Shopping could be a whole lot easier if the Internet knew whether the stuff you were looking for was available at stores nearby.

Milo.com, a startup in Palo Alto, Calif., has been working for two years on setting up a database that knows not only what products are in stores near you–but also whether they’re in stock. Need a new pencil sharpener in downtown San Francisco? Milo says there’s one available for $1.99 at the Office Max on 3rd Street.

But the company (whose mascot is its founder’s dog Milo, shown here) got some big competition on Thursday, when Google officially launched a mobile version of its Product Search feature, including information about local inventory. If a product is in stock nearby, the listing shows up with a blue dot next to it.

Yet Google’s announcement highlights just how difficult it is to create a reliable database of things in the real world. The search giant launched its service with inventory data from just five retail outlets — Best Buy, Sears, Williams-Sonoma, Pottery Barn, and West Elm (the last three of which are all owned by Williams-Sonoma). They’ll undoubtedly expand that list, and are taking volunteers from businesses that want to join in the program.

In an interview, Milo’s CEO Jack Abraham didn’t seem too worried about Google’s arrival in his business. “We are, to be honest, surprised that they are launching it with so few retailers,” he said. “That really does underscore just how difficult it is to get this data.”

Milo has signed up 49 retail chains, covering 48,000 stores and 2 million products. Beyond brands like Best Buy and Sears, which have open systems that let any outside programmers tap into their inventory database, they’ve managed to sign up some big names, including Target, Nordstrom, Macy’s and J.C. Penny.

There’s a lot of technological complexity around inventory data, Abraham said, that Milo has solved those problems by developing custom software to plug into each retailer’s own unique inventory system. “We take the raw data in whatever form it comes,” said Abraham. Milo doesn’t have exclusivity from the retailers it taps — but it also wrote the software that helped bring their inventory online.

Over the next year, Abraham says Milo is going to focus on adding 5,000 to 10,000 small businesses into its database. They may actually be easier to integrate than the big retailers, he said, because they’re less likely to have customized systems.

The next big challenge has yet to be cracked by either Milo or Google: getting credit – and revenue — for sending customers into physical stores. Stay tuned, says Milo’s Abraham.

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