U.S. Markets close in 4 hrs 4 mins

Google's Latest Attempt to Take on Amazon

Adam Levy, The Motley Fool

Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) management has said for years that Amazon (NASDAQ: AMZN) is its biggest competitor. And the competition between the two originally disparate companies has become clearer and clearer in the last couple years. About half of all product searches on the internet begin on Amazon.com now instead of Alphabet subsidiary Google, up from around one-third just 3.5 years ago.

Google has done well to win back some of those valuable searches, and now it's taking it a step further. It's partnering with other retailers like Walmart (NYSE: WMT) and Target (NYSE: TGT) to go to battle against their common enemy with a new program called "Shopping Actions."

Shopping Actions allows retailers to list their products across Google Search, its Google Express shopping service, and its Google Assistant AI found in smart speakers and phones. The idea is to make it easier for retailers to reach shoppers in every way they shop online while making it easier for shoppers to find and add everything they want to a single shopping cart.

A person holding a credit card in one hand and using a laptop with the other.

Image source: Getty Images.

Piggybacking on Google

Google's prevalence in people's lives makes it an essential tool for retailers to compete with the online retail giant. Google Search is the default in most web browsers, Google Home is the second-most-popular smart speaker, and Android is the most popular smartphone operating system in the world. No retailer outside of Amazon has nearly the reach of Google.

Just 15% of product searches began on non-Amazon retailers' websites last year, according to data from Survata. That percentage is actually getting smaller as more consumers flock to Google and Amazon to find products. Google (and other search engines) took 36% of product searches.

As such, Google presents a key channel for retailers. Retailers will likely jump at the opportunity to make it easier for consumers to find their inventory via Google, and Shopping Actions offers exactly that.

We already saw Walmart and Target take the opportunity to partner with Google for voice shopping through Google Home in an effort to take on Amazon's Echo. Shopping Actions expands that functionality to all retailers.

Using Shopping Actions with Google Assistant, Google Express, and Google Search.

Image source: Google.

Building a coalition

There are over 100 million Prime-eligible items on Amazon.com. That number is growing every day, and soon enough Prime members will be able to order groceries from their local Whole Foods through Prime as well. Amazon is becoming a one-stop shop for any and all shopping needs.

Google is a content aggregator. It doesn't produce much content itself, but it's a top destination to find content. Google's core competency of aggregating data and serving it back to consumers makes it well-equipped to lead a coalition against Amazon.

Combining the inventories of dozens of retailers would provide Google with considerable product selection that can compete with Amazon. That's been a major struggle for other retailers in their efforts.

Even Walmart can't match Amazon's product selection on its own. Its website has about 70 million unique items available, but its free two-day shipping service only applies to a couple million of those items.

The real value of Shopping Actions is to create a second destination for online shoppers. Amazon currently dominates mind share for online shopping. That's why it wins 49% of online product searches while all other retail websites take just 15%. If Google can create a better product search experience, it could win a greater share of sales for its Shopping Actions participants.

Of course, Google has to convince retailers to offer up their inventory and shopper data in order to make the product work. That could be a tough sell, especially since Google would have smaller retailers competing for a spot in the shopping cart against the big guns like Walmart and Target. Those two already have a head start on smaller retailers with their Google Home integrations. If Google's Shopping Actions is going to make a dent in Amazon's momentum, it needs a critical mass of retailers on board, so investors should pay attention to how many sign up.

More From The Motley Fool

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Adam Levy owns shares of Alphabet (C shares) and Amazon. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Amazon. The Motley Fool has a disclosure policy.