Setting aside their thriving
Cloud Computing business, Amazon primarily sells consumer goods and
digital entertainment (E-Books, Songs, Movies, TV Shows, and Android
Amazon has created a strong incentive to purchase digital contents through their store. They offer hardware dedicated for e-books (the Kindle line) as well as a 7" Android tablet for apps, music, e-books, and video. However, they do not lock you into their platform. You can read an Amazon e-book on Android devices, iOS devices, and your computer. You can stream Amazon shows and movies to various set-top boxes. Compared to Apple or Google's online offering, they have the most complete and consumable content available, usually for the lowest price.
For physical goods, they have created a similar draw. Their Amazon Prime program is a genius approach to lock in customers. For $79 a year, your entire household can have everything they order from Amazon* delivered 2nd day, FOR FREE. Couple this with the lack of Sales Tax, ordering something from Amazon is almost always cheaper, and usually more convenient than going to a retail store. If you are really in a hurry, you can pay $3.99 per item to have it delivered overnight.
This eliminates most comparison shopping by Amazon Prime customers. If you've paid the $79, and are ordering it online, you will almost always start with Amazon, and usually will not spent time and effort comparison shopping.
* As long as Amazon fulfills the order. When another store uses Amazon as a retail front but handles their own order processing, the Prime shipping is not available.
Amazon has been very careful
about where it establishes a physical presence. It does this to avoid
having to collect state and local sales taxes in most states. It has
engaged in very public fights with states when they attempt to force
Amazon to collect sales tax. This has primarily manifested itself in
battles over its affiliate programs, with Amazon discontinuing the
programs in any states that pass laws that cause affiliates to be
considered a physical presence in the state.
However, the writing is on the wall. Amazon will end up collecting sales taxes in most states. As this Fortune article states, Amazon already collects taxes in 5 states, and has agreed to add 8 more starting this year, through 2016. It is obvious at this point that they will eventually have to collect taxes in nearly every state.
The incentive to avoid a physical presences in states is disappearing, and I expect within 5 years will be gone completely. That opens up a host of new opportunities for Amazon.
In a future where physical location is irrelevant, Amazon is free to
open up Stores, Warehouses, and Distribution Centers anywhere they like.
But as I write this, I see I've already been preempted. In fact, instead of describing what these will be, Slate has an article talking about same day delivery. Go read the article at Slate. (thanks DaringFireball).
In short, Amazon is building a massive and advanced distribution center. They will put these in all major metropolitan areas, and will be able to fulfill orders same day.
I'm curious to see whether they maintain their shipper relationships (UPS), buy one, or build their own local courier/delivery service. But we will see a day within 5 years where you order an item on Amazon and it is delivered to your home the same day in a number of major cities.
I also expect that Amazon will open up retail centers. As they drive all the big-box stores out of business, there will be plenty of retail locations for them to snap up cheaply. The centers will be show rooms for their massive online catalog, with convenient in person support and return. I envision a modern day Service Merchandise style store.
For those folks concerned about big ticket purchases online, they can walk into the Amazon showroom, pick out a TV or other item, and have it delivered to their home that afternoon.
If Amazon can pull this off, they will be THE major retailer, online or otherwise.