Isn't the idea behind prime shipping that with enough volume, any product in demand should already be stored close to the customer? Their expanding fleet of aircrafts make me doubt that it works that well but who knows, maybe their air cargo as a percentage of all shipping is decreasing drastically.

In the end, online stores aren't that hard to build and local stores can become competitive if Amazon really decides to cash out. Amazon is growing so fast because they don't really turn a profit, not because they pushed everyone else out of the market.