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Friday, July 27, 2012

Is Amazon Working on Same-Day Delivery?

Bricks-and-mortar retailers have battled long and hard over the sales-tax advantage that online vendors have, particularly Amazon. Customers are supposed to pay sales tax on all purchased items, but few actually do, providing a significant price advantage for online services.

Merchants say if Amazon had to pay local sales taxes like they do, consumers would see online prices more on par with their own physical-store prices. Amazon appears to now agree as it is dropping its tooth-and-nail fight against every sales tax initiative in favor of negotiating agreements to build warehouses in large metropolitan areas.

It’s a change in strategy that could help Amazon accomplish what some believe is its new goal: providing same-day delivery for many of the products it sells. That may be a necessary change considering a Citigroup survey found 52% of Amazon shoppers would be less likely to buy goods on the site if they had to pay sales tax.

Whatever the reason, Amazon is putting a lot of money behind the project. The company will reportedly spend more that $1.2 billion on distribution facilities in California, Indiana, New Jersey, Tennessee, Texas, and Virginia, with $500 million for as many as 10 locations in California alone. That should be enough centers to provide next-day service for nearly all of the continental United States.

Along with new facilities, Amazon has been working on ways to improve shipping times at the facilities it already has. It acquired Kiva Systems, which developed a robotic warehouse system, and set up automated lockers in drugstores and convenience stores in Seattle, New York, and the United Kingdom. It also works with local couriers capable of same-day delivery when the product is available that quickly.

“Amazon is investing billions to make next-day delivery standard, and same-day delivery an option for a lot of customers,” technology writer Farhad Manjoo said in this Slate article. “If it can pull that off, the company will permanently alter who we shop. To put it more bluntly: Physical retailers will be hosed.”

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