Retailers in Pa. and Calif. no longer swimming against a sales tax undercurrent
WHAT IT MEANS AND WHY IT'S IMPORTANT — As of Sept. 1, some 1.2 million Pennsylvanians will be able to go to bed at night secure in the knowledge that their jobs won't be drowned out by some online juggernaut. And by the middle of September, 3.1 million Californians will be able to breathe that same sigh of relief. That's how many retail employees there are across those two states. And now that Amazon.com will be levying sales taxes of 6% and 7.25% in each of those states, respectively, that's how many retail jobs no longer will be threatened by an unlevel playing field.
(THE NEWS: Amazon.com to begin collecting sales taxes for purchases made in Pennsylvania. For the full story, click here.)
Just last week, DSN senior editor Antoinette Alexander outlined why multichannel retailing is so important — 60% of consumers will make their purchases online for only a 5% savings. Only five states don't charge a sales tax (Alaska, Delaware, Montana, New Hampshire and Oregon). There, retailers are on more of a level playing field. The lowest state sales tax is Colorado, at 2.9%. Beyond that sales taxes range from between 4% at the low end and 7.25% at the high end.
In Pennsylvania and California, and in the six other states mentioned in the story, brick-and-click retailers no longer iwill have to discount their merchandise another 6% to 8% just to be in line with Amazon.com's prices (or any online retailer with a physical presence in each of those states, for that matter). A $100 purchase will no longer cost a consumer $106 (plus gas) at retail, and $100 (plus free shipping) through that online retailer.
That doesn't mean Amazon.com no longer will be a formidable competitor to the retailers in Pennsylvania and California. And it doesn't even mean Amazon.com will no longer field a significant competitive advantage in every sector in which they compete. They will and they should.
But let's face it, the Amazon.com business model is different from traditional retail. They have the buying power of a national chain without the capital costs of brick-and-mortar retail. The future of retailing is gravitating toward online convenience. Adapt or go home. (Check out how Walgreens is making their offering all about the "experience, experience, experience" with one seamless, multichannel play in the Sept. 24 issue of DSN.)
But that's fair game, because the emphasis for many of the retailers we cover in the pages of DSN is to turn their multichannel offerings into a tactical advantage despite all of that. She wants to shop online? Sure. She wants to then pick that purchase up in the store on her way home from work? OK, no problem. She wants to shop in the store and then have it shipped to her home within the day? If they aren't already, a lot of retailers are moving in that direction, too.
She wants to save another 6% by hopping over to another URL? Nope, sorry, can't do that anymore.
What are your thoughts? Sound off in the comments below.