Google And Amazon's Competition Is A Win For Smaller E-Commerce Companies

This article was originally published on my Forbes column here.

E-commerce is booming, and one player is leading the charge. Amazon is expected to drive 80% of all e-commerce growth this year. That is tough market domination for anyone to crack.

Enter Google, Amazon’s long-time rival, which has recently begun pouring resources into its alternative e-commerce platform, Google Shopping. And the timing couldn’t be better: according to a survey from Survata, search engines’ share of U.S. consumers’ initial product searches grew from 28% to 36% between 2016 and 2017, while Amazon’s dropped from 55% in 2016 to 49% in 2017.

This isn’t the first time that Google has disrupted an area which Amazon dominates. They recently expanded their Home device range to directly compete with Amazon’s Echo line of devices. The reviews are split, despite Amazon’s long market monopoly; Google launched Google Home in November 2016, a full two years after Amazon debuted the Echo smart speaker and had launched two versions of the smaller Dot. The competition between the device’s voice assistants—Google’s Google Assistant and Amazon’s Alexa—remains just as tight.

And as the two Goliaths fight over e-commerce, small to medium-sized e-commerce companies have an opening.

Kyle C. Murphy, practitioner faculty of strategy at Pepperdine Graziadio Business School, knows e-commerce inside out. Here are a few of his insights as to how smaller companies can profit.

The convenience of Google’s Shopping feed

Amazon is the e-commerce incumbent. According to researchers at eMarketer, Amazon is set to take 49.1% of all U.S. e-commerce sales in 2018—that works out to 5% of all retail sales in the country.

Google Shopping is a direct challenge. The goal is to allow users to search and then click “buy now” directly from Google by using Google Express. “Google facilitates the transaction without the need to go a vendor’s website and navigate the purchase process,” says Murphy. “They’re trying bring customers and stores closer together through Google search.”

Google has experimented with its Shopping feature for a few years, but it is just now becoming a game changer for small to medium-sized e-commerce companies. That is in large part because of the convenience that is being built into the product.

“People buy a lot of things on Amazon because it’s easy; you just click a button and it is done,” says Murphy. “People aren’t going for the lowest price, they’re going for convenience. That’s where Amazon dominates. Google’s trying to get in on that.”

A friendlier deal through Google

Amazon’s platform has matured in a direction that makes it difficult for smaller e-commerce companies to stand out. It is very hard to show up in an Amazon search due to stiff competition and a proliferation of knock-offs. Also, while Amazon used to encourage more organic search results, it now practically requires that companies buy ads to show up in searches—most of the time the top three products that are listed are sponsored. In addition, Amazon then takes a cut of the revenue for any purchase.

The numbers are pessimistic. According to a report by e-commerce market intelligence firm PipeCandy, Amazon has over two million sellers worldwide, but only about 100,000 sellers make $100,000 in profit a year. Cumulatively, those 100,000 sellers have paid $30 billion in commission to Amazon—and that doesn’t even include any advertising the sellers paid for.

For the 85% of e-commerce companies that generate less than $1 million in revenue (again according to PipeCandy), Amazon may no longer be an attractive option. However, those smaller companies can gain an advantage by getting listed on Google Shopping.

As Google innovates, it is building an environment friendlier to smaller e-commerce sellers. For example, while Google does require some advertising in order to be seen, companies “don’t have to spend as much to show up in searches if they get their product feed to Google working well,” Murphy says.

Challenges still exist through Google Shopping

There is one small downside to Google Shopping: to get listed, sellers have to jump through a few hoops.

For one, Google pulls all its listings data directly from a seller’s website, and it expects the information on that website to be extremely clean. The company can choose to exclude sellers who do not comply with its strict listing standards. “If you say ‘sale’ or some promotional information headline, it’ll kick it out and won’t accept it,” Murphy says. For wannabe Google Shopping sellers, carefully constructing product content to meet Google’s product data specification guidelines is a must. That means attending to details like the file size of the product image—non-clothing products use an image of at least 100 x 100 pixels, and clothing products use an image of at least 250 x 250 pixels, for example.

In addition, Google asks sellers to update their listings every 30 days, otherwise the product will drop off Google Shopping.

In other words, submitting to the feed management tool can be time-consuming and require a lot of attention to detail. Sellers must check and double-check small details to ensure the product data meets Google’s requirements, like whether the listing is in the right category and if the headline keywords are correct, for example. There are third-party services that optimize and manage listings on the seller’s behalf. These can often smooth the process and can be a smart investment.

Though it may not be quite as simple to use as Amazon, Google gives smaller e-commerce companies a greater opportunity to generate profit. E-commerce sellers simply need to follow Google’s guidelines carefully, and they could reap real rewards.