Rumor Mill: Amazon Exploring Same-Day Delivery
The Financial Times reported last week that the reason Amazon is setting up scores of distribution centers across the U.S. is so it can soon start making same-day deliveries.
Amazon hasn’t discussed same-store delivery and told the San Francisco Chronicle it doesn’t comment on "rumors and speculation."
The possible move would amount to a major shift for the online giant that has long sought to plant its massive distribution centers in tax-friendly states to avoid paying sales tax. Indeed, it may be prompted by several states passing laws closing the tax-free loophole in recent years. Amazon has also surprised many by reaching agreements with several states and some now see this as part of its warehouse proliferation goal.
Amazon has already been touting a same-day delivery option in select cities using local couriers.
The potential of widespread, reasonably-priced, same-day delivery sparked a debate on whether Amazon is better off with the price-advantage it has long maintained through its tax status or being able to be provide quicker delivery and convenience to customers.
Retail consultant Helen Bulwik told the Chronicle that she believes such a strategy from Amazon would represent a more significant threat to other online competitors than to brick and mortar. She adds, "People still want to shop, they still want to go into a store, and they will continue to do that."
She also said customers generally don’t mind waiting for online purchases as much as initially thought, with average e-commerce delivery times actually increasing over the past few years.
On the other hand, a CNN article points to a Citigroup survey earlier this year. Fifty-two percent of Amazon shoppers surveyed, 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.
Still, others see Amazon’s ability to accomplish same-day delivery as a game-changer. Colin Sebastian, analyst with Baird Equity Research, told the Chronicle, "Once they have the facility in your backyard and trucks operating in your area, they become more competitive."
In a column on Slate.com, Farhad Manjoo proclaimed such a move would "destroy local retail." While brick-and-mortar has counted on instant gratification to lure customers, same-day delivery from Amazon "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 shop anywhere else?"
- Amazon Finds Benefit to Sales Tax payment – Financial Times (sub. required)
- Amazon same-day delivery rumored – San Francisco Chronicle
- Amazon to focus on same-day delivery? – CNN
- I Want It Today – Slate.com
Discussion Questions: How big an advantage would Amazon gain from same-day delivery? Do you think speedy delivery and convenience will offset the deterrent of paying sales tax?