• by Thom Forbes  @tforbes, December 2, 2011

Google is testing a service that would compete with Amazon.com by allowing consumers to order goods from local stores and the branches of national retailers (Macy’s, Gap and Office Max, for example) and have them delivered to homes and offices by the next day. The Wall Street Journal’s Amir Efrati and Stu Woo broke the story yesterday. Both Google and Amazon refused to comment on the report.

“Google doesn't plan to sell items directly to consumers,” Efrati and Woo were told by a person familiar with the matter. “Instead, it will meld its search engine's product-search feature, which directs shoppers to participating retail websites, with a new quick-shipping service that Google will oversee.”

The service “would escalate Google's budding rivalry with Amazon, which has been riding the success of its $79-a-year Amazon Prime program,” the story reports. In a sidebar blog, Efrati lays out the intrigued-filled details of the two online behemoths frenemy relationship over the years.

Amazon has been one of the largest purchasers of Google AdWords since its inception in 2002 -– so much so that it devised a system of having individual employees open accounts to bid on keywords, working around the limits Google had placed on the number of search terms any one company could have in its inventory. Google caught on, though, and worked out a deal.

Amazon CEO Jeff Bezos told his employees to not share the results its ads got with Google employees, Efrati reports, fearing competition down the line. Over the years, he has also fretted about Froogle, the price-comparison service, and Google’s AdSense, which provides ads to websites for a cut of the action. Google, in turn, was worried about Amazon’s A9 search engine, which has never quite taken off.

Claire Cain Miller and Nick Bilton report in the New York Times that the new service would be “part of a bigger, strategic effort by Google to move beyond its core search business by helping people buy things, not just find them.”

Smartphone browsing and purchases using Google Wallet would be part of the strategy, they report, as well as “Google Offers for daily deals, apps that show location-based mobile ads and product search for local stores.”

The service would start in a few cities, including New York and San Francisco, if Google deems the early testing successful, one source tells the Times.

ChannelAdvisor CEO Scot Wingo tellsInternet Retailing’s Thad Rueter that an e-commerce shipping service from Google would affect everyone in online retailing right down to the moms and pops.

“Large retailers will need to figure out if partnering with Google is more or less evil than going it alone, partnering with Amazon or both,” he says. “Small retailers will most likely be the big winners here since this could level the playing field by having some sort of Prime offering put together for them, which is essentially funded by Google Ad Words.”

Noting Google’s strengths in data processing and analysis, Mercent Corp. CEO Eric Best believes it will “focus on becoming an arbiter of shopping intent and transactions, bringing shoppers, merchants, and carriers together, rather than building physical infrastructure or distribution.”

Despite Google’s extensive successes, not everyone views the plan as a slam-dunk.

“This looks like a text book example of Google leveraging its massive search dominance to shoehorn itself into other businesses — and tweak a competitive rival,” writes Dashiell Bennett on The Atlantic Wire, “but as Matt Rosoff at Business Insider points out, that's traditionally how Google gets itself into trouble. By trying to be all things to all people, it wastes time, energy and money on forgettable products, while simultaneously distracting itself from its core business.”

One thing is clear. The consumer inside us all is salivating.

“In the end, if Google can help me get my new microSD card a few days quicker, that's a few days sooner I'll be able to download more MP3s from Amazon on to my Android phone,” blogs Eric Mack on CNet. “Man, keeping score between these two is giving me a headache.”

Not that this kind of headache is a bad thing.