When companies become successful and generate tons of cash, they will try to capture more market share doing something else, but related to their business. After all if they are a success, why would would they not be in the new field because they have the ability to spend enough resources to get it done.
In an article by Daisuke Wakabayashi of the New York Times New Service, Google tried to copy Amazon to become the shopping hub of the internet, but so far they had little success.
Amazon is the elephant in the room with over $295 billion in Amazon’s third party marketplace. According to Juozas Kaziukenas, founder of Markeplace Pulse, a research company, Google’s effort is closer to $1 billion.
Amazon has been essential for marketers and its Global advertising business grew 30% to $17.6 billion, trailing only Google and Facebook.
During the pandemic every time the government closes the economy for public health, the only way for retailing to survive and prosper is to go online. The choices have been Amazon, Shopify and Google. After setting up shop online, the need to buy ads is required, and Google has algorithms to pick where the ads will go and what products to feature, depending on the budget. In the article on business placed $1,800 in ads which were viewed 3.6 million times and led to $247,000 in sales.
The retailer considered Amazon’s marketplace but Amazon fees are higher than Google’s. There is a possibility of selling more product, but at less margin. The fees can account for up to 1/4 of every sale, not including advertising. Amazon also likes to do everything in house which means it is harder to give your brand an unique identity and it limits the retailer to generate future business.
In the article, the retailer had a problem with the Google site because their algorithms noted the shipping costs on Google and the shipping costs on Shopify were different, the retailer said they were the same but it took time to sort it out.
Google is trying to break people out of their Amazon habit, but the pull of Amazon is great. Amazon has the lead on many things including same day service (it is expensive to duplicate); which means Google is trying the normal things such as lower fees, free search, and partnering with Shopify.
According to the research firm eMarketer, in October Amazon had 37% of online shopping and Shopify has 9% up from 6%.
Linking to dividend paying stocks, every industry has leaders and those in second place wanting to become leaders. There are often huge barriers to overcome and resources to be allocated if the company wants to become number one, in the meantime the number one company is continuing to push its success. Often times it is waiting game, eventually the number one company becomes complacent and then market share can shift. All industries have leaders and it is your homework to see why they are number one?
There are more questions than answers, till the next time – to raising questions.