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Google Follows Amazon Presence in US Fresh Food Delivery Market

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Perishable goods market

As we discussed in the first part of this series, Amazon (AMZN) plans to become a one-stop shop for its customers by offering one-hour delivery service for hot food. In addition to its entry in the online food delivery market, Amazon previously rolled out several initiatives to attract customers to its portal. These initiatives include making hotel reservations, booking home services, and offering a crafts marketplace.

Another initiative is the delivery of fresh food in the US. Amazon has been in the fresh food delivery market since 2006, when it launched its AmazonFresh grocery service.

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In September 2015, Google (GOOG) announced its foray into the perishable goods market, with the objective to leverage the lucrative grocery shopping market. It is currently a $10.9 billion industry and is projected to grow annually by a CAGR (compounded average growth rate) of 9.6% by 2019, according to an IBISWorld report.

Competition for Amazon

Eric Schmidt, chairman of Google, commented at a recent event in Berlin, Germany, “Many people think our main competition is Bing or Yahoo. But, really, our biggest search competitor is Amazon. People don’t think of Amazon as search, but if you are looking for something to buy, you are more often than not looking for it on Amazon.”

Google Express plans to begin the trial for its new delivery service with partners that include Costco Wholesale (COST) and Whole Foods Market. Google Express is Google’s same-day shopping service. Customers can place orders online from retail stores such as Staples (SPLS) and Walgreens.

The two companies’ operational processes are completely different. Google works directly with local retailers while Amazon maintains its own warehouses and has a much larger selection of items. Amazon dominates the same-day delivery market.

Same-day shipping market has huge growth potential

According to a report from Business Insider’s BI Intelligence research service, and as the chart above shows, the US same-day delivery market could grow from $100 million in 2014 to $4.03 billion in 2018, at a compounded average growth rate of 150%.

To get diversified exposure to Amazon, you could invest in the PowerShares QQQ Trust, Series 1 ETF (QQQ), which invests 3.5% of its holdings in Amazon.

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