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Amazon is the 800 pound gorilla of e-commerce, and to maintain its dominance, it has developed a number of competitive advantages that will make it harder for any other company to take its throne.

Increasingly, one of those competitive advantages is Amazon Prime, which, among other things, offers customers free two-day shipping on all their orders for $79/year

But if new rumors that have surfaced are to be believed, Amazon Prime may soon have competition, and it won't be from another retailer.

The Wall Street Journal has the details:

The Web-search giant is in talks with major retailers and shippers about creating a service that would let consumers shop for goods online and receive their orders within a day for a low fee, said people familiar with the matter.

The quick-shipping service would be based on Google's behind-the-scenes system that allows shoppers to figure out whether nearby stores have a product in stock and whether they can get that product shipped to them within a day. When shoppers place an order on participating retailers' websites, Google's system could kick in to offer them the option of same-day, or next-day, delivery, said a person familiar with the matter.

The effort could involve partnerships with shippers such as United Parcel Service Inc. and local courier companies, said people familiar with the matter. A UPS spokesman declined to comment.

While getting involved with online retail fulfillment, and possibly even subsidizing shipping costs, might seem like a huge distraction for the world's largest search engine, according to the Wall Street Journal's sources, Google's plans may be somewhat rational.

How? It would keep shoppers from going directly to Amazon for product search. Amazon Prime customers, which are growing in number, increasingly go direct to Amazon.com when they're looking to search for products the Wall Street Journal's sources say.

That makes sense, of course. Amazon Prime, with its unlimited free two-day shipping, is designed to encourage customers to do more of their shopping on Amazon. So there may be far less reason for Prime customers to turn to Google when they're in the mood to shop than non-Prime shoppers.

The question for Google, of course, is whether injecting itself into perhaps one of the toughest parts of online retail is a worthwhile venture, even if Amazon Prime is causing product search losses. Without knowing the details of how 'Google Prime' is going to be structured, it's hard to say.

Online retailers have even bigger questions to answer. Will Google be a reliable partner? Could Google Prime discourage customer loyalty and thus be self-defeating? Whose brand will get hurt the most if Google's shipping algorithm makes a mistake -- Google or the retailer?

Savvy retailers would be wise to think long and hard about these questions before they decide to get involved in Google's fight against Amazon.

Patricio Robles

Published 2 December, 2011 by Patricio Robles

Patricio Robles is a tech reporter at Econsultancy. Follow him on Twitter.

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