Over the past year, Amazon share price has grown by around 14% while Google shares have doubled. Why the difference?

Amazon and Google are the two largest and most influential businesses operating in the ecommerce space. They are each worth around $1.7T (i.e. more than the GDP of 202 (out of 213) of the countries in the world). In terms of mediating online sales, 85% of Ecommerce purchasing journeys start with an Amazon or Google search. Amazon remains the largest online retailer in the world with record 2020 sales up 38% to $386 billion .

Amazon has always taken shopping seriously. It has grown by either out-competing rivals or by securing a wide range of key partnerships, diversifying (e.g. web Services), offering fantastic service for customers along with what is arguably currently the best fulfilment operation (Prime) of any leading online retailer. Above all else, the objective of Amazon is to win market share and to dominate the competition. Amazon is driven by a single-minded focus around company success and customer service.

Google on the other hand just loves technology and has pushed the envelope of almost everything digital from photography to AI/ML, from maps & self-driving vehicles to office and business tools, from quantum computing to phones and computers. With many of these developments, Google pours in money and resources because the tech is ‘cool’ rather than because it necessarily offers strategic business value. I’m not suggesting that Google isn’t business focussed, I’m simply suggesting that ‘cool stuff’ at Google can often command resources beyond its ability to deliver business value.

If companies had human personalities then Amazon might be described as an aggressive and domineering control freak while Google, a technophilic dataholic.

What Amazon and Google do have in common is remarkably high levels of competence, innovation and skill delivered by some of the best technologists and business people in the world. Both drive ecommerce in different ways. Amazon is always keen to assert and control through it’s Amazon brand while Google’s brand is more chaotic (Alphabet, Google, Nest, Home, Android, Chrome ….).

Key ecommerce differentiators for Amazon are Prime and retail market share. Key ecommerce differentiators for Google are search and overall integration of smart functionality.

The web is so massive that search is essential, pervasive and, outside of China or Russia, largely driven by Google. Until 2018 Google advertised Amazon and drove traffic there. No longer. Today, Google is finding new ways to partner with other platforms and channels such as Shopify, Square and even Etsy as well as empowering the sales funnels of millions of small businesses across the globe. While Amazon continues to squeeze third party traders, Google welcomes them with open arms with free listing on Google Shopping.

To offer global search, Google has to be (and must be seen to be) an honest broker that can direct potential customs to exactly the right product for them. Meanwhile, Amazon charges Amazon traders who use the Amazon platform for the facility to use Amazon paid advertising to then compete with Amazon’s own products or even the same products but ones sold directly through Amazon. Amazon uses its data advantage to grow its business. Doing so is completely logical for Amazon and is wholly consistent with its massively successful business model.

Are these business models future proof and what is likely to change?

One of the most common business discussions I get involved with is with small and medium-sized traders who have operated primarily through Amazon. While Amazon has been a huge contributor to their success, they now start to think harder about margins, profits and, even, possible exits. I always make the point that, for many, Amazon offers good value for money and can be an excellent way to grow a brand, win sales and establish a business. Relative to its size and revenue, Amazon’s profits are relatively low with most of it coming from Amazon Web Services rather than online trade. Traders using Amazon often don’t fully appreciate the full costs of advertising, service, warehousing and fulfilment. Whatever the truth, many traders are looking to be more independent, more in control of their business destiny and Google may well be the net beneficiary of this changing behaviour.

A somewhat unfair complaint that's often levelled at Amazon is that traders that use Amazon do not have free, fair and open access to those that ultimately buy their products. If traders are to gain their independence then they need the ability to directly market to end-user customers, to sell them new products, to offer special deals, to gain direct customer feedback but above all else they want those customers to be their customers, not Amazon’s. Amazon’s simple logic is that they were the ones that created the customers in the first place and, in any case, business is business.

Google makes no such claims over customer ownership. In fact, Google goes out of it’s way to let end-user customers know who the sellers are.

Another shift is that many of the component parts of the Amazon sales machine are starting to be replicated, and even improved on, by other businesses. One of our clients is thinking seriously about using Autostore for a new warehouse which makes Amazon warehouses look truly antiquated. Independent couriers are now offering ultra-high-speed delivery of packages while also facilitating cross-border trade. Amazons past USP’s are no longer Unique.

What is clear is that Google is now taking ecommerce ever more seriously and is doing a lot to help smaller brand owners and independent traders. They have established their Manufacturing Centre and have done a huge amount of work to level the playing field, to remove rogue cowboys and to penalise those that offer a poor web experience to their customers or to mislead customers in any way. Google sits at the top of many companies' sales funnels and allows these businesses to offer great products that customers want to buy. Doing so allows these smaller enterprises to prosper by rewarding them with ever better online visibility. Could this be the explanation for the share price differential between Google and Amazon. Possibly. What is clear is that if the trends continue as they have done over the past year then Google’s market capitalisation will overtake Amazon’s within the next few months.

While there are significant changes taking place within the ecommerce landscape, buyers often stick with what they know and use. National and International bodies are now lining up their tax and monopoly crosshairs onto Google and Amazon. This will inevitably erode momentum while giving improved advantage to smaller businesses. While all this continues, any business that is keen to gain the fastest possible growth really should be doing all they can to optimise their marketing and sales through both Amazon and Google. Good business is, and remains, pragmatic.