backtop


Print 40 comment(s) - last by Proxicon.. on Jul 18 at 5:41 AM

Amazon is now collecting sales tax in some states in exchange for more distribution centers for same-day shipping options

Amazon is already a major threat to brick-and-mortar competitors with its low prices and easy online shopping method, but now, physical stores have another reason to fear the monster e-tailer: same-day shipping.

Amazon is currently working on same-day shipping methods for customers, which would send a package out only a few hours after the order is placed according to Slate. How is Amazon doing this? By opening more distribution centers, and putting a lot of money into these new centers to make them efficient. This is likely an expansion of Amazon's existing Local Express Shipping option which provides same-day delivery to a handful of large U.S. cities.  

Amazon's old way of conducting business was to set up distribution centers in low-cost states and ship the orders to wherever they needed to go. This worked because Amazon didn't have to collect taxes in states that it didn't have a physical presence in, and low-cost states didn't put too much financial strain on the e-tailer.

However, Amazon has been fighting that tax-related battle for awhile now. The online retailer cut ties with states like Texas, where Texas State Comptroller Susan Combs charged Amazon $269 million in unpaid sales taxes, and Illinois, where Sen. Dick Durbin (D-Ill.) introduced a bill called the Main Street Fairness Act, which would force Amazon to collect sales tax. In California, Governor Jerry Brown signed a bill that would require websites that forward shoppers to Amazon to collect sales tax in the state. The law is expected to generate $200 million in revenue, and prompted Amazon to threaten to leave California-based affiliates. It ended up filing lawsuits in many states like California, Rhode Island, North Carolina and Colorado.

But more recently, Amazon has been backing off on the tax front. It has agreed to collect sales tax in many states, including Texas, New Jersey, Nevada, Tennessee, Indiana and Virginia. Before that, the e-tailer only collected taxes in Kansas, Kentucky, North Dakota, New York and Washington.

Amazon has decided to bend on the tax issue because this would allow the company to open more distribution centers within those states. Having more distribution centers means even faster shipping, which is where the same-day shipping idea came from.

To make sure the same-day shipping method is a success, Amazon has poured a lot of money into making these new distribution centers. For instance, the e-tailer invested $130 million into new facilities in New Jersey, $135 million for two new centers in Virginia, $200 million for Texas distribution centers, $150 million in Indiana and another $150 million in Tennessee. But it's not finished yet -- Amazon plans to build as many as 10 distribution centers in California, totaling $500 million in expenses.

Amazon has also made these centers super efficient by purchasing picking robots, which accurately improve shipping times. It is also placing "lockers" at nearby drug stores and convenience stores, where those who live or work nearby can pick up their Amazon purchases from the locker if they wish.

Same-day shipping could really give brick-and-mortar stores (and even other online stores) a run for their money. Not only is Amazon convenient and cheap, but now it's also fast. The e-tailer keeps giving customers more reasons to shop from Amazon instead of competitors like Walmart and Best Buy. It's funny that brick-and-mortar stores complained that Amazon's lack of sales tax collection was unfair, and now that the online shop is collecting taxes, these other stores could still have the disadvantage -- and we'll likely be hearing about it.

In addition to being a major e-tailer, Amazon is becoming more of a tech giant as well with the release of its hit Kindle Fire tablet last November, and the upcoming release of its first smartphone and the next generation Kindle Fire.

Source: Slate



Comments     Threshold


This article is over a month old, voting and posting comments is disabled

RE: Kozmo v2?
By lightfoot on 7/12/2012 2:14:05 PM , Rating: 5
Shipping is shipping, and overnight (air freight) is already one of the most expensive shipping methods. By having local distribution centers they could actually be reducing shipping costs.

Amazon uses technology to beat it's rivals. It reduces cost, improves speed, and reduces errors. In fact I bet their "picking" robots are already more knowledgeable and have better people skills than most Best Buy employees (of course the same could also be said of your average parking meter.)


RE: Kozmo v2?
By StevoLincolnite on 7/12/2012 5:26:44 PM , Rating: 2
Actually air shipping can be cheaper than ground shipping, it all depends on weight and how bulky an item is from my own experience dealing with Australian ground and air freight.

Plus... Air is so much more convenient, I've ordered items from an online computer store at around 10am and then had it travel 3,000 kilometers and arrive on my doorstep at about 1pm that same day.


RE: Kozmo v2?
By lightfoot on 7/12/2012 5:41:19 PM , Rating: 2
I'm not saying that they aren't using air shipping. Only that they are pre-shipping the product in bulk and staging it locally to meet local demand. This should be no more expensive than air shipping the product individually, and may actually be significantly cheaper (assuming the savings offset the cost of local warehousing.)

The customer may still spend more for same day shipping, but it's only because the convenience is worth the extra cost.


RE: Kozmo v2?
By mindless1 on 7/13/2012 2:04:18 PM , Rating: 2
That is not possible. Even if the computer shop already had the item on the cargo plane and that plane parachuted it down to your door step, with typical travel speed of 800 KPH it would take more than 3 hours for the flight alone... and many cargo planes don't fly that fast.


RE: Kozmo v2?
By MrBlastman on 7/16/2012 12:47:52 PM , Rating: 2
quote:
Plus... Air is so much more convenient, I've ordered items from an online computer store at around 10am and then had it travel 3,000 kilometers and arrive on my doorstep at about 1pm that same day.


Something doesn't sound right there. Are you talking about 1 PM Aussie time versus some other far away 10 am in another timezone? It just isn't possible to ship something 3,000 kilometers in 3 hours with our level of technology without physically loading it into a cannon and firing it at your house (and it'd have to be a really amazing cannon at that)--more likely a missile.

I wouldn't want to be there to have to sign for it. ;)

I think what people are missing here is that it might be great that Amazon is going to do same-day shipping--and hopen warehouses in those states... doing so costs money. They will have to pay for more leased property (or buy it), more upkeep costs on those properties. Along with that comes employees to manage and service things (including the robots).

Then you have inventory costs. You're going to be stocking more inventory or at the minimum, a categorized standard set based off of Amazon's database of typical purchases for your surrounding zip codes. They'd have to do this at the minimum to prevent stagnant product collecting dust (which per squre foot costs them money every month if they don't keep recirculating the space). Not everything will be stored locally as it'd be far too expensive to do so.

The gap between Amazon and B&M will continue to narrow due to the increased convenience.


"I f***ing cannot play Halo 2 multiplayer. I cannot do it." -- Bungie Technical Lead Chris Butcher














botimage
Copyright 2014 DailyTech LLC. - RSS Feed | Advertise | About Us | Ethics | FAQ | Terms, Conditions & Privacy Information | Kristopher Kubicki