Facebook, Google vie to sell, deliver merchandise

12/27/2012

Google Inc. and Facebook Inc. made their names by helping people find information or friends online. But in recent weeks the rivals have made some surprising moves in a different direction — the business of selling and delivering goods.

Facebook is trumpeting its Gifts service that lets users order stuff, from wine and cupcakes to pet toys and children’s clothes, and have them delivered to friends. Google, meanwhile, has been tight-lipped about its recent deal to buy a small firm that operates temporary lockers where shoppers can take delivery of items they buy online. But some believe Google will combine the start-up’s delivery expertise with other services to help merchants sell products through Google.

If today’s ecommerce is dominated by well-known retailers such as Amazon.com and Walmart.com, analysts say Google and Facebook may view these new initiatives as a potential source for revenue and a strategy for keeping their users engaged — while giving people one less reason to visit Amazon or competing sites.

“These companies want to keep people from leaving. They would love to have a complete ecosystem where they own every part of the customer experience, from browsing to buying and repeat visits,” said Sucharita Mulpuru, an ecommerce expert at Forrester research firm.

However, online shoppers are more likely to start their quests on Amazon than Google, according to some studies. If that trend continues, analysts warn, it could make Google’s site less attractive to retail advertisers.

Facebook also has good reasons to offer shopping on its site, as the social network seeks to broaden its business beyond selling advertising and games. Facebook made Gifts available to all U.S. users in December. But Sterne Agee investment analyst Arvind Bhatia estimated the program could become a significant revenue source, contributing “several hundred million dollars” of annual earnings.

Facebook partnered with big chains and independent merchants that sell items through the Gifts program and give Facebook a cut of the proceeds. Facebook won’t say how much, although Mr. Bhatia believes the cut is 10 to 15 percent.

After a customer places an order on Facebook, most of the partners handle the processing and delivery. But Facebook said it’s operating a small warehouse to store and ship goods from smaller partners that don’t have their own infrastructure.

While Facebook seems unlikely to match the size and scale of a retail giant like Amazon, Gartner tech analyst Brian Blau said the social network has an edge in the information it has about each user’s friends, their personal interests, and important dates such as birthdays and anniversaries, all of which can be used to nudge people into buying gifts.

Google sells digital goods such as music and videos through its Google Play online store, has experimented with electronic payments through the Google Wallet service, launched a daily-deals program called Google Offers, and revamped its shopping-search service by shifting to a model where merchants pay to have their products listed.

But Google has said little about its late-November purchase of the Canadian start-up BufferBox, which operates lockers at transit stations and grocery stores. Online shoppers can have items shipped to a locker that’s secured with a temporary PIN code and pick them up later.

A Google spokesman wouldn’t discuss plans for BufferBox, except that “we want to remove as much friction as possible from the shopping experience, while helping consumers save time and money.”