Amazon and Taxes - Shifting Consumer Behavior

Big news is hitting thanks to Ohio State University.  States where Amazon.com has begun charging for tax are seeing a significant decrease in buying on the Amazon.com website.

http://www.internetretailer.com/2014/04/22/how-amazon-losing-its-sales-tax-advantage

Here is a snippet from that piece:

The total amount spent with Amazon, No. 1 in the 2014 Top 500 Guide, in those states decreased by 2.8%, says the report, “The ‘Amazon Tax’: Empirical Evidence from Amazon and Main Street Retailers.” Those five states enacted online sales taxes in 2012 and 2013.

This has been an interesting one to follow.  Amazon.com has not been the real cost leader (low cost) for some time now but the perception has remained in place they are.  The implementation of sales tax charges has appeared to damage that perception and impacted behavior.

I've experienced this personally in Massachusetts.  That quick buy of the latest Blu-Ray is now less likely to happen through Amazon.com and I'm increasingly looking at local brick & mortar retailers to fill these needs.  Why not go back to the days where I'd combine a couple errands with a stop at a local Target, or whatever, to pick up that movie I wanted?

In response Amazon.com appears to be moving to a convenience model rather than a low cost model.  Their increasing investment in Distribution Centers (DCs) and shipping capability (trucks) has increased their ability to deliver on a next-day basis or even same day.  Their business model is evolving and consumer behavior is shifting, yet again.

Happy Reading,

J.W. Gant