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Ecommerce
Market Battleground Shift Because of Legislation
By Nilofer Merchant on May 07, 2013 12:17 pm
Yesterday, the US Senate passed the online sales tax bill by a
69-27 vote.
The measure will shape the e-commerce space, certainly affecting
Ebay, Amazon, Etsy and others. The bill still needs to pass the GOP-controlled
House of Representatives and receive the signature of President Obama, a
supporter, to become law. The legislation would require Web-based retailers
with sales of at least $1M to collect sales taxes for the states where they
ship goods and merchandise.
E-commerce accounted for $225B in revenues in 2012, according to
the US Department of Commerce. To put this in practical terms using my state…
California would experience between 15-20% of that volume, at 9.25% tax rate,
so … well, it’s easy to do that math and know why this is a big deal. Amazon,
which until recently was dead-set against a national online sales tax, now
embraces it as it looks to expand its physical operations across the USA.
eBay, Amazon’s rival, argues the tax would hinder its sellers who do more
than $1 million in out-of-state sales annually. In a recent letter to eBay
sellers, Chief Executive John Donahoe pushed the suggestion that the law
should exempt any firms that have fewer than 50 employees or make less than
$10 million annually on out-of-state sales. With no national way to establish
the tax base, calculating taxes could become it’s own nightmare of a business
problem (and I could imagine both Amazon and Intuit offerings to address the
need). As you might imagine, national and regional chains are tired of
being showrooms for shoppers (hello Best Buy!) so they’ll be lobbying hard to
pass this legislation and thus change the market dynamic. They are sick of
having customers shop in their stores and then search on their smartphones
for lower prices to buy it online. (That said, I think the regional chains
are mostly deluding themselves to think this is the core issue of their
problems.) According to a recent University of Tennessee study, states missed
out on over $11 billion in uncollected taxes in 2012 from online purchases.
There are many times when being small, and Gazelle-like is an
edge in the Social Era. But this legislative issue is one that benefits the
Gorillas’ of the world. It means that small independent players *need* the
efficiency and capabilities of a big platform like Amazon or Ebay to be able
to do their business, ideally handling this tax payment issue on their
behalf. That makes me think that this tax issue changes the relationship from
an interdependence to a reliance. Power will jump to the platform players
like Amazon.
And that sound you are hearing is the tide changing. Ecommerce
used to be the cheapest way to buy, but no longer will be. One to
watch.
The post Ecommerce Market Battleground Shift Because of
Legislation appeared first on Nilofer Merchant.
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Wednesday, May 8, 2013
Nilofer on Ecommerce battle
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