The problem is that states aren't seeing the sales tax revenue from out of state purchases and have become increasingly insistent that they receive said revenue. They've tried collecting it on income taxes (who really files that anyway?) but it doesn't work.
Facing increased budget pressure, the states aren't likely to give up. More than likely, any competitor who isn't at least Amazon-sized (and let's be serious, other than maybe Walmart, who is?) is going to get leaned on hard by the state's legal department if the competitor doesn't roll over on the Amazon tax.
I don't foresee any competition taking over Amazon's market share over a 6.5% sales tax.
> The problem is that states aren't seeing the sales tax revenue from out of state purchases and have become increasingly insistent that they receive said revenue.
That's not a problem: It's a use-case covered explicitly by the US constitution. The real problem is that the states have been slow to change and adapt to a world where interstate commerce is edging out intrastate commerce. Trying to overrule the constitution is just waiting for someone with deep pockets to make a federal case out of it.
Already amazon is losing biz on electronics to the folks that aren't collecting.
Trying to overrule the constitution is just waiting for someone with deep pockets to make a federal case out of it.
Already happened, in the famous Quill case. Consequently, is permissible to impose a sales tax on out-of-state retailers if they have a "substantial nexus" with the taxing state.
Colorado passed a law that tried to require internet retailers to provide the state with a summary of purchases made by CO residents so that those residents would be required to paid sales tax.
The law was stricken down and again on appeal as a violation of the Commerce clause of the U.S. Constitution.
If this trend continues, ultimately all 50 states will be collecting sales tax from Amazon. In that case, what is amazon's edge going forward, especially if the retails stores can come close on price while offering immediate gratification?
a) The warehouses are in lower cost areas as compared to showrooms.
b) Warehouses allow amazon to serve the profitable long tail of products because they are not limited to shelf space.
c) If they start offering same day service, the advantage of immediate purchase from retail stores will me largely mitigated.
d) I largely dont want to shop in a store anymore because amazon has the discovery problem solved to a much better extent than stores do. I feel very helpless now when I am in a retail store and struggle to answer the question - 'which one of these products is any good'. Retailers could maybe counter that with shopping companion applications but I dont know of any good ones.
It's not just same-day service that's compelling, it's same-day service with delivery.
If I can order something from my desk at work in the AM and have it in-hand before I drive home, that blows away any brick-and-mortar store by a long shot.
Assuming retail stores that have to pay for more expensive real estate and employees can compete on price, I think there's actually more to price for reasons to shop at Amazon.
First, a retail store is not really immediate gratification -- I have got get to the retail store. Often times I would rather wait a day or two (and soon it may not even be that much with Amazon), than spend an hour of my time trying to get to and from the store. I also often want to read reviews of what I buy, and Amazon often has the most reviews for any particular product. Trying to lookup reviews, or comparison shop while in a retail store is difficult at best (sometimes not even possible if there is no reception). At least with Amazon if something seems like it may be highly priced, I can quickly search around for an alternative.
With Amazon, I also know the return process will be easy if I need to make a return, and I won't have the go back to the store and argue with a manager.
In other words, there's more to just price that gives Amazon an advantage.
"With Amazon, I also know the return process will be easy if I need to make a return, and I won't have the go back to the store and argue with a manager."
Costco is the same way, and they do it in-store ...
"I have got get to the retail store"
While true, oftentimes you are going there or in the general direction as part of a commute or for some other reason (like getting gas for your car)
The more I think about it, the more compelling a long-COST-short-AMZN trade sounds ...
Perhaps this is the difference in where we live. I live in New York. Never is anything more than an expensive small gourmet grocery store or a pharmacy possibly "on the way." Things also tend to be much more expensive than average here. Costco is out of the way and would probably require the rental of a car, or paying for a taxi. Returning something to Costco would be a big hassle compared with just leaving a UPS package for my doorman. Further, I don't have the apartment space necessary for Costco quantities. I prefer to buy smaller quantities (even at higher per unit prices) if it means that I don't fill up my small apartment with paper towel rolls.
I sold my car -- it wasn't worth spending $300+ on parking plus insurance and gas just in order to have to spend hours of my life to bulk shop and crowd my apartment. But, everyone has different priorities.
This post is about Connecticut, and Connecticut has five Costco's to cover the whole state. It's a small state, but that still ends up being a lot of people who are 20-30 miles from the nearest one (for me it's 17 miles). $4 of gas and 40 minutes of driving just to go shopping.
(And NEVER EVER short AMZN. It's a really good way to lose a lot of money.)
Immediate gratification is the ONLY advantage local chain stores have over Amazon for me. Every other aspect of shopping with them is inferior. With Amazon having to pay sales tax, they have no reason to NOT build local warehouses, and then the local box stores will have to learn to provide decent service or, more likely, go out of business.
I've been to Costco. It's a madhouse, and quite unnerving for an introvert like myself.
But that's not even the main reason I like Amazon -- it's for the product ratings. How do I know what I'm getting at Costco is the best quality for the price? I can get a very good idea of that at Amazon. Not to mention Costco can't even being to compete with the product selection at Amazon.
"It's a madhouse, and quite unnerving for an introvert like myself."
That is a fair point. On the flip side, I find phone or email or text-based customer service to be unnerving. I like talking to a real person face-to-face :) Part of why I like TD Bank (in the northeast, it's the only bank open on Sundays)
"How do I know what I'm getting at Costco is the best quality for the price? I can get a very good idea of that at Amazon. Not to mention Costco can't even being to compete with the product selection at Amazon."
There are two ways to look at product selection and product ratings.
Amazon gives you everything and the kitchen sick, and leaves the problem of quality to you (via the ratings scheme, but in order to have a rating someone else must have purchased it and thought it wasn't good). Every purchase carries, above the standard risk of product defect, the risk that the product may be terrible.
While Costco doesn't have the breadth of substitutes in any particular class of item, their selections are generally high quality. They separate the sheep from the goats for you, and while I've had some bad experiences with products from Amazon I haven't had a bad experience with costco stuff (even with their store brand "Kirkland").
So you have Amazon, which gives you depth of selection but requires you to do the due diligence and take the risk, and you have Costco, which gives you limited selection but doesn't offer the stuff that would get 1 or 2 stars on Amazon.
Not being able to compete with Amazon's product selection is a feature, not a bug. Amazon's answer to the question of "how do I know I'm getting something that is high quality at a good price?" is to give you a wide range of options and give you all the data to make an informed decision. Costco's answer is to give you only one or two choices after building up an underlying sense of trust that (a) their prices are fair (everything is priced at a flat percentage over cost, rather than varying profit margins based on the item), and that (b) the products they choose to sell are generally very high quality. There are a lot of groceries and household goods that I buy at Costco rather than anywhere else because Costco's house brand is better than luxury-brand competitors and costs half as much.
As someone who likes to fuss over every single purchasing decision and compare a dozen nearly-identical models of something before buying, I agree that Amazon's model is preferable. On the whole, I buy more things from Amazon than Costco. But that doesn't mean that Costco's model doesn't have merit for a lot of people.
I'm a regular shopper at Costco, and no, their customer service does not "blow away Amazon." At Amazon I can search for anything I want via any computer anywhere, including my phone, read the specs, customer reviews, compare it to competition, etc. I can see if its in inventory, and have it overnighted to me at work or home. If anything is wrong with it, Amazon has been excellent in taking care of that, usually without talking to a human at all.
But most important! I rarely have to use Amazon customer service, because they so rarely screw up.
> Amazon also promised to spend $50 million to build a facility at an unspecified site and create hundreds of jobs.
With their tax advantage disappearing, Farhad Manjoo's comment about Amazon's strategy to open same-day delivery centers in these settled states comes to mind.
I don't think Amazon's 'edge' is sales tax, I think it's a wide variety of goods, and me buying things on my couch.
Because of tax, time, and gas, it's more expensive to drive to a store 20 minutes away, get 'hassled' by employees, and purchase something (with sales tax) than it is for me to roll out of bed, type in 'Amazon', find the thing I want, add it to my cart, login with my password, and buy it. I get to track it too, like a predatory animal waiting for my prey to arrive in the mail.
Amazon has hit a convenience point that no one else can touch. They bought 'Small Parts', now I can do almost all my Home Depot shopping on Amazon too (although my purchases at Home Depot are almost always ones that can't wait for shipping).
The tax will be a small bump in the road that people try to make a huge deal out of, but it's the convenience they'll follow.
Very true. And it's even worse to drive to a store 20 minutes away and not find what you're looking for (either the store doesn't carry it, or it's out of stock, or nobody can tell you what aisle it's in). My usage of Amazon didn't decrease at all when they started charging sales tax in my state.
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[ 2.5 ms ] story [ 92.4 ms ] threadFacing increased budget pressure, the states aren't likely to give up. More than likely, any competitor who isn't at least Amazon-sized (and let's be serious, other than maybe Walmart, who is?) is going to get leaned on hard by the state's legal department if the competitor doesn't roll over on the Amazon tax.
I don't foresee any competition taking over Amazon's market share over a 6.5% sales tax.
That's not a problem: It's a use-case covered explicitly by the US constitution. The real problem is that the states have been slow to change and adapt to a world where interstate commerce is edging out intrastate commerce. Trying to overrule the constitution is just waiting for someone with deep pockets to make a federal case out of it.
Already amazon is losing biz on electronics to the folks that aren't collecting.
Already happened, in the famous Quill case. Consequently, is permissible to impose a sales tax on out-of-state retailers if they have a "substantial nexus" with the taxing state.
The law was stricken down and again on appeal as a violation of the Commerce clause of the U.S. Constitution.
b) Warehouses allow amazon to serve the profitable long tail of products because they are not limited to shelf space.
c) If they start offering same day service, the advantage of immediate purchase from retail stores will me largely mitigated.
d) I largely dont want to shop in a store anymore because amazon has the discovery problem solved to a much better extent than stores do. I feel very helpless now when I am in a retail store and struggle to answer the question - 'which one of these products is any good'. Retailers could maybe counter that with shopping companion applications but I dont know of any good ones.
If I can order something from my desk at work in the AM and have it in-hand before I drive home, that blows away any brick-and-mortar store by a long shot.
First, a retail store is not really immediate gratification -- I have got get to the retail store. Often times I would rather wait a day or two (and soon it may not even be that much with Amazon), than spend an hour of my time trying to get to and from the store. I also often want to read reviews of what I buy, and Amazon often has the most reviews for any particular product. Trying to lookup reviews, or comparison shop while in a retail store is difficult at best (sometimes not even possible if there is no reception). At least with Amazon if something seems like it may be highly priced, I can quickly search around for an alternative.
With Amazon, I also know the return process will be easy if I need to make a return, and I won't have the go back to the store and argue with a manager.
In other words, there's more to just price that gives Amazon an advantage.
Costco is the same way, and they do it in-store ...
"I have got get to the retail store"
While true, oftentimes you are going there or in the general direction as part of a commute or for some other reason (like getting gas for your car)
The more I think about it, the more compelling a long-COST-short-AMZN trade sounds ...
Depending on where you live, parking can be cheap (I'm paying 450/mo at union square and 300/mo at central park south)
(And NEVER EVER short AMZN. It's a really good way to lose a lot of money.)
Have you been to Costco? I daresay their customer service blows away amazon
But that's not even the main reason I like Amazon -- it's for the product ratings. How do I know what I'm getting at Costco is the best quality for the price? I can get a very good idea of that at Amazon. Not to mention Costco can't even being to compete with the product selection at Amazon.
That is a fair point. On the flip side, I find phone or email or text-based customer service to be unnerving. I like talking to a real person face-to-face :) Part of why I like TD Bank (in the northeast, it's the only bank open on Sundays)
"How do I know what I'm getting at Costco is the best quality for the price? I can get a very good idea of that at Amazon. Not to mention Costco can't even being to compete with the product selection at Amazon."
There are two ways to look at product selection and product ratings.
Amazon gives you everything and the kitchen sick, and leaves the problem of quality to you (via the ratings scheme, but in order to have a rating someone else must have purchased it and thought it wasn't good). Every purchase carries, above the standard risk of product defect, the risk that the product may be terrible.
While Costco doesn't have the breadth of substitutes in any particular class of item, their selections are generally high quality. They separate the sheep from the goats for you, and while I've had some bad experiences with products from Amazon I haven't had a bad experience with costco stuff (even with their store brand "Kirkland").
So you have Amazon, which gives you depth of selection but requires you to do the due diligence and take the risk, and you have Costco, which gives you limited selection but doesn't offer the stuff that would get 1 or 2 stars on Amazon.
As someone who likes to fuss over every single purchasing decision and compare a dozen nearly-identical models of something before buying, I agree that Amazon's model is preferable. On the whole, I buy more things from Amazon than Costco. But that doesn't mean that Costco's model doesn't have merit for a lot of people.
But most important! I rarely have to use Amazon customer service, because they so rarely screw up.
Not needing to travel to a store to buy items that I could wait 1-2 days for delivery on.
With their tax advantage disappearing, Farhad Manjoo's comment about Amazon's strategy to open same-day delivery centers in these settled states comes to mind.
http://www.slate.com/articles/business/small_business/2012/0...
Because of tax, time, and gas, it's more expensive to drive to a store 20 minutes away, get 'hassled' by employees, and purchase something (with sales tax) than it is for me to roll out of bed, type in 'Amazon', find the thing I want, add it to my cart, login with my password, and buy it. I get to track it too, like a predatory animal waiting for my prey to arrive in the mail.
Amazon has hit a convenience point that no one else can touch. They bought 'Small Parts', now I can do almost all my Home Depot shopping on Amazon too (although my purchases at Home Depot are almost always ones that can't wait for shipping).
The tax will be a small bump in the road that people try to make a huge deal out of, but it's the convenience they'll follow.