states in the week before tax collection began on Sept. 15, 2012. In November,
after the tax was imposed, sales were down 5 percent to 10 percent, according to
ChannelAdvisor. By the end of the year, sales had returned to normal levels.
And, Wingo said, in the next three-month period after the tax collection began,
sales were higher than they were in the pretax days.
"That's the part a lot of people have a bit of a hard time getting their head around," Wingo said.
Wingo attributes that post-tax increase to the fact that once Amazon is collecting taxes it usually accelerates the creation of distribution centers in a state, which allows it to win customers with faster delivery. He said he saw that happen in North Carolina, where ChannelAdvisor is located.
"People start to learn about the convenience of having fulfillment centers in your state and that starts to outweigh the negative _ the tax cost of center convenience," Wingo said.
Amazon has broken ground on a distribution center in Robbinsville, N.J. The center is expected to begin operations at the end of this year, or early 2014. Amazon did not respond to questions about other plans for distribution centers in New Jersey, but it has vowed to build an additional center in the state and reportedly has acquired a former food warehouse in Woodbridge, N.J.
Amazon, Wingo said, has learned in other states "that by putting the product closer to you, you have a much better experience. It also saves them money because they pay UPS and FedEx a lot less because it's a shorter drive in that last mile between fulfillment center and the consumer," he said.
Amazon tax collection "is definitely going to be a boon for us," Gramegna said. He said the pricing model for camera equipment ensures that every retailer charges the same base price, so taxes are the main differentiator. "For us, now that basically the price is the same anywhere, if the choice is Amazon with a box and a receipt and no help, or Bergen County Camera with all the TLC in the world, it makes the choice pretty easy," he said.
He also believes he can compete on same-day delivery because his stores stock 12,000 different items, and customers can try out a camera before buying it.
Paula Rosenblum, managing partner at retail consulting firm RSR Research, doesn't think sales-tax collection will cost Amazon many customers. "People shop at Amazon because they get insanely fast delivery and really good prices. I don't think they shop at Amazon because they don't pay sales tax," she said.
Rosenblum, like other retail analysts, believes convenience, not price, is how Amazon will win customers. "They've changed the bar so dramatically when it comes to delivery expectations that there's hardly any words for it," she said. "The challenge is that they also don't make a whole lot of money, so you can't exactly emulate them, because most of us couldn't live on 1 percent earnings."
In 2012, Amazon's net sales climbed 27 percent to $61.1 billion, but it reported a net loss of $39 million, compared with net income of $631 million in 2011. Its operating income in 2012 was $676 million.
For merchants like Gramegna and Bill Skees, owner of the Well Read bookstore in Hawthorne, N.J., who have seen customers opt for tax-free online options, Amazon tax collection is a big deal.
"It levels the playing field," Skees said. "If I have to play tax collector, they should have to as well."
Skees said he and his suppliers are already gearing up to do battle with Amazon on the same-day delivery front, with some of his distributors piloting same-day delivery to his store for books customers request. He already has next-day delivery on books that he doesn't have in stock in his store.
JOINING THE TAX COLLECTION CLUB:
Next month, New Jersey will become the 10th state that requires Amazon.com to collect sales tax. The other states are:
(Florida will require tax collection starting next year.)
(c)2013 The Record (Hackensack, N.J.)
Visit The Record (Hackensack, N.J.) at www.NorthJersey.com
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