Google is getting ready to delivery fresh goods and produce straight to customers' doors via a new same-day grocery delivery service that will directly compete with AmazonFresh grocery delivery and startups offering similar services, such as Instacart and FreshDirect.
The new service, which was first reported by Bloomberg and confirmed by Google, will launch first in San Francisco and a second city that is yet to be announced. Google Express General Manager Brian Elliott says Google has signed deals with Whole Foods Market and Costco Wholesale to delivery grocery items, including fruits, vegetables and other fresh produce, to customers.
"For a lot of our merchants that have been successful with this, we're not representing the whole store today," Elliott says. "It's in our incentive, as well as the merchant's incentive, for us to help customers get the full store delivered to them."
The goal, Elliott says, is to drive down Google Express' expenses while offering more options for customers. Google's shopping service, formerly known as Google Shopping Express, already delivers dry goods, including packaged foods, to customers. However, having its own warehouse requires steep overhead costs, such as refrigeration, that Google can otherwise get rid of if it partners with other retailers instead.
"If I've got to pay someone to drive the product from point A to point B, the bigger the basket size, the more revenue I've got to offset the cost," Elliott adds.
Grocery delivery is not a new service. In fact, Google's old rival, Amazon, has already gotten there first with a similar grocery-delivery service called AmazonFresh. Startups such as Instacart and FreshDirect also offer the same service, while ride-sharing companies such as Uber and Gett are dabbling into the industry.
It is no surprise why so many companies are looking into grocery-delivery. Bloomberg cites a report from IbisWorld that says the online groceries industry has rapidly grown into a $10.9 billion market, and it is expected to grow even further by 9.6 percent every year until 2019.
Meanwhile, Google has also expanded its next-day delivery service to include five more Midwestern states, including Indiana, Iowa, Michigan, Ohio and Wisconsin, and open up to another potential market of 25 million customers. The service is now available in a number of major urban areas in the United States, such as Chicago, Los Angeles, Washington D.C., Boston and Manhattan.
