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12/2/2011
02:29 PM
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Google Prepping Answer To Amazon Prime?

Macy's reportedly has been approached by Google about participating in a discounted shipping program for Google's online retail partners.

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Google is said to be laying the groundwork for a discount one-day shipping program similar to Amazon Prime, a highly successful subscription service offered by Amazon. Amazon Prime allows customers to receive "free shipping," at a cost of $79 per year.

A Macy's spokesperson told The Wall Street Journal that Google had approached Macy's about the possibility of participating in such a program and said that Macy's had not made any decisions about the proposal.

Jim Sluzewski, SVP of corporate communications for Macy's, declined to confirm that a Macy's spokesperson had made those comments. Google did not respond to a request for comment.

A free or discount shipping service has the potential to increase the click-through rate of ads placed through Google's network by the company's advertisers, particularly if the ads included some mention of this benefit. In theory, this would lead to improved revenue for both Google and the retailers advertising through Google.

[ Google Chrome has surpassed Firefox as the number two browser in the world. ]

While Google and other software companies can be extremely savvy about delivering software that dissuades users from switching to a competing application, technically-encouraged loyalty only goes so far. As Google transforms from an online service to commerce ecosystem that touches real-world shopping and finance through mobile devices, it will need to explore other ways to secure customer loyalty. Evidently, Amazon's lesson about the mental lock-in created by "free shipping" has not been lost on Google.

If Google is going ahead with such plans, it isn't the first company to the envy the success of Amazon Prime.

In October last year, GSI Commerce launched a shipping loyalty program called ShopRunner with some 40 retail partners. Online shoppers pay the same fee they'd pay for Amazon Prime, $79 per year. The program, now run by Kynetic as a consequence of GSI's acquisition by eBay, has since grown to include many more merchants.

Other brick-and-mortar retailers like Best Buy and Wal-Mart have experimented with free shipping, generally as part of a holiday promotion.

Amazon has not disclosed many details about the value of Prime customers beyond acknowledging that its program drives sales. But Businessweek has suggested that Prime members buy 150% more items than they did as non-members and may contribute as much as 20% to Amazon's U.S. sales.

And Amazon has been working to enhance the value of Prime subscription. This year it expanded the benefits of Prime membership by adding unlimited, commercial-free, streaming of over 5,000 movies and TV shows and the ability to borrow ebooks on its Kindle devices through the Kindle Owners' Lending Library, at no extra cost.

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