Why Google had to kill a part of its speedy delivery service to prepare for its next big expansion

Google wants to get serious about its Amazon Prime competitor, Express.

The speedy online delivery service plans to spread its coverage from roughly 20 states and regions to the entire country by the end of the year, general manager Brian Elliott tells Business Insider.

To make that possible, the group made the "hard decision" to kill part of its grocery business and stop selling perishables, like fresh fruit and vegetables, a pilot it started this February in parts of San Francisco and Los Angeles.

"We've been testing a lot of different things, figuring what works, and how it works," Elliott says. "And now we're really, dramatically scaling the business."

Nation-wide coverage and new partnerships

Google launched its Shopping Express delivery service back in 2013, in part to avert Amazon's encroach on its product search territory. More and more, people were beginning their searches for water bottles, flat screen TVs, banana slicers, you name it, on Amazon instead of Google, which threatened the search engine's ads business. Express was a way for Google to reinstate itself as the go-to choice for product searches and to make it easier for people to actually buy the goods they found.

In the three years since, though, it's had some struggles, including having to maketweaks to its delivery model and some executive turnover. The division lost its founding boss, Tom Fallows, to Uber in late 2014 and had several temporary execs until Elliott took over almost exactly a year ago. Now, he says, Shopping Express has finally figured out its business enough to start scaling up.

Instead of a one-size-fits-all-regions delivery style, Express will offer a combination of same-day, overnight, and two-day delivery options. Users can either pay a $4.99 minimum delivery fee for each store order, or a yearly $95 membership fee that eliminates the per-store fee. Shoppers can also test the service through a $10-a-month plan.

As of now, Express has signed on 50 total merchants, including Target, Walgreens, Petsmart, REI and, as of Tuesday, the home-goods shop Wayfair and 99 Ranch Market, an Asian grocery store.

It's also expanding nationwide service for two partners: Whole Foods and Costco. Even people who don't have Costco memberships will be able to shop there, albeit at prices that are a bit higher than what members would get.

Expanding the delivery blanket of those two stores is instrumental to Express's focus on groceries, even though shoppers won't be able to order anything that needs temperature controls.

"We made the hard decision to focus on dry good groceries and having that be national," Elliott says. "For now, we're not gonna sweat the milk, and eggs, and ice cream side of it."

That separates it from Amazon's grocery service, Prime Fresh, as well as other instant delivery startups like Instacart or Postmates, which can manage full, diverse orders.

Not delivering perishables makes delivery much easier, though. Google plans to partner with different third-party delivery services like OnTrac and Dynamex, so you'll be seeing fewer of its Google-branded delivery vans. Getting rid of its own fleet will help Google cut costs as it makes money by taking a small commission of total purchase prices.

"In a year from now, what we want is for this not only to be nationally present, but something that people see as a big part of their every day lives," Elliott says. "We want to go from 50 merchants to hundreds of merchants."

Not an "everything store"

If you look at Google Express and Amazon's shopping service, Prime, head-to-head, the appeals of the "The Everything Store" are apparent. Even if Express does hit hundreds of stores, Amazon will still have far more products to choose from and an almost-identical yearly fee ($95 for Express vs $99 for Amazon) that will get shoppers a bunch of other perks, like free movies and music.

But Elliott advocates that people who like Google's service come looking for specific goods from specific stores. You don't want just any fleece jacket - you want that one from Target. He see Express as a way to buy from a bunch of retailers easily, in one place, not as a way to buy anything you want.

"We have this range of merchants that people really love, so they don't think about this as 'online shopping,'" Elliott says. "They just think of this as shopping. We want to bring a lot of the stores that people need to shop at on a regular basis into one easy-to-use service that makes it worthwhile."

Meanwhile, retailers hesitant to sell their good on Amazon see Google as more of an ally than a competitor since Express ensures them fast delivery while preserving much of their brand experience.

A future focused on what Google's good at

Since the beginning, Express was meant to make Google's product search ads more useful. But, even three years later, the connection between search ads and Express isn't really there.

Elliott, who worked on Google Shopping and its Buy Button before coming to Express, says that now that the infrastructure is in place, that's about to change.

"Because [Express] hasn't had a national presence, it's been hard to think about how to integrate this into other Google products and services," Elliott said. "But you can imagine that we'd want to do it so that when you searched for these products on Google, you'd actually find them in [Express]."

He also wants to find ways to help retailers give a heads up on their own websites that they offer their products through Express.

If Google rolls out a free way to feature Express merchants on product search pages, more retailers will likely want to be included. Though whether people will actually use Express as it spreads its availability through the US remains to be seen. Analysts estimate that Amazon has up to 69 million Prime subscribers. Elliott declined to comment on Express's revenue numbers, users, or its budget (the latter of which Recode reported as $500 million per year in 2014).

"It's a very small initiative and opportunity for Google relative to what they primarily do - selling advertising," says Pivotal Research analyst Brian Wieser. "I would argue that, in general, Google would benefit from prioritizing its focus on endeavors that directly relate to advertising or otherwise reinforce its position in the space. However, it's also entirely unlikely that will happen."

Here's what Google's delivery list looks like now:

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