $500 million to expand its Google Shopping Express delivery service beyond its test markets, which include the San Francisco Bay area, part of Los Angeles, and New York City.
 
Much of the money will be spent on staffing up. Google will be hiring people to literally pluck products off the shelves of participating stores, and others to pack them up, load them on trucks, and deliver them to customers.
 
At this point, Google Shopping Express is offering new customers in its test markets free delivery for six months. After that, customers pay $4.99 for each store order.
 
The eventual goal is to extend Google Search into a full-service process for shoppers. That is, a consumer can search for a product, click on a related Google Shopping Express ad, and order the product delivered.
 
Meanwhile, Amazon is moving on to its own next stage in logistics, with a request to the Federal Aviation Administration to permit it to use unmanned drones for local deliveries.
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