Will Amazon's shipping change retail?

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Facebook acquisition makes big splash
Facebook acquisition makes big splash

Amazon appears to have ended its 18-year battle with states over collecting taxes on consumer purchases—a move that is speculated to be part of a shift in Amazon's operations. On July 10 The Financial Times reported that Amazon is expanding its nationwide network of warehouses as part of a plan to enable same-day delivery of products to customers. This is an exciting possibility for consumers, but a daunting one for retailers, who experts agree will face significant pressure if Amazon succeeds.

James Temple, San Francisco Chronicle

For the past dozen years I've been an unapologetic Amazon fanboy. But one thing that brick-and-mortar retailers still had going for them, one reason I still walked into stores with doors, was the fact that I am incredibly impatient. When I really want something, I want it in my hands now, not shipped to me in three to five business days. If Amazon can close that gap, it removes one of the last drawbacks for a gigantic corporation that already enjoys plenty of advantages. Amazon's rumored move certainly puts new pressure on physical stores and online rivals. To what degree…depends on whom you ask.

Farhad Manjoo, Slate

Amazon's new goal is to get stuff to you immediately—as soon as a few hours after you hit “buy.” 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. Can Amazon pull it off? Getting something shipped to your house offers gratification that's even more instant: Order something in the morning and get it later in the day, without doing anything else. Why would you ever shop anywhere else?

Brian Barrett, Gizmodo

Same-day delivery is already feasible in most of its major markets. But nationwide? Not so much, according to [Amazon CFO Tom] Szkutak: “In terms of same-day, we don't see a way to do that on a broad scale economically.” There was no hint of a lingering “yet” at the end of that sentence. That's not to say that Amazon's not going to continue investing great gobs of money in its delivery infrastructure, or that you won't see delivery times continue to improve. But the fact is, there's just too much ground to cover to make even state-wide orders happen at the snap of a finger, not now and maybe not ever. And you know what? That's fine. It gives local retailers at least some reason to keep existing, and  having to wait a day or two (for Prime members) or five (for not) can't even be  considered an ironic hardship.

Heather Kelly, CNN.com

The company is taking a gamble on speed and convenience being more important to its consumers than the lack of sales tax. In a Citigroup survey earlier this year, 52% of Amazon shoppers currently not paying sales tax said they would be less likely to buy goods on the site if they had to pay that additional amount. Why would the company want to give up its price advantage? The Financial Times thinks it's so it can start making same-day deliveries. It's unclear how the logistics of a same-day business model would work. Amazon has already been using local courier services capable of same-day delivery. Given how much work Amazon regularly throws their way, FedEx and UPS could work with the company on new shipping options. …But Amazon's new plans mean the company will begin collecting sales tax.

OUR VIEW:

Amazon has long been the destination for consumers willing to sacrifice instant  gratification for an unbeatable price. If Amazon can manage to add same-day delivery to its offerings, it will obviously bring some trouble to brick-and-mortar retailers. The key word here, though, is if. As of this writing, Amazon has not verified the rumor that it will begin incorporating such an option, and there's no guarantee that Amazon could pull off such a complicated move. In the worst case scenario for brick-and-mortar retailers, Amazon successfully launches a same-day initiative for select products—but that doesn't mean the apocalypse for store-run businesses, it just means a challenge, and an opportunity to beef up bargains and enhance customer service.

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