“I don’t need math to become a marketer,” you scoffed. As a young, naive, marketing major in college, you selectively skirted your way around courses involving math, opting instead for the likes of brand management and marketing communications 101. When you did have to take a math course, you willed your way through knowing that you’d “never have to use it again” once you made the grade. Now it’s 2017, and talk of data analysis in marketing has you scared straight. (more…)
President Trump’s longstanding feud with eCommerce giant Amazon and its CEO, Jeff Bezos, has been the subject of media attention since the the President’s election campaign. The then-presidential candidate claimed that Amazon is a ‘big tax shelter‘, and warned that should he become president, “oh, do they [Amazon] have problems. They’re going to have such problems”. Trump’s indignation only soared after Amazon, together with Facebook, Google, and others, filed a suit to block his proposed travel ban to keep refugees from entering the United States.
However, though the President hasn’t yet announced any legislature that specifically targets the eCommerce industry, many of his proposed policies could have a monumental impact on the future of many online retailers.
Below, I take a look at just three of the ways President Trump’s policies could change the future of eCommerce.
1. Imposition of import barriers
Last month, President Trump announced an investigation that will explore the possibility of imposing barriers to steel imports into the United States, citing ‘national security’ concerns. This is perhaps unsurprising, given that throughout his election campaign the President repeatedly commented on his intention to impose further import barriers to the United States.
For example, his proposed 45% tariff on imports such as electronics and steel from China could result in cost increases for both consumers and eCommerce retailers: US retailers buy lower cost goods from overseas, a cost benefit which is passed on to the customer. Retailers could therefore be faced with the choice between sourcing the goods domestically (which could prove impossible for some eCommerce retailers), or paying for the price hike in imported goods. Meanwhile, consumers could be faced with a significant increase in the cost of goods, and therefore could also face a choice between spending more, not spending at all, or searching elsewhere for cheaper goods.
Commenting on the impact of a 45% tariff on both a global and local scale, Gwen Schlefer of online marketplace Bonanza says,
“Trump’s planned 45% tariff would raise prices for online sellers who source their products internationally but sell domestically, so much so that they would be unable to earn a profit. For international sellers who turn a profit selling to customers in the US, goods affected by the proposed tariff will increase in price so significantly that consumers will either no longer buy the items, or continue to buy them but then have less money to spend elsewhere in their local economies”.
For small businesses who import goods to sell on marketplaces such as Amazon and eBay especially, the proposed tariff increase could negatively impact their workforces. According to Carolyn Kmet, Senior Lecturer at the Quinlan School of Business at Loyola University Chicago;
“Amazon’s most recent annual report showed that there are more than 70,000 entrepreneurs with sales of more than $100,000 a year selling on Amazon, resulting in the creation of over 600,000 jobs. Increased costs due to higher tariffs means decreased margins, and those small businesses will likely have to raise prices and reduce their workforce in order to stay viable”.
Despite these speculations, Krista Fabregas, Staff Writer for Fit Small Business believes that it’s unlikely that any import barriers will affect the economy substantially.
“Per imports, the general feeling among many economists and large importers is that something will happen, but that that something is unlikely to be as dramatic as soundbites portray, since neither side wants to upend working economies. Experts also point out that any deal between the US and China will help US sellers access buyers in China, which is a plus,” she says.
Yet just last month, Trump initiated what could be the start of a trade war with neighbouring Canada, which is the US’s largest purchaser of goods, indicating that even pre-existing amicable agreements are not safe from import barriers. Should Trump raise import barriers, this could pave the way for tariff retaliations from targeted countries.
2. Breakdown of existing trade partnerships
Trump’s abandonment of the Trans-Pacific Partnership (TPP) has removed commitments to the eCommerce industry, such as improving SMBs’ access to global markets. The TTP, which contained specific chapters on eCommerce, aimed to “ensure close cooperation among TPP countries to help businesses, especially small- and medium-sized businesses, overcome obstacles and take advantage of electronic commerce”.
Continuing with his commitment to remodeling existing trade agreements, President Trump has recently agreed not to scrap the American Free Trade Agreement (NAFTA), but rather renegotiate its terms. However, he has not yet ruled out terminating the treaty completely, tweeting that, “if we do not reach a fair deal for all, we will then terminate NAFTA“.
…subject to the fact that if we do not reach a fair deal for all, we will then terminate NAFTA. Relationships are good-deal very possible!
— Donald J. Trump (@realDonaldTrump) April 27, 2017
Many hope that any NAFTA renegotiations would include provisions on eCommerce and data localization, issues that NAFTA doesn’t yet cover due to their recency. A White House draft letter has called for future negotiations that ensure that NAFTA countries abstain from creating legislation that might “impede digital trade in goods and services…[and] obtain commitments that any domestic regulations…[will] promote an open market environment”.
3. Proposed online sales taxes
Trump’s frequent concern with Amazon’s taxes has been highly public and vitriolic, propagating speculation over what the future relationship between the President and the eCommerce giant’s future will look like.
— Donald J. Trump (@realDonaldTrump) December 7, 2015
— Donald J. Trump (@realDonaldTrump) December 7, 2015
However, Amazon aside, Trump also voiced his support for online sales taxes at state level during his electoral campaign. Proponents of the online sales tax argue that the tax-free online sales industry receives an unfair advantage over brick-and-mortar stores who are liable for sales taxes, and that the retail world is currently an uneven playing field with such a large tax loophole.
In the landmark case of Quill Corp. v. North Dakota 1992, the Supreme Court ruled that businesses without a physical store in a state are not required to collect sales taxes, but that Congress can overturn this decision through the use of legislation.
Yet earlier this April, the Marketplace Fairness Act of 2017 was introduced in the Senate by a bipartisan group of senators. The bill seeks to allow states to require online sellers to collect sales and use taxes on remote sales (sales that are not made in physical stores) – which would essentially nullify the ruling made in Quill Corp. v. North Dakota 1992. The bill does allow for a ‘small seller exception’, which would exempt businesses making gross annual sales of $1,000,000 or less.
There are several ways that internet sales taxes could hurt eCommerce businesses. Whereas brick-and-mortar stores are currently only liable for a small number of general sales taxes, eCommerce businesses could be liable for collecting a huge number of complex sales taxes, based on shipping addresses of customers, covering the entire country and almost 10,000 jurisdictions.
Such a tax system could increase costs for businesses, which would eventually be passed on to customers, with each business needing to learn how to stay tax compliant – for example, knowing exactly what each state defines as a taxable good. The True Simplification of Taxation, a coalition seeking to protect the judgment held in Quill Corp. v. North Dakota 1992, estimates that the implementation cost of software to uphold such a tax system for businesses could be between $80,000 and $290,000, and between $57,500 and $260,000 in maintenance costs: numbers that could potentially destroy small online retailers.
Many states have already begun the process of requiring eCommerce sellers to pay sales taxes in the form of creating nexus. Krista Fabregas, says:
Nexus, also known as sufficient physical presence, is the determining factor of whether an out-of-state business selling products into a state is liable for collecting sales or use tax on sales into the state. Nexus is required before a taxing jurisdiction can impose its taxes on an entity.
“Many states such as California, Colorado, and others, are getting creative with their laws and nexus. They are trying to use affiliates to create nexus, and require non-nexus online sellers to report annual sales and pay taxes if sales within the state exceed a certain amount. Colorado is even trying to do this on a per-buyer basis. All of these state laws are onerous for a small business to track without resorting to costly services”.
The prospective online sales tax would serve another purpose: with Trump seeking to increase the deductions that individuals can claim on their tax returns, and cut corporate tax to fifteen percent, proponents of an online sales tax believe that this could offset the loss of these taxes. However, speaking of the states that have already created affiliate nexus, Carolyn Kmet says:
“It is unlikely that the concept will result in increased tax revenue for states. In fact, several of the states that have already implemented nexus tax laws have seen a reduction rather than an increase in tax revenue. This is because many eCommerce retailers are terminating partnerships with small businesses in these states to avoid the establishment of an affiliate nexus. If small businesses see less income, states see less tax revenue”.
In 2011, the state of Illinois introduced its own affiliate nexus law, requiring internet retailers such as Amazon to adhere to a sales tax. However, instead of an increase in tax revenue, Illinois saw a marked decrease in collected taxes. As a result, Amazon and Overstock quickly ended their relationship with Illinois-based affiliates. The law was eventually ruled unconstitutional, with Judge Robert Lopez Cepero stating, “the activity described in the statute does not establish nexus”.
What can your eCommerce business do to prepare for any changes?
As with any new political administration, it’s hard to predict a new leader’s next steps, and the effects on the eCommerce industry are yet to be seen. However, taking into account Trump’s lack of political background mixed with his often populist and impulsive rhetoric, there is very little to go on beyond what he says on a day-to-day basis (which can be subject to frequent change).
However, amidst the uncertainty, there are things that you can do to help prepare your eCommerce business for any changes formulated by the Trump administration.
“Keeping up to date with relevant policy news in the eCommerce industry is the main way that retailers can help prepare themselves for changes,” says Gwen Schlefer. “It’s becoming increasingly important that online marketplaces and their sellers stay informed about these policy changes in order to prepare for a shift in the eCommerce environment”.
Retailers should familiarize themselves with policy on both a national and federal level. Carolyn Kmet warns that legislation is likely to vary from state to state: “The challenge with nexus laws is that they are going to differ by state. Each state has different definitions of what constitutes nexus, and different thresholds of liability, and so legal teams need to be up-to-speed on pending legislation. A great resource is the Performance Marketing Association, which tracks legislative developments, and has been fighting these kind of laws since 2008″.
Implement tracking mechanisms
To go one step further and stay ahead of the curve, retailers can implement certain tracking mechanisms to semi-automate the process of tax compliance, such as tax management software.
Says Tricia Meyer, Executive Director of The Performance Marketing Association, “The best thing that retailers can do to prepare themselves for changes in the sales tax laws is to implement tracking mechanisms that help them understand their volume in each state for both total sales and total number of sales. Those two things are what are at the heart of most of the “economic nexus” taxes that are being proposed. Having solid tracking in place and technology that will identify when the volume for each state has triggered reporting will help retailers easily stay within compliance”.
Tricia further recommends software by Avalara and Taxify by Sovos, tools that help businesses stay ahead of law changes that could affect them. She says, “Both tools are very knowledgeable about these types of tax changes and incorporates them into their technology to make things easier for retailers.”
What do you predict the future holds for the eCommerce industry under a Trump administration?
Do you have any insights about how the future of the eCommerce industry could change? Leave a comment below, or email me at email@example.com.
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We talk to robots several times per day. If you have Amazon’s Alexa, talk to Siri on your iPhone, or chat with friends on Facebook Messenger, then you use chatbots – computer programs designed to talk to you as if you’re speaking to a human. While these products won the first chatbot battle, research shows that they might lose the war to small businesses. (more…)
Think your employees are happy with their compensation packages? Think again: 60 percent of employees who think they’re underpaid intend to leave their job.
Business uncertainty is at a 42-year high. Companies are growing increasingly concerned about their ability to effectively plan and forecast for the future, and are suffering setbacks in establishing priorities. In this mixed-up business landscape, what do most companies want from 2017? Late in 2016, GetApp conducted research into the top priorities for small and medium-sized business in 2017, revealing that their main business priority is client retention and attraction.
With client retention and attraction at the top of the priority list, businesses have to be mindful of the fact that customers are now hyper-aware that they have more choice than ever when it comes to where and how often they spend their money.
The business landscape is dynamic, but companies can be too – the right tools teamed with solid priorities can help businesses excel at client retention and attraction. In this piece we take a look at some of the innovative cloud-based software solutions that businesses can use to execute their business priority of attracting and retaining customers.
3 Smart Ways to Attract and Retain Clients
Customers are a fickle bunch: 95 percent of customers have abandoned a purchase in store, while 85 percent have abandoned a purchase online. For whatever reason they abandon your online or brick-and-mortar store, the customer knows that if you can’t offer everything they want, someone else can.
It’s clear that businesses need to do more to hold the attention of customers, even loyal ones. In fact, according to McKinsey, only 13 percent of customers are now ‘loyal’ to brands, choosing instead to ‘shop around’. Customers today need to be engaged with: as we know, customer engagement equals customer retention.
Customer Relationship Management (CRM) software is a great tool for helping businesses maintain healthy relationships with their customers and acquire new ones through the use of customer journey mapping, tailored engagement, and performance analysis of sales strategies. But, while CRM software can help foster these relationships, the following software can help businesses take more granular and actionable steps to build on customer attraction and retention efforts.
1. Video marketing
You don’t need Scorsese level skills to sell your business through video, but there is a reason that businesses are investing so much time and energy into video marketing: almost 50 percent of consumers have made a purchase after watching a branded video.
Birchbox, the subscription box which sends subscribers samples of beauty products, makes great use of video marketing to showcase individual products from each box. This simple video takes one of its products and demonstrates its multi-functionality in under one minute.
Plated is a recipe and ingredient delivery service that uses video marketing not only to explain how simple their product is to use, but it also produces short and succinct tutorial videos on how to use its ingredients in the right way.
Check out these video marketing solutions:
2. Live chat
If your business isn’t yet enamoured with chat bots, a great way to bridge the features of digitalized and traditional customer service is with live chat, which boasts an incredible 92% customer satisfaction rate after use. Live chat has a big impact due to its immediate, personable, and convenient nature.
Live chat is the most interactive way to talk in real-time to visitors while they’re live on your website and potentially looking for help or solutions. Chatting live with visitors can build relationships with prospective customers while helping them with product decisions or queries, and can help past or recurring customers that need help with items they’ve already bought. By using live chat software, businesses can be agile and reactive in supporting customers to prevent problems before they arise.
Check out these live chat solutions:
3. Customer reviews
Customer reviews may make some business owners quiver in their boots – the potential of hosting bad reviews on their websites is a risk that some just aren’t willing to take. However, there’s a skill in being able to react and respond well to bad reviews, and the presence of good reviews on your website can outweigh the bad ones.
In terms of attracting new customers, it’s reported that reviews influence 90 percent of buying decisions, and almost 90 percent of customers trust reviews as much as they would trust a word of mouth recommendation. In fact, recent GetApp research showed that reviews are more important to customers than website security when it comes to trusting a website.
Check out these customer reviews solutions:
What are your tips for client retention and attraction?
We’d love to know how small businesses are using new and innovative ways to attract and retain their clients, so leave us a comment below, or get in touch at firstname.lastname@example.org.