Way back in the early nineties, pundits who really didn't know very much predicted that online shopping wouldn't really take off because "people wanted that human touch." Anyone saying that has obviously never shopped at the Duane Reade near my dormitory. The managers are generally unfriendly. The store layout seems to have been designed with ineffeciency kept constantly in line: big signs instruct customers to "FORM ONE LINE PER CHECKOUT AISLE," an instruction that customers ignore to a man because to do so would actually prevent other customers from getting to the aisles. And the sales assistants, despite not showing any interest in talking to you, indicate that you are privileged to bathe in their noble presence, and any extra second that you do so is obviously your extreme joy. Hurry, therefore, is not in their nature.

The Rite-Aid is no better, so as you might expect, I'm willing to expend a certain amount of effort in order to avoid getting household goods there. Oddly, Amazon Prime has now provided me a way.

I'm mystified by how Amazon Prime is supposed to make money for Amazon.com. For a flat fee of $80, I get free two-day shipping on everything sold by Amazon (though not their marketplace sellers or other company stores within Amazon, like Target or Toys 'R Us). This doesn't sound like much until you realize what a broad range of products Amazon sells these days.

For instance, in the last 48 hours, I've purchased most of the household goods that I normally buy at Duane Reade: shampoo, bath products, chapstick, deodorant, batteries, facial tissues, etc. (Note: buying or looking at condoms causes the "Your Recommended Products" section to become more interesting than you may desire.) Looking over old Duane Reade receipts, the prices aren't that far off: a reasonable amount of bargain shopping shows that most of my purchases have a pre-tax price within +/-10% of bricks-and-mortar stores, better if something's on sale. (This is probably less true if you don't live in a high cost big city.) Items that I never would have ordered online because of the shipping (Q-tips, for instance) are now available to me, and I can buy items in bulk or in sizes not available at my local store.

It's a strange new experience, and if it works for Amazon, it looks to completely change the way I shop. I would have saved money in shipping simply through my normal purchase pattern, but now I'm looking at smaller, more trivial goods. It raises some major questions for me:

How is Amazon making money on this? Or rather, how did Amazon get its distributors to agree to this? I've tracked the packages every so often over the last few days, and they've been coming from all over America, usually via UPS. Instead of grouping products in the smallest number of packages possible, orders are being split into multiple boxes from multiple distribution sources. Surely on low-margin goods this is suicide?

How did Amazon get its marketplace and associate firms to agree to this? Or at least, are the other firms going to revolt? Even if Amazon charges a bit more than some of their associates, very rarely will the price difference be less than the shipping fee. At the moment, it's not easy to shop only from Amazon. For instance, if I do a search for Kleenex, I get offers from several different stores, and it's not immediately obvious which one I need to click to get free two-day shipping. This is a bit of a frustration, but the interface has gotten easier in only the last few days. (Besides, if you take "amazon" to the end of your search string, most of the items you get will be Amazon Prime material.)

The result has got to be a gradual cannibalization of partner sales, at least for partners whose product line largely matches Amazon's. If this becomes big, aren't partners likely to leave in droves?

Am I going to get in trouble?: I said the prices were competitive. What I forgot to say was that pricing was competitive for many of the items I buy before sales tax. On the other hand, Amazon hasn't charged me any sales tax on any of these goods: a frequent problem with online purchasing.

I'm not clear on the law in this area, but I'm dimly aware that I'm probably supposed to report all my purchases to the state of New York and send them a check. The thing is, I have no idea where I'd go to figure out what I owe or where to send it. I really wouldn't mind if Amazon reported it all to New York, who then sent me a bill, and I know that states haven't strictly enforced any such rule in a while. But given the significant amount of my income (well, loans) that will now be crossing state lines, will that change?

I don't know. What I do know is that my first consignment just arrived, and it is wonderfully convenient.