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Google Reportedly Working on Local Delivery Service

Google could be making a major leap forward in online retailing, reports say. Aiming to break the iron grip Amazon has acquired over online shopping with its Prime service, which offers free two-day shipping for an annual $79 fee, Google is purportedly working on a system to provide 1-2 day shipping for local retailers and local branches of national chains.

Rather than create its own shopping service and warehouse network, Google is working with retailers and couriers such as UPS to develop a delivery system. According to reports, when a consumer shops online with a partnered retailer, the system will check the inventory of the retailer's closest location to determine if the item is in stock; if an item is found, the customer can choose to have the product shipped in 1-2 days for a fee.

The new delivery system represents a direct challenge to the dominance of Amazon Prime. Prime, which has captured a large swatch of the online retail market through its powerful product search engine and competitive pricing, is a serious threat to Google's retail advertising revenue, because many users just go directly to Amazon for shopping rather than clicking on ads. Google hopes to use this service to further leverage its ability to connect shoppers with local businesses.

Whether Google will generate revenue from this service by taking a cut of each sale or through retail advertising remains to be seen.