Amazon.com, Inc. (AMZN) has been the king of online retail for a while now. But if the results of a new industry survey are in any way accurate, Alphabet Inc’s (GOOG, GOOGL) Google could be in some long-term trouble.
A recently conducted BloomReach survey of 2,000 online shoppers found that a whopping 44% of them began their online shopping quest on Amazon. That compares to just 34% that use search engines to start their shopping research.
That’s great for AMZN and bad for GOOG, which makes substantially all of its money from online ad revenues.
When customers go searching for a specific product or type of product, Google has the ability to serve extremely relevant ads across those results — placements that cost advertisers a pretty penny.
No End In Sight
Not only does AMZN continue to dominate in e-commerce as it has for years, but its grip on the market appears to be growing. A 2012 Forrester Research study found that 30% of U.S. online shoppers began their search on Amazon.
The giant is getting bigger.
Amazon and CEO Jeff Bezos have no plans of ceding ground to GOOG anytime soon, either. The company’s most distinct advantage over Google is its Amazon Prime membership program.
In the same way that Costco (COST) charges an annual membership fee and allows customers to shop at dirt-cheap prices all year long, AMZN charges $99 a year for Amazon Prime and offers a suite of services to go along with it. From streaming video to free two-day delivery to early access to new products like the Amazon Echo and other devices, Amazon Prime has a bevy of benefits — and they keep customers around.
To give some sense of just how much pull AMZN has in e-commerce, consider that the company actually invented its own shopping holiday this year, Amazon Prime Day, which was an unqualified success.
The sales holiday blew past expectations, and resulted in more single-day sales than its most successful Black Friday ever. AMZN also came out ahead because it required customers to be Amazon Prime members to participate, a tactic that resulted in the most single-day signups for the service of all-time.
Needless to say, AMZN will be repeating the sales holiday next year.
This sort of e-commerce firepower isn’t just putting pressure on GOOG to get into e-commerce itself to push back against Amazon’s constant encroachment, it’s giving AMZN leverage to freeze Google out in different ways: The company recently announced it would no longer sell Google’s Chromecast or the Apple (AAPL) TV because they allegedly don’t interact well with Prime Video.
The ban will go into effect on Oct. 29 — just weeks before Black Friday. Considering the Chromecast is the seventh-hottest electronics item on Amazon today, and that there are high expectations for Apple TV, Amazon is really playing hardball.
And for GOOG investors, Amazon’s stubborn dominance could be a slow and steady bleed on results, especially if its own e-commerce efforts like Google Express don’t work out.