Can Google Win Back the Market Share It Lost to Amazon?

It's possible, but Amazon has a big lead in shopping

google shopping cart icon
Google is on a mission to elevate the profile of Google Shopping. - Credit by Sources: Google, iStock
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Key Insights:

Dominance in overall search does not equate to dominance in product search. That’s a hard truth Google may have learned too late.

Now, however, it’s trying to win back brands and customers by establishing itself as an Amazon alternative in ecommerce. And, in its latest bid, Google announced the sellers who use its Buy on Google checkout experience will no longer have to pay commission fees.

Part of the redesigned Google Shopping experience, Buy on Google offers order support, a product and delivery guarantee, and checkout and returns through Google, rather than individual vendors. Eligible items are designated with a cart icon.

David Dweck, head of paid search at digital marketing agency Wpromote, said Buy on Google enables customers to purchase from multiple vendors through a single checkout, which makes the experience more like Amazon. And that should help attract shoppers.

But Google has a lot of ground to make up.

5,600 vs. 461,000

While it dominates overall search in the U.S. with an 88% share of the market, according to StatCounter, Google has seen about half of American consumers migrate their product queries to Amazon in recent years.

Now, Amazon.com has a formidable lead in U.S. ecommerce with 461,000 active third-party sellers and more than 10 million orders per day, per analytics firm Marketplace Pulse. Google did not disclose the number of merchants on its platform, but Marketplace Pulse CEO Joe Kaziukenas said his data shows Buy on Google has 5,600 sellers as of this month. (A Google rep said, “We see hundreds of millions of people coming to Google every day for their shopping needs.”)

And so the $100,000 (likely more) question is: Is it too late for Google Shopping?

That, of course, depends on sellers and consumers.

Hefty commissions and other Amazon flaws

It’s important to note that Amazon, while dominant, is not perfect.

Debora Pokallus, CEO of skincare brand Bel Essence, said she pays between 30% and 35% of the retail price of the goods she sells on Amazon in fees.

“Of course it’s worth it to join [Google with] the commission-free selling … but I honestly don’t know if Google is going to be able to get back what they gave away to Amazon,” Pokallus said. “But it would be nice to have an alternative to Amazon, or at least a second, equally profitable channel.”

Similarly, electronics company SleepPhones pays 15% per accessory sold on Amazon, but CEO Wei-Shin Lai said additional fees add up to about 50% of the product price once storage, shipping, returns, advertising and service are factored in.

Google, she noted, is attractive because SleepPhones only pays for advertising and “we’re not being nickel and dimed through an obscure system of Amazon-speak charges.”

Indeed, Dweck said big brands like Nike have left Amazon in part because of commissions.

“Customers were searching for Nike on Amazon, and then [Nike] ended up paying a commission to Amazon for products they would have sold otherwise,” he added. “If there’s no commission on Google, it’s far more advantageous for big brands to sell on Google.”

In addition, Amazon manufactures, advertises and sells products that directly compete with brands on its platform. Google, on the other hand, is not competing unless those brands sell smart speakers, which Dweck noted gives Google yet another advantage.

Willing to give it a shot

Among the new changes to Google Shopping is the integration of digital commerce platforms PayPal and Shopify as additional measures to make it easier to sell, which should also be attractive lures for businesses.

“It makes it easier for people selling anything to be on Google, which will help [Google] in more niche categories that might not otherwise have products on Google, but would have products on Amazon,” Dweck said.

Andrew Ruegger, managing partner and executive director for commerce, data science and technology at media advertising company GroupM, agreed the integration “dramatically lowers the barrier for retailer participation.”

That, of course, is because sellers on Google need a website and ecommerce functionality, whereas sellers on Amazon can simply set up an account and upload products.

To be fair, many sellers, including Bel Essence and SleepPhones, use multiple sales channels and so the most likely scenario is we’ll see more sellers give Google a shot while maintaining a presence on other platforms.

Indeed, Ruegger said there’s no indication that Google’s sales volume is large enough to deter sellers from doing business with Amazon, but it’s “definitely enticing enough to drive trial.”

Jason Hartley, evp and head of search and shopping at creative and media agency 360i, agreed it’s not often an established player as large as Google offers an opportunity like this. “We expect many advertisers will make the effort to at least test it out, even if they are using other platforms,” he said.

Momentum?

The news this week follows earlier changes from Google like the addition of organic listings to its Shopping results, which was also intended to make Google a more attractive destination for online retail. And data shows Google does in fact have more shopping activity now.

Clayton McLaughlin, svp of media investments at digital marketing agency iCrossing, said his company has seen product-related searches rise in most categories and across most channels, including search and digital commerce engines.

Ruegger agreed product searches are up, but said it’s hard to credit Google’s changes as the primary influence because consumers are generally inclined to buy more online now.

Dweck, however, said giving customers more merchants to buy from will only improve this ecosystem.

“I think, ultimately, consumers will end up buying more directly through Google, but it’s hard to tell what the impact has been with several big changes in a short period of time in the middle of such a unique market climate,” Ruegger added.

The work to come

In fact, Dweck said this is a trend that will probably play out over the next couple of years—and monitoring the percentage of product searches that start on Amazon is a good place to start.

“It’s the right shift. Google is waking up—they’ve improved the customer experience, and now they’re improving the merchant experience,” he added.

If Google wants to beat Amazon, Matthew Mierzejewski, svp and search capability lead at performance marketing agency Merkle, laid out the strategy. It will have to win over consumer trust in price, selection, quality and speed of delivery; and retailers with product diversity, inventory, price competitiveness and trusted goods. Plus, it’ll have to earn not only user awareness, but user preference. And that last part means an actual shift in customer behavior.

The elimination of commissions helps win over sellers, but Mierzejewski said Google must continue investing in its product search and discovery platform now, along with a marketing program that stresses better curation of products and its $0 annual fee for customers. But he said a shift in customer behavior under those circumstances is possible.

McLaughlin agreed.

“If they can continue to both remove barriers such as the commissions, while also increasing transparency and ease of transaction, they have a chance of establishing themselves as a strong competitor in this space that has been traditionally dominated by Amazon,” he said.

The challenge for Google, however, is it does not own fulfillment end-to-end, so it can’t guarantee quality like Amazon.

“I guess the real difference is customer expectations,” Ruegger said. “People expect very different experiences on eBay and Amazon. I would imagine Google intends to emulate Amazon, but without end-to-end control it could prove to be difficult.”


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@lisalacy lisa.lacy@adweek.com Lisa Lacy is a senior writer at Adweek, where she focuses on retail and the growing reach of Amazon.
Publish date: July 24, 2020 https://dev.adweek.com/retail/can-google-win-back-market-share-amazon-shopping/ © 2020 Adweek, LLC. - All Rights Reserved and NOT FOR REPRINT