Amazon to Offer Same-Day Delivery, Could Pummel Brick-and-Mortar Retailers
July 12, 2012 12:33 PM
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
. 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,
, 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
next generation Kindle Fire
"So, I think the same thing of the music industry. They can't say that they're losing money, you know what I'm saying. They just probably don't have the same surplus that they had." -- Wu-Tang Clan founder RZA
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