Can Local Retail Survive the Behemoth that is Amazon?
After years of fighting against being compelled to collect local and state sales tax in the USA using a Federal Court ruling of 1992 that exempted retailers from sales tax in states where they do not have a physical presence, Amazon now appears to have rolled over and accepted the inevitable.
Under the ruling Amazon tended to be between 6 - 9 percent cheaper than local retail rivals, just because it didn’t have to collect state sales tax. Years of lobbying by main street rivals, however, meant that there was more and more pressure being applied, culminating late last year when the State of Texas presented Amazon with an unpaid tax bill of $269 million. Amazon responded by closing its distribution depot in Dallas, with the loss of many jobs.
The online behemoth has focused on having huge depots in low cost states, shipping products into more populous areas with higher costs. Having said that, the company ended last year with 34 warehouses across the US. Now, however, in a move that has flatfooted its bricks and mortar opponents, Amazon has acquiesced to the demands of the lawmakers, and has agreed to start collecting state sales tax.
Does this mean Jeff Bezos has finally given into his detractors and gone soft on the lawmakers, as even his Wikipedia entry states that his inclination is, “to avoid collecting sales taxes on purchases made on its website”?
A new delivery model
The answer is a resounding NO! What it does mean is that the door is now open for Amazon to start building new distribution centers much closer to the main centers of population, with the aim of offering a ‘same day delivery service’ into these areas. This is a real ‘game changer’ for internet retailers, and Amazon is investing billions of dollars to make ‘next day delivery’ standard and ‘same day delivery’ a premium option for customers. If Amazon can pull this off, the company will permanently alter the way online shopping is viewed across the world. From a customer’s perspective if you can order your groceries online at lunchtime and have them delivered that evening when you are at home, what is there not to like?
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