Same-Day Delivery Could Make Amazon Even Bigger

| About:, Inc. (AMZN)

Delivery time is no small component of e-commerce, especially at those critical times where you need a gift or essential item by the next day., Inc. (NASDAQ:AMZN) is attempting to alleviate this burden, however, by pushing toward same-day delivery options. This removes even more incentive for frequenting brick-and-mortar stores like Wal-Mart Stores, Inc. (NYSE:WMT), Target Corporation (NYSE:TGT), or Barnes & Noble Inc (NYSE:BKS). Amazon's competitor eBay (NASDAQ:EBAY) is also working to ease the burden of long delivery times, but its moves are much more minor. Amazon will likely pull even further ahead in the e-commerce market, boosting revenue in a market it's already dominating.

Amazon is currently trading around $239, and its trailing P/E is 291.66. Its price has been trending slightly downward over the past couple weeks, but I think the company will be a strong long-term investment. Keep in mind, Forester estimates that the online retail industry could climb up to near $280 billion in the next few years. Amazon's about to announced its second quarter revenue, and expectations are for somewhere near the $13 billion mark. Its first quarter revenue was $13.19 billion, and while that was up substantially from last year, it came in below expectations.

A recent report explains certain information about the online retail market, and things still look very good for Amazon. Although brick-and-mortar stores like Wal-Mart have entered the world of e-commerce, the largest market shares still belong to "pure-play" online stores. Amazon had 21.0% of the total online retail sales in 2011 and still appears quite strong. The United States, furthermore, provides the second largest Internet user base in the world, so if it could improve its services in the United States, this would be great for the company.

Amazon is taking an interesting step towards accomplishing this, as it is siding with brick-and-mortar stores on proposed legislation about requiring taxes for online retail stores. Stores like Wal-Mart and Target have a physical presence in the states, so they must pay taxes that Amazon, eBay, and other online retailers often do not have to pay. This maintains a high price gap between the companies. There is currently a bill in Congress that would make taxes mandatory for online retailers, regardless of whether they have a physical presence in the state. While eBay and Facebook (NASDAQ:FB) are against the bill, Amazon joins Wal-Mart, Target, and Barnes & Noble in supporting the bill. This should seem odd at the moment, but this move goes well with another recent development that is creating a lot of Internet buzz and should help Amazon gain an even bigger U.S. presence.

Some have already noted that Amazon's moves related to taxes are a part of its larger effort to push for same-day delivery. Its goal is to deliver as soon as a couple hours after the purchase has been completed, and this means that it needs to change things in a major way. It has already signed some tax deals with states, and in these deals, Amazon has added that it will construct one or several local warehouses. Therefore, it makes perfect sense that Amazon supports the online retailer tax bill, as Amazon will be establishing a physical presence in states to create better shipping options.

In addition to building new shipping centers, Amazon has been making shipping more efficient, and this has stemmed largely from its previous purchase of Kiva Systems. In a few cities, it has even set up automated lockers where items will be securely delivered for pick-up, allowing for faster and more efficient shipping in these few areas. All of this shows Amazon's consistent work over a fairly long period of time, so it does seem that same-day delivery could eventually work out for Amazon. I think this would help it become am even bigger threat in the e-commerce market and the retail market in general.

EBay is another online retailer that is making moves related to the burden of shipping speed, but this is a minor development that will quickly get overshadowed by the news from Amazon. Much like Amazon, eBay recognizes how bothersome long shipping times can be. To help ease this burden, it will be flagging posts that have shipping times exceeding three days. It will begin doing this in September, and it should help users spot better shipping times when browsing through offers. I do not think this is substantial enough though. In fact, it is something that eBay should already be doing, and this will do nothing to help it compete with the flexible shipping options that Amazon generally offers at the time being. This is a good move for eBay, but it is not nearly enough. As a result of Amazon growing stronger and eBay stock being on a downward trend, I do not recommend this stock.

Amazon is currently a huge company in the e-commerce industry, and with its consistent moves to improve shipping time, one has to assume that it will only grow stronger. This is bad news both for brick-and-mortar retailers and for online competitors like eBay. The online retail tax legislation could be bad news for companies like eBay and Facebook as well, but Amazon has a way to capitalize on this. It certainly appears to be in a good position to improve its shipping time through an increased number of distribution centers and attempts to be more efficient in shipping.

One has to wonder if Amazon prices will be going up with added taxes and new distribution centers, but I doubt the company will wholly sacrifice its low prices that help make Amazon such a success. This is my main hesitation with the situation, but it is just a small one. Amazon stock may be a little more expensive than some would like at the moment, but there is still room for profit. With all this in mind, I do recommend Amazon stock, especially for the long term.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.