Game Over?

For years Amazon has capitalized on a legal "loophole" that requires retailers to charge sales tax only if the retailer has a physical presence in the state.  With sales tax in most states ranging from 6-9%, a tax-free Amazon offers a significant value proposition to consumers especially on large ticket electronics.  Amazon's Big Box competitors have claimed that much of Amazon's success is mainly due to this tax loophole.  Amazon is well aware of this fact and last year filed for a referendum after California mandated the retailer charge sales tax.  Recently other states (New Jersey) have made similar moves, but Amazon has remained surprisingly quiet.

Barney Jopson, at FT.com, speculates that we are seeing a sea change in Amazon's strategy.  Amazon has recently spend hundreds of millions of dollars on warehouses outside of NYC and is planning on building a half dozen or so more around the US.  These new facilities represent a "physical presence" in each state thus requiring Amazon to collect sales tax, however they also allow Amazon to offer same day shipping to millions of customers.

Jonathan Johnson, president of Overstock and victim of redundant naming, says : “Amazon’s business model has changed from being a remote seller without a physical presence in most states to a company that – through distribution centers and delivery lockers and the things it’s doing to get close to customers – has a physical presence in lots of places.”


Also Amazon has purchased Kiva systems, the masterminds behind adorable robot technology:




Why get all dressed up to go to Walmart, when you can have books, food, and a quart of wolf urine delivered to the comfort of your own home?  With Borders closing last year, this has got to be a major concern for Barnes and Nobel (good luck focusing on in-store experience).  Simply put, Big Box retailers are potentially gonna get hosed.  The damage may extend to Columbia Business School as operations professors will be forced to throw out 28% of their lectures if Walmart's hub and spoke model fails.

What's next?  Well once "Same-Day Shipments" are complete, Amazon can work on its ultimate dream: "Yesterday Shipments".