Why Is Amazon Shareholders Coming to Google for E-Commerce?

Why Is Amazon Shareholders Coming to Google for E-Commerce? ...

According to a recent article from Bloomberg, Google is planning to venture into e-commerce.

This is not the first time that the company has tried to build its own internet marketplace. Google attempted to compete with Amazon (AMZN) in 2013, but never received any explicit results.

The search engine company, which is owned by Alphabet (GOOGL) - Get Alphabet Inc. Report, is planning a new offensive, and is confident it will be able to slam Amazon''s market share.

Is AMZN''s stockholders interested in it?

We think the opposite. In fact, we believe it''s a sign that Amazon shareholders should keep investing and perhaps even purchase additional AMZN stock.

Figure 1: Why Amazon Shareholders Are Reading E-Commerce?

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Googles E-commerce Strategy

Through a partnership with retail companies such as Target (TGT) and Walgreens (WBA), Google created its own online retail division, Shopping Express. The project has failed for two main reasons:

This time, Google''s offensive is being headed by executive Prabhakar Raghavan, who was responsible for the creation of the company''s main services. Instead of copying its main competitor, Raghavan''s intention is to make Google a anti-Amazon by creating a free marketplace for merchants.

Raghavan wants to enhance the differentiation of Google''s products by adding features to help customers search for items to buy. For example, you''ll be able to take a photo of a product you want with your smartphone, then go to the Google app to buy the same product online with one click.

The search engine will also be able to identify discounts and loyalty programs.

Is Google a Threat to Amazon?

If Google succeeds in its venture, it would give Amazons third-party sellers another means to conduct their businesses outside the Bezos behemoth marketplace. That may force Amazon to cut fees or offer discounts to its sellers.

According to Rick Watson, chairman of RMW Commerce Consulting, these anxieties are far from becoming reality: For the past 15 years, Google has been attempting to establish commerce. They have never even executed.

Google is dealing with several difficulties as it ties into its search website by creating an e-commerce marketplace. Instead of buying on Google, it may confuse its own users.

Regulators might consider it to be a monopoly, as did Google Express in Europe in 2015. If that happens, the company may be forced to split its services.

According to Mike Ryan, the portfolio strategist for Smarter Ecommerce, Amazon appears to be doing the opposite.

Why Would this conflict be a positive sign for AMZN?

Let''s look at the whole picture.

In 2022, macroeconomic losses forced Amazon''s stock to lose all of its gains achieved during the COVID epidemic. The company even disclosed a loss for its e-commerce business, something investors had not seen since 2015.

However, the e-commerce market is predicted to reach $2.27 trillion in 2025. Not only is Google trying to crack it, but Meta (FB) - Get Meta Platforms Inc. Reportand TikTok are also trying to get involved in these gains.

Because, as the graph suggests below, retail may assist these firms generate additional ad revenue.

Figure 2: Retail is the leading authority in the internet advertising sector.


Our Take

At a particularly difficult macroeconomic moment, many firms are willing to invest in their own e-commerce marketplaces. However, we cannot help but conclude that this is a high-potential market.

Because Amazon already dominates the e-commerce industry and has a growing advertising division, we believe the Seattle-based titan is the company best placed to profit.

AMZN shareholders'' patience will finally be rewarded once the current e-commerce slump is passed.

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Aside from the article, affiliate links may be included. These partnerships do not influence editorial content. Thanks for the support of Amazon Maven.)

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