Google Will Never Be A Threat To Amazon’s Retail Business Without A Major Change To Its Strategy

Read original article on Forbes.

An article by Bloomberg announcing that Walmart has removed its products from Google’s Shopping Actions service and has also withdrawn from its partnership with Google Express, is raising concerns among retail analysts that Google will now struggle as it attempts to battle Amazon in e-commerce. Bloomberg cited the move by Walmart as a “blow” against Google.

It doesn’t make sense for any analysts to claim that Google will now struggle against Amazon as doing so falsely presumes that Google has enjoyed a level of success against Amazon in the first place as it relates to e-commerce. It hasn’t. Amazon remains the clear leader in e-commerce with nearly a 50% market share of online sales.

Additional articles I reviewed all displayed a similar tone – Walmart ending its partnership with Google in terms of making its products available will negatively impact Google.

To date, Google has created two primary platforms/programs for e-commerce:

Google Express is a delivery service powered by Google where consumers can shop from stores like Target, Costco, Walgreens, PetSmart and more — all from the Google Express app. Walmart used to be part of Google Express but not any more. Consumers can select products from as many of the retailers as they choose and pay for the items through the app. The products are then delivered direct to the customer within one to three days.

In some ways, Google Express reminds me of former JC Penney CEO Ron Johnson’s idea of opening boutiques selling different brands and products inside each JC Penney store. Just as Google Express uses the tagline “All of your stores in one place”, JC Penney had a similar idea. The concept never came to fruition for JC Penney.

Shopping Actions is a program that allows retailers to surface its products across different Google platforms. Shopping Actions enables a frictionless shopping experience by using a shareable list, universal shopping cart, and instant checkout with saved payment credentials, allowing customers to easily turn browsing into buying.

The last point is key, turn browsing into buying. Instead of consumers shopping for a product online and immediately going to Amazon, Shopping Actions directs the consumer to a participating Shopping Actions retailer to buy the product. Google gets a percentage of any sale generated by participating retailers.

On the surface, Google Express and Shopping Actions appear to be programs capable of attracting a large number of retailers to sign up for the service and in turn, divert consumers from shopping on Amazon’s platform. Unfortunately for Google, that’s not the case. Neither program has come close to slowing down Amazon’s ability to increase it’s market share of online sales or increase its competitive advantage over Google and the participating retailers.

Don’t Enable, Lead

I believe the reason why Google is struggling to compete against Amazon isn’t because Google can’t attract retailers to its platform or because Walmart ended it’s partnership with Google. The reason why Google is struggling is because it created Google Express and Shopping Actions without also moving into physical retailing. 

Google wants to be an enabler of retail by helping retailers drive transactions and get closer to customers instead of being a retailer similar to Amazon. I disagree with the strategy as I believe it restricts the talent at Google from maximizing their full potential to create something special. I don’t want Google to copy Amazon. I want Google to unleash its talent to reimagine the retail experience for physical and online retail.

I know Google can do better.

Beginning with Google Express, a phrase I heard from multiple sources when discussing Google went something like this: “We don’t really see the value of Google Express but we didn’t want to be left out so we signed up. Google Express isn’t strategic or material to our business.” The comments came from current and former executives at companies currently using Google Express.

Based on multiple reviews of Google Express that I have conducted for clients, including Kroger, I cannot recommend the service.

As for Shopping Actions, I do not dispute that some retailers using the program have seen an increase in the average size of a shopper’s basket. However, after thoroughly reviewing the program, I see nothing that can touch what Amazon is presently doing or come close to what I am aware Amazon plans to do well into 2021. I am not claiming that Shopping Actions isn’t generating at least a modicum of results, I am stating that Shopping Actions pales in comparison to the experience Amazon offers its customers.

I asked multiple sources if Shopping Actions can compete with Amazon or topple Amazon, no one I spoke with stated that it could. Many spoke positively of what Google has created with Shopping Actions but the consensus is that it is far from an “Amazon Killer.”

Instead of Google investing so much time, effort and capital to try and enable other retailers, Google should have invested in itself. I don’t want Google to enable other retailers, I want Google to become a leading retailer. Big difference.

Don’t Bring A Knife To A Gunfight

There are many words that I can write to explain why Amazon is successful but one word stands out above all others – aggression. Amazon has a burning desire to grow and the company aggressively targets specific industries and categories, for example e-commerce and groceries.

Acquiring Whole Foods wasn’t just a strategic move by Amazon it was an aggressive move designed to send a message to other grocery retailers that Amazon has every intention to be the leader in groceries. In addition, Whole Foods greatly enhances Amazon’s ability to interact with its customers. By 2030, Amazon may have 2,000 stores across the U.S. Amazon’s strategy of online and physical retail gives Amazon a competitive advantage as customers have multiple options for engaging with Amazon.

The world’s leading online retailer, Amazon, evolved to embrace the value of physical stores. Why? Because no company can win in retail on a large scale only using an online model. Walmart, the world’s leading brick and mortar retailer evolved to embrace the strategic value online retail. Why? Because no brick and mortar retailer can win in retail without a digital presence.

When I compare Amazon’s and Google’s strategy for groceries and e-commerce, one thing is clear – Google thus far hasn’t been willing to be as aggressive as Amazon and its hurting Google. Amazon doesn’t want to enable others, Amazon wants to lead through its own efforts. No one can question Amazon’s formula is successful.

Google’s singular focus of attempting to compete against Amazon in e-commerce through its platform and retail partnerships is a strategy that will never work according to analysts I spoke with. The challenge for Google is that Amazon dominates in first product searches and Amazon has achieved Top-Of-Mind Awareness with consumers. The idea that consumers will somehow be directed away from Amazon because a product they want to buy is available at a participating retailer on Shopping Actions generated a large degree of skepticism.

As we used to say in the Marines, don’t bring a knife to a gunfight. In the fight against Amazon, Google’s strategy lacks fire power. I believe the time has come for Google to pivot from being an enabler of retail to becoming a leader in retail. I strongly recommend Google pursue one or more of the options below:

Option 1. Acquire Target And Sprouts Farmers Market

This is my preferred option for Google primarily because it gives Google ownership of one of the best retailers in the U.S. My only complaint against Target is that it has failed to create anything close to a best in class grocery service for its customers. If Google acquires Target, I believe the optimal solution is for Google to also acquire Sprouts Farmers Market and open Sprouts locations inside Target’s 1,850 stores. Google can also grow Sprouts organically across the U.S.

Another option would be for Google to sign a strategic partnership with Lidl to open locations inside Target’s stores if Google chose not to acquire Sprouts. I believe Sprouts is the best option.

Food and groceries are a $1.5T business. Many companies, including Amazon and Uber, are making big bets on groceries. Google should do the same. On an annual basis, consumers make more purchases of food and groceries than any other products. Acquiring Target and Sprouts would propel Google into a leadership position in the grocery industry.

I also like the fact that Target owns Shipt, a leading same-day marketplace and delivery company that Google can leverage.

Google has no choice but to consider the fact that Amazon may view Target as a potential acquisition.

Google can utilize any number of options for acquiring Target and Sprouts including a combination of cash or a stock swap strategy according to financial analysts I spoke with. The same methodology can be applied to any of the options listed.

Option 2. Acquire Instacart

Instacart has contracts with the leading grocery retailers in the U.S. In addition, Instacart has documented the strengths and weaknesses of all the grocery retailers it serves. Google can utilize the intelligence it would gain from Instacart to reimagine physical and online grocery retailing.

In such a scenario, I can envision Google acquiring retail locations (former Sears and Kmart locations, for example) or regional grocery retailers. It is even possible that Google would open Instacart branded stores. Google can also leverage Instacart to expand into private label manufacturing and grocery distribution.

The possibilities are nearly endless if Google acquire Instacart. To complement Instacart, I recommend Google explore acquiring Boxed Wholesale.

Option 3. Acquire Costco

Like Target, acquiring Costco would give Google ownership of arguably one of the best and most popular retailers operating today. Although currently focused on bulk sales, Google could expand Costco’s focus to include groceries on a much larger scale. An option worth exploring would be for Google to also acquire Instacart.

As I stated earlier in the article, Google has to make a big move. Acquiring Costco or Costco and Instacart together would be regarded as the single most disruptive acquisition ever in retail.

This is my second favorite option for Google to consider especially if Instacart is also acquired. Google could acquire Peapod instead of Instacart but Instacart is the recommended choice.

Option 4. Acquire eBay

I originally made a recommendation for Facebook to acquire eBay and integrate the platform into the user page of each Facebook member in order to turn Facebook into an e-commerce platform linking social media and commerce. A fellow-Forbes contributor wrote about my opinion on the topic of Facebook acquiring eBay in this article.

(I believe Google must seriously consider the possibility that Microsoft will expand LinkedIn to become an e-commerce platform. I wrote about Microsoft and LinkedIn in this article. Google must also consider that Microsoft may decide to make a major acquisition of a retailer.)

I have spoken at conferences and I have written multiple articles where I have made the recommendation for Google to acquire eBay. I clearly understand the value of eBay’s marketplace to Google. I estimate that acquiring eBay’s marketplace could cost Google as much as $12B or more.

5. Acquire Shopify

The Canadian company offers commerce solutions on the cloud to small and medium businesses. The company has over 600,000 merchants on its platform. In addition, Shopify has a relationship with 15,000 partners that help the company provide merchants with a variety of services while maintaining consistent growth.

I believe Shopify is an excellent fit for Google and would provide Google with much needed capabilities in e-commerce, payments, marketing and Retail as a Service to name a few.

6. Acquire QVC

QVC is an American cable, satellite and broadcast television network, and flagship shopping channel specializing in televised home shopping. I believe Google can integrate YouTube and QVC to create a highly immersive retail experience as well as introduce additional content for consumers.

7. Acquire Storr

By far, Storr is one of the more unique companies on the list of potential acquisitions. Storr is a digital marketplace that allows anyone to open an online store from their phone in just three clicks. Once a store is opened, brand-name products can be selected and displayed for sale. The person who opened the store can make between 15% to 25% commission on each sale. Storr is geared towards channeling people to buy products from friends, family and influencers they follow like celebrities and sports figures.

I added Storr to the list as I believe it is going to usher in a new type of commerce. Regardless of what other acquisitions are made by Google, Storr should be acquired as well. I wrote about Storr in this article.

In addition to the options I’ve listed, Wish.Com and Spreetail are worth assessing. Overstock.Com has a proven e-commerce platform but Overstock has encountered severe headwinds in its business. Wayfair is a solid company but like Overstock, online sales of furniture and home furnishings aren’t a good fit for Google.

Some readers may wonder why I believe Google must make acquisitions instead of just launching its own supermarkets or chain of retail stores. The reason is this: Amazon is a growing threat to Google. For every day that passes, Amazon grows stronger. Google can’t make incremental changes, Google must make substantive leaps hence the recommendation to make acquisitions.

Conclusion

The intent of this article is to present options that will generate discussions inside Google and within the retail community. I have presented options but I am not claiming they’re the best or the only options for Google to consider.

I believe it is imperative for Google to have a physical retail presence. While I understand Google’s desire is to enable retail, I believe Google can do a better job of designing and implementing a retail strategy and ecosystem capable of going head-to-head against Amazon, than the retailers using Google Express and Shopping Actions. Regardless of Google’s current size and market cap, Google should have a mindset of driving  growth for the company at all times.

Will some retailers end its relationship with Google if Google acquires Target, Costco, Kohl’s or any number of retailers? Probably. However, other retailers and especially sellers will be more than happy to leverage Google’s platform to enable transactions and engage with Google in its own stores.

Stores will allow Google to open boutiques specific to brands providing customers with an increased immersive experience as well as increased content, two things that are very important to customers. Stores are also critical for grocery sales. A truism in retail is that customers want to pick their own fruits, vegetables, meat, milk, eggs, dairy and baked goods. Physical stores will allow customers to Inspect and Select the products they want to purchase.

I can only imagine what Google could do if it acquired Target and Sprouts. What’s certain is that Google, and not Amazon, would have the advantage as Google would surpass Amazon in the total number of grocery stores plus offer customers a department store experience in 1,850 locations. Shipt would ensure Google is able to meet customer expectations for delivery including same-day.

To the team at Google, I want the company to live up to its full potential in retail. Enabling retail is thinking small. Google becoming a retailer and leveraging its entire ecosystem of products to reimagine retail is thinking big. You have more than enough talent at Google to make it happen.

Retailers are looking for a predator to take on Amazon. I believe Google is up the task if it’s willing to make changes to its strategy and become much more aggressive as a company. Google must take the fight to Amazon as most assuredly, Amazon is going to take the fight to Google.