By Colin Barker
Monday, March 20 2006 12:12 PM
URL: http://www.zdnetasia.com/news/internet/0,39044908,39344755,00.htm

Google is hoping to take on the huge task of moving a significant portion of the European retail sector online.

The company is extending Google Base, its system for advertising and selling goods and services, into a full retail operation, it revealed this week.

Some industry analysts are sceptical about Google’s prospects and have dismissed Google Base as "just advertising". Another analyst believes that Google Base’s true worth goes beyond just retail and that its "rounded, more complete, approach" will make life tough for companies like Amazon.com and eBay.

Nikesh Arora, head of Google's European arm, told the Financial Times last week that Google wanted companies in retail and related sectors such as real estate to submit details of their goods and prices. Google would index them and package the information into a search engine.

"Google Base is going to have a huge impact on retailers," said Arora, adding that the move reflected internal research which found that many leading European retailers did not feel they were competitive enough online.

While Amazon.com is often cited as the success story of online retailing many believe it is difficult to duplicate its success in other markets. Distribution is typically cited as a key issue.

Online works best with higher-priced low bulk (and low weight) products which are cheaper to ship. Deregulation of postal services in the UK promises to ease that problem by lowering prices--a move which will encourage Google.

It's unclear how retailers and manufacturing companies will respond to Google’s initiative. Smaller manufacturers in sectors like food, household and consumer goods may welcome the move. Across Europe, and especially in the United Kingdom, supermarkets have begun to dominate supply across many sectors, not just food, and smaller suppliers and manufacturers can find it difficult to squeeze into markets. An alternative gateway though a well known brand retailer is likely to be welcomed.

A lot may depend on Google’s ability to build a major distribution operation. Even the largest chains, Sainsbury’s being one example, struggled early on to be successful at online retail in a market built on high volumes and wafer-thin margins.

Gartner analyst Allan Weiner doubts that Google is planning to become a major distributor of retail goods.

"Are Google going into the distribution business? I don’t think so," he told ZDNet UK.

"Google has taken a very clever approach. Their approach to Google Base is consistent with what they are doing with search--to build in as much value as possible," said Weiner.

"It’s not just a retail offering. It is a platform on which others can build. It is a different approach from eBay and it far more organic. Google excels at offering end-to-end solutions, so I think it should do well," Weiner added.

If Weiner sees a question mark hanging over Google Base it is not in distribution but in payments. "Google is relying on a payment system that is part of the overall Google product line. To turn that into a very large payment system could be the issue," he suggested.