How Amazon.com Kills Wal-Mart and Target
The world's largest e-tailer is changing its strategy in a big way. CEO Jeff Bezos turned his coat on sales taxes last year, abandoning a long-running campaign to avoid paying taxes on most of its sales. Now, Amazon claims to support online sales taxes, as long as they're done in a consistent and easy-to-implement way. Amazon's ultra-efficient operations actually make equal taxes into another weapon in the company's arsenal, because other online shopkeepers will suffer more than Amazon when the taxman comes.
But there's another side to Amazon's suddenly tax-friendly philosophy. If you have to pay sales taxes anyway, no matter where your shipping centers happen to be located, then why not turn that challenge into weaponized plutonium as well?
That's exactly what Amazon is doing now. With several states already imposing sales taxes on online purchases and others due to follow suit, the company is busy building enormous shipping centers in places like New York, San Francisco, and Los Angeles -- massive population centers where Amazon formerly couldn't be bothered to run warehouses because of the tax implications.
And that's how Amazon is turning the retail industry on its head yet again. Financial Timesnotes that the newfound local access to large markets will let Amazon offer faster shipping than the competition -- all the way down to same-day delivery. Amazon has a history of offering service upgrades at very reasonable prices, like a year's worth of free shipping and streaming movies for just $79 a year. Another low-cost blow with same-day delivery would pretty much remove the last advantage physical retailers have over online stores, namely instant gratification.
"If someone needs a pack of nappies, a mobile-phone charger, or bottle of cough medicine this evening, the only way to get them immediately is to go to a local store such as Wal-Mart (NYS: WMT) , Best Buy (NYS: BBY) , or Target (NYS: TGT) ," the FT article says. "But if Amazon can deliver to work or home in three or four hours -- and at little or no shipping cost to the consumer -- then why bother with the store?"
Why bother, indeed? Many a shopper would happily give up car trips to the store in exchange for having online goods dropped on their doorstep just hours after the order's final click. It's like pizza delivery, except you could buy pretty much anything this way.
Best Buy is responding to increasing online competition by focusing on smaller stores with lower overhead costs, but it will still never match Amazon's fabled ultra-efficiency. Wal-Mart and Target may be reduced to mere grocery stores and clothing retailers in the long run, which isn't enough to support today's enormous big-box warehouses. And Amazon's same-day delivery could eventually replace the supermarket as well, once shoppers get used to the idea of buying milk and eggs online.
This is how Amazon will kill big-box chain stores the same way Wal-Mart and Target destroyed scores of mom-and-pop stores. Read our special free report titled The Real Cash Kings Changing the Face of Retail to learn more.
The article How Amazon.com Kills Wal-Mart and Target originally appeared on Fool.com.Fool contributorAnders Bylundholds no position in any of the companies mentioned. Check outAnders' holdings and bio, or follow him onTwitterandGoogle+. The Motley Fool owns shares of Amazon.com and Best Buy.Motley Fool newsletter serviceshave recommended buying shares of Amazon.com and creating a bull call spread position in Wal-Mart Stores. We Fools don't all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter servicesfree for 30 days. The Motley Fool has adisclosure policy.