They are building the Fulfillment Centers everywhere. Think WalMart x 100 - this is where Amazon is heading.
I think they’re headed for same day delivery in most of the country. The original fulfillment centers were at shipping hubs, the more recent ones seem to be aimed at having a couple of sizable centers within an overnight radius of most major cities.
In the cities where they’re trying same day delivery, they tend to stock a sub-set of their most sold products in a number of in-town locations, then backfill from their regional hubs all day long. They’re doing their own deliveries for same day, and relying on a combination of shipping companies allied with the post office for last stage on overnight deliveries. Now that they’ve got most of the hubs in place, opening up local delivery is pretty cheap for them.
The last big advantage to local retailers is that you can run up to the corner and get what you want immediately. I think Bezos is aiming to kill off that advantage.