« If You're Looking For Deep Thoughts, Look Elsewhere | Main | What the Good Lord Giveth, the Good Lord Taketh Away »

The Amazonian Prime Directive

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.

TrackBack

TrackBack URL for this entry:
http://www.threeyearsofhell.com/cgi-user/mt/mtPleaseLinktoMe.cgi/1063

Comments

NY state tax forms have a chart for how much you should add for internet sales taxes. Happily for those working part of the year, it's based on income...as I recall, I added less than $20.
All very interesting. I suspect you're right, in that Amazon are not going to make money on this. But Amazon have never made money on anything *right from the start*, all their successes have been slow burners. Lose money for three years while you build a customer base - then start adding the dollars. It was about 2001 before they started making money on books. The company kept making losses for a while after that because they were still trying to gain market share in other areas. So in three years time Amazon will have a million or so people doing their grocery shopping and such online and then they'll build the logistics system they need to support them. Or they'll have *not enough* people buying this stuff online and they'll drop it. Or Amazon expect to charge lots of people $80 and then not have them use the system, kind of like gym membership fees. If you really care there's probably something about it in a quarterly report or something.
I'm with Alison. Most state departments of revenue require you to declare purchases that were bought in such a manner that they were not initially subject to state sales tax. However, providing that you don't buy a car on Amazon Prime, you shouldn't have anything to worry about. If you prepare your taxes using Turbo Tax (or similar software), I am positive that they will prompt you for all of the necessary information. Save your receipts, I guess.
The hazard of TAing ConLaw. How can New York tax interstate commerce? I'm pretty sure that's why you don't get charged sales tax on internet purchases from companies that don't have a physical presence in the state in the first place. See, if they had a store, then that would be intrastate commerce, but as it is, anything you buy from Amazon is interstate commerce and thus beyond the reach of New York state. I may use this for a practice exam question.
http://www.tax.state.ny.us/pit/income_tax_2004/it-200_use_tax.htm You're right! They are charging tax on stuff you order from out of state! One more good reason to move back to California. How is that legal?
Yeah, Quill v. North Dakota said that mail-order companies had to have an in-state store to be taxed, but also concluded, "This aspect of our decision is made easier by the fact that the underlying issue is not only one that Congress may be better qualified to resolve, but also one that Congress has the ultimate power to resolve. No matter how we evaluate the burdens that use taxes impose on interstate commerce, Congress remains free to disagree with our conclusions. See Prudential Insurance Co. v. Benjamin, 328 U.S. 408 (1946). Indeed, in recent years Congress has considered legislation that would "overrule" the Bellas Hess rule. Its decision not to take action in this direction may, of course, have been dictated by respect for our holding in Bellas Hess that the Due Process Clause prohibits States from imposing such taxes, but today we have put that problem to rest. Accordingly, Congress is now free to decide whether, when, and to what extent the States may burden interstate mail order concerns with a duty to collect use taxes." More on NY and online taxes.

Post a comment

NOTICE TO SPAMMERS, COMMENT ROBOTS, TRACKBACK SPAMMERS AND OTHER NON-HUMAN VISITORS: No comment or trackback left via a robot is ever welcome at Three Years of Hell. Your interference imposes significant costs upon me and my legitimate users. The owner, user or affiliate who advertises using non-human visitors and leaves a comment or trackback on this site therefore agrees to the following: (a) they will pay fifty cents (US$0.50) to Anthony Rickey (hereinafter, the "Host") for every spam trackback or comment processed through any blogs hosted on threeyearsofhell.com, morgrave.com or housevirgo.com, irrespective of whether that comment or trackback is actually posted on the publicly-accessible site, such fees to cover Host's costs of hosting and bandwidth, time in tending to your comment or trackback and costs of enforcement; (b) if such comment or trackback is published on the publicly-accessible site, an additional fee of one dollar (US$1.00) per day per URL included in the comment or trackback for every day the comment or trackback remains publicly available, such fee to represent the value of publicity and search-engine placement advantages.

Giving The Devil His Due

Choose Stylesheet

What I'm Reading

cover
D.C. Noir

My city. But darker.
cover
A Clockwork Orange

About time I read this...


Shopping

Projects I've Been Involved With

A Round-the-World Travel Blog: Devil May Care (A new round-the-world travel blog, co-written with my wife)
Parents for Inclusive Education (From my Clinic)

Syndicated from other sites

The Columbia Continuum
Other Blogs by CLS students

De Novo
Theory and Practice
Liberal Federalism?
Good News, No Foolin'


Althouse
Nancy Pelosi covers her head and visits the head of John the Baptist.
Vlogging in from Austin.
Omikase/"American Idol"


Jeremy Blachman's Weblog: 2007
Happy Passover
Looking for Advice re: LA
Google Books


Stay of Execution
What I've Learned From This Blog, or My Yellow Underpants
The End
Mid Thirties


Legal Theory Blog
Program Announcement: Summer Programs on the Constitution at George Washington
Book Announement: Political Foundations of Judicial Supremacy by Whittington
Entry Level Hiring Report


The Volokh Conspiracy
Making the Daily Show:
Civil unions pass New Hampshire House:
Profile of Yale Law Dean Harold Koh:


Crescat Sententia
Hillary II
Hillary
Politics and Principal/Agents


Law Dork
Election Approaches
Following Lewis
New Jersey High Court: 'Same Rights and Benefits'


IrishLaw
Homecoming
Surveying the revival
Birds of paradise


Half the Sins of Mankind
Cheney Has Spoken Religious conservatives who may ...
Does Ahmadinejad Know Christianity Better Than MSN...
Borders as Genocide In discussions of climate chan...


pf.org
Progress
For lovers of garden gnomes...and any China-freaks out there
We Interrupt Your Regularly Scheduled Programming


Ideoblog
Does SOX explain the flight from NY?
More Litvak on SOX effect on cross-listed firms
What did the market learn from internal controls reporting?


The Yin Blog
Iowa City = Riyadh
Jeffrey Rosen's "The Supreme Court"
Geek alert -- who would win between Battlestar Galactica and the U.S.S. Enterprise?


Letters of Marque
Graduation
And there we are
Oil!


BuffaloWings&Vodka
Signing Off


Dark Bilious Vapors
Jim (The Waco Kid): Where you headed, cowboy?
Bart: Nowhere special.
Jim: Nowhere special. I always wanted to go there.
Bart: Come on.
--"Blazing Saddles"

Technical Difficulties... please stand by....
The Onion should have gotten a patent first....


Legal Ethics Forum
Interesting new Expert DQ case
Decency, Due Care, and The Yoo-Delahunty Memorandum
Thinking About the Fired U.S. Attorneys


Ex Post
Student Symposium- Chicago!
More Hmong - Now at Law School
Good Samaritan Laws: Good For America?


Appellate Law & Practice
Those turned over documents
CA1: courts can’t help people acquitted of crimes purge the taint of acquitted conduct
CA1: restrictions on chain liquor stores in Rhode Island are STILL okay


the imbroglio
High schoolers turn in plagiarism screeners for copyright infringement
talisman
Paris to offer 20,600 bikes at 1,450 stations to rent by the end of the year


The Republic of T.
The Secret of the Snack Attack
links for 2007-04-04
Where You Link is What You Get

Distractions for stressed law students

The Other Side: Twisted AnimationsSomething Positive, a truly good webcomic

Syndicate This Site

Sitemeter

Technologies


Stop Spam Harvesters, Join Project Honey Pot