It was reported last week that Amazon may be gearing up to offer same-day shipping to a large portion of the US population. They plan on doing this by building state of the art fulfillment centers in strategic locations.
Most of the articles I’ve read on the topic lead into the story by the highlighting the fact that Amazon has recently dropped their opposition to an “online sales tax”. As it currently stands, most states only require a business to collect sales tax if they have a physical presence in the state.
Online retailers generally like this arrangement, because (1) it saves customers money, encouraging them to buy online; and (2) it’s less of an administrative burden.
You’d think that as the world’s largest online retailer, Amazon would continue to put up a strong fight against the issue, right? Well, this is where same-day shipping comes in. The presumption is that an online sales tax will become a reality one day…it’s just a matter of time. So, Amazon figures that if it will happen eventually anyway, they might as well begin building warehouses throughout the country. In turn, Amazon believes these warehouses will provide them with the capability of offering same day shipping to much of the US population. Of course, these warehouses will create lots of jobs, so it’s likely that states will also be offering Amazon plenty of valuable incentives to have the facilities built in their state.
So, what does this mean for you?
Consumers: This depends on the type of consumer you are. This isn’t necessarily a good thing if your purchasing decisions are based primarily on price. If an online sales tax becomes a reality, the cost of goods will likely go up for consumers as they will be the ones absorbing this cost. While Amazon’s shipping times should be reduced, I must admit that I’ve been pretty pleased with their speed in the past…it’s not often that I’ve really needed something that couldn’t wait a day or two. All your online transactions will begin to cost you more. Period.
Online Retailers: I think it’s clear that this is bad news for most online retailers. Our customers would be paying a sales tax on all orders, thus making the cost of our good more expensive relative to local retailers. Plus, there’s no way that someone like me would be able to offer the same day, or even next day, shipping at a reasonable cost.
Local Retailers: This will be the interesting one to watch. Yes, a local retailer’s prices should look relatively better since the cost of ordering something online will go up, but they will also lose the advantage associated with customers being able to get an item immediately. What will customers value more?
I really don’t like how Amazon is changing the competitive landscape for retailers, but I’m at least glad that I can benefit from their competitive advantage by being a Marketplace seller. If I had to predict what my business would look like in five years, I’d probably say that Amazon will represent a larger percentage of my revenue than it does today.
You know the old saying…”If you can’t beat’em, join’em“.
What are your thoughts?
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