April 19, 2012 at 8:55 pm | Blog
I read an interesting article in the Wall St Journal, Amazon Faces Taxing Time Ahead.
Amazon may be losing the online retailers battle that exempted them from collecting taxes where they did not have a physical presence. This was one of Amazons competitive advantages; Jeff Bezos originally located his company in Seattle since it offered a smaller population of customers who would need to be taxed.
Main street merchants rebelled because they became showrooms for the online retailers and they, of course, had to charge tax. The article cites some analysts who suggest it won’t change Amazon’s competitive advantage because Amazon’s prices will nearly be as low as Wal-Mart and 7% below Target. The price advantage would be somewhat diminished for Amazon products. There is speculation at this point about the overall impact of this on Amazon. However, a Stanford study of eBay customers suggested that “the higher the sales tax in a buyers home state, the more likely he or she was to avoid paying it and using a seller in a different state.”
I think this will be interesting to follow. There is a substantial population who has become accustomed to the “convenience” and “choice” offered by Amazon. The extremely price sensitive shoppers may move elsewhere for pennies in difference, but I believe what Amazon offers is worth the difference to the majority of online shoppers.
Wired Magazine in January 2012 agrees: “Why pack into Target when Amazon can speed the essentials of life to your door? ….We declare the obsolescence of ‘bricks and mortar,’ but let’s be honest: What we usually want to avoid is the flesh and blood, the unpleasant waits…” Wired Magazine points out that technology, ala our computers, keeps us out of crowds. Who and how many of us value that over price?
Well I, for one, am raising my hand! I dislike crowds, hate waiting in line, and have no interest in putting up with all that just to save some sales tax. The convenience is worth the very slight extra cost.
This is the point many businesses don’t grasp. It’s not about price, not always, not as often as you think, and not to as many folks as you assume. When customers highly value attributes like convenience, speed, and ease of ordering, they are willing to pay for it. My guess is Amazon will confirm its customers value the online buying experience sufficiently in spite of added sales tax. (How far out of your way do you go for the cheapest gas?)
What benefit do you offer that your customers value highly? How do you know?
Most companies “guess” what is important to their customers and prospects; our research on over 150 companies shows the company teams are wrong an amazing 90% of the time. This is a dangerous gamble! As a result they either don’t know which of their differentiators are relevant, or are very poor at articulating them (or both). So they are relegated to using price as the tiebreaker. Find out what is truly valued, and engage in Relevant Selling.