Online retailers have always been just one step ahead of face-to-face retailers. Why? Sales tax. Sales tax can certainly be a determining factor in whether or not a product is purchased by a consumer – especially when sales tax is nearly 10%, like in some areas of California.
California has recently passed a law that will charge sales tax on online purchases. This brings up many questions. Will sales tax be charged on international purchases? When will other states implement this sales tax? How will this affect the market?
More importantly, one must wonder what Amazon will do next. Many are stating that their next step is to add distribution centers throughout other states, in order to decrease shipping time. This strategy is expected to compensate for the newly implemented sales tax. Amazon may have even been pushed enough to open their own retail stores, directly competing with companies like Wal-Mart, Radio Shack, Target, and Best Buy. With this in mind, one must also wonder how these popular retail stores will respond.
Regardless, this ruling affects many different companies, which means it also affects advertising. Popular retail stores could use this ruling as ammunition against Amazon or eBay (in the future), in regards to advertising. For example, Wal-Mart’s advertising strategy could focus on bringing awareness to this tax implementation, in an attempt to steal consumers from Amazon. This can be a great opportunity for these retailers to target the largest online retailer in the world. Amazon, in turn, could respond by advertising their upcoming ability to increase shipping speeds.
Should retailers use advertising to build awareness of this tax implementation to target Amazon? Should they, instead, lower prices to compete with the massive online retailer? How do you think Amazon would respond to that? Also, what will be the future of other massive online retailers like eBay?
What is your perspective?
Looking for more info? Check out these links:
http://www.businessweek.com/ap/2012-09-13/tax-on-amazon-purchases-in-calif-dot-begins-saturday#p1
http://www.forbes.com/sites/robertwood/2013/01/28/sales-tax-amazon-fights-irs-too/
http://www.sensibleemarketing.com/2013/02/will-amazon-be-next-walmart-new-tax.html
The Advertising Perspective 
This is a very interesting point of view on the subject. This could lead Amazon to now be forced to rethink corporate strategies of how to keep loyal customers and their great low prices. Even if retailers used advertising to build awareness of this tax implementation to target Amazon, I still believe that Amazon prices and reliability would still maintain its high supporters. I have confidence that Amazon would find loopholes or ways to still benefit their customers.
Amazon is standing in the firing range, but do they have a shield? California has passed a series of laws that states that the 1992 Supreme Court decision is now invalid. This decision states that a company shall not be taxed if it does not have a physical presence in the state. Since Amazon is an online retailer, it benefited from the 1992 decision and therefore they did not have to pay taxes on their sales. With this new law, the competition may believe that Amazon is in a weak position. Although this might be true, Amazon has prepared itself for this as if it knew the decision would one day ultimately come. Their new strategy to compete with other retailers while remaining online and now paying taxes is expected to be tremendously successful. It is interesting to see how different companies deal with problems that arise and come out on top. I believe the tax implementation will not hurt Amazon, although some companies might believe that letting consumers know about the tax might be a strategy worth pursuing.
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I like how you brought up the advertising aspect that could possibility take place with the new taxation laws. I completely agree with you and see how Walmart can use the new laws against such websites like Amazon and E-bay in advertising campaigns. Walmart right now has their “Buy American” campaign currently running, and I can only see them using the taxation laws to their advantage. I actually think it would be smart of them to do that since Amazon is currently their biggest competitor. Amazon already has such very low prices, I’m not sure how much lower they could go without hurting the organization. It’ll be interesting to see how everything will play out once more states start passing the same taxation laws as California.
I find this post very interesting, the fact that Amazon is such a leader in the online market for good consumption, and how competing with Walmart would be a great battle to see who succeed. It is important how you evaluate what Amazon’s next step would be, Amazon not only would focus on selling online but I see you took a step further and evaluate how they might add distribution centers throughout other states in order to increase shipping time. It is very vital for this company to do this in my opinion, some people go to the store and shop for their favorite goods because they would not wait for 6-12 business days for it to arrive, but if you guarantee 1-3 business days? now that sounds very tempting. People like the comfort of their home and been able to shop online on this manner. What about openning retails stores such as Best Buy and Target? that’s what I’m not so sure….