Been searching for that new tablet on Google lately? If so, Google may recommend, via Google Now, when you are near a store that carries it. They will even conveniently tell you the price. In one sense, this is the oldest rule of retail: the impulse purchase. High margin impulse purchase items with high turnover are kept near the front of the store, tempting you to snag that candy bar or soft drink you’ve been thinking about since you saw it on the way in.
Where the two are different, is that traditional rules of impulse purchasing are impersonal. They make no allowance for, say, the impulse tabasco sauce buyer or the impulse bottle of motor oil buyer or the impulse just-remembered-you-ate-pepperoni-pizza pepto buyer. Google’s approach, on the other hand, is entirely personalized. The “impulse item” is whatever item you’ve been searching for that Google’s algorithms think you’re likely to buy at a nearby shop.
The challenge involved is enormous. Google will have to model algorithms capable of differentiating (if only through a learning process) between an idle search for a product, and one you are really looking to buy. The system will have to notify you in a timely manner, taking into account data like your search history calendar, email, location, velocity, mode of transport, and more. It will probably have to learn to favor highly actionable notifications, like buying a new sport jacket or evening gown from a shop when you’re on foot after working hours, rather than notifying you of a dealership carrying a car you’ve searched for while you’re driving in a car nearby. Of course, none of this will matter if it doesn’t also have accurate product listing info.
Quite likely it will get very little of this right on Day 1. Instead, it will have to learn, both as a system run by algorithms, and as a personal shopping assistant service, when and how best to target the consumer to achieve conversions, and how to avoid annoying people into turning it off. There’s a gamble involved here, as well: if it doesn’t work, Google’s efforts to be a major player in local shopping and online retail in general could be severely set back.
The risk is worth it for the reward, which is To Dominate the World! OK, not really, but the next best thing, the “Holy Grail” of brick-and-mortar retail businesses: using data about nearly the entire global internet user base to target shoppers at just the right moment when their intention to purchase can be captured and converted immediately.
The “Intent Graph” is why Google dominates Search and online advertising revenue: the ads are delivered at just the right moment, the moment of commercial intent search, and if it delivers the right “answer” to the user, then the ad was at least as good as any organic Search result. Despite no shortage of experimentation going back to the era of feature phones, no one has yet delivered anything equivalent to this Intent Graph for physical stores and business. If Google can succeed, it may open the door to a rich new revenue stream for both Google and businesses.
Taking on Amazon
Amazon dominates online retail. They have become such an immediate source for many consumers that they bypass Google Search entirely, and Amazon uses its massive revenue stream to fund loss-leading projects like the Kindle Fire and Amazon Prime to further draw you away from going through Google for some types of commercial intent searches. They’ve even turned their own servers into a source of web services, which compete with Google (quite effectively, in fact).
Google recognized this fact when they created Google Shopping, switching from a mere Product Search to a Pay-to-Play advertising service. In doing so, not only did they force Amazon to choose between potentially losing traffic or paying even more money to Google than they already do (they remain a large advertiser with Google, of course), but they also took control of the experience. While they may not be able to guarantee the quality of all of their merchants, they have a higher degree of confidence because of cost-of-entry and a more uniform data set. Seller Ratings and Google Trusted Stores help complete a more Amazon-like experience.
However, Amazon’s real weakness is local retail. While many local retailers do list products on Amazon, Amazon does little to help or actually hurts these businesses when it comes to foot traffic. Showrooming, where the customer looks for items in stores and then goes home and purchases them on Amazon, is epidemic for some businesses. Even that is still better than the growing number of consumers who never even come into a store. Amazon delights in this phenomenon and is even releasing a specialized device to assist your showrooming habits.
By reaching the customer with intent to purchase at the right moment and in the right context, Google Now’s new shopping recommendation feature could help brick-and-mortar businesses find some of their own mojo to compete better for your dollars. This might prevent some degree of showrooming behavior, or at the very least it might simply increase the likelihood of the right customer finding your business at the right time. Google can take advantage of their neutrality to unite the brick-and-mortar business world against their threat from Amazon.
Given time and opportunity, Amazon will find the way to conquer large swaths of that market for local shopping, but Google doesn’t intend to lose that fight, either, and neither do Amazon’s direct retail competitors.
Where Does It Go From Here?
I think we can assume that Google will eventually push for deep integration of this feature into the Google Shopping experience, by carrot or by stick or some combination. Imagine a not-too-distance future where not only will Google Now recommend where to buy something nearby, but will allow you to buy the item with one click through Google Wallet and either pick it up at your convenience, or possibly even have it delivered to your home the same day or next day. Imagine, after some suitable period of time, Google Now asks you to rate your experience, or review the business, or both. Imagine Promoted Recommendations as a new ad format.
We will probably see some of this, maybe all of it, maybe more. For example, we might eventually see Recommended Services. If your business offers Doggie Day Care Service, then someone in your area searching for doggie day care might see your business as a recommendation.
The more points of data Google can ultimately bring to bear on this, the better it will be, so while Search history and location may be the primary source for recommendations right now, we should probably expect them to eventually incorporate data from Google Calendar, Gmail, Google Keep, and any other Google property that might conceivably improve their targeting.
The End Game
Nothing can put the genie back in the bottle. Online shopping is out there in the ethers and will only increase. That does not mean, however, that brick-and-mortar businesses will become obsolete any time soon, or that they can’t enjoy something of a resurgence by providing a more satisfying customer experience.
There is nothing about the online shopping experience, in the end, that matters more to the customer than that they find what they are looking for when they’re looking for it, at the right price. With Google Now, Search is evolving beyond simply responding to anticipating our needs and even identifying those needs before we think to search for them. In the offline world, where it can be hard to know when something we’re looking to buy is available nearby or what it might cost, this kind of predictive, contextual shopping information served right to our devices may be the only way to deliver some of that same instant gratification convenience.