For years, Amazon has fought to avoid collecting sales tax in the United States in order to keep its prices low. But now it’s given up on that battle and is set to launch a same-day delivery service that could destroy American retail shops.
Farhad Manjoo has put together a wonderfully insightful essay over at Slate, which explores the impact Amazon’s new strategy will have on the retail industry. To give some perspective, Amazon’s decision to accept sales tax in the US as inevitable means it can change its play. To avoid sales tax in the past, it had a handful of large distribution centres. Now it’s set to charge sales tax, it can legally set up smaller distribution centres in any state. In theory, that means it’ll be able to ship products on the same day as the order is received. As Manjoo points out, that would be incredibly disruptive:
It’s hard to overstate how thoroughly this move will shake up the retail industry. Same-day delivery has long been the holy grail of Internet retailers, something that dozens of startups have tried and failed to accomplish. (Remember Kozmo.com?) But Amazon is investing billions to make next-day delivery standard, and same-day delivery an option for lots of customers. If it can pull that off, the company will permanently alter how we shop. To put it more bluntly: Physical retailers will be hosed.
Whether Amazon can pull it off, of course, remains to be seen. You should read the Slate feature to gauge the situation for yourself — but it seems reasonably likely. After all, as Manjoo points out, if it can ship items cross-country overnight, so it sure as hell should be able to get them across one state in a day. At that point, you can kiss local businesses goodbye. [Slate]