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Does Internet Sales Tax really level the playing field between clicks and bricks?

Does Internet Sales Tax really level the playing field between clicks and bricks? The US Senate has passed the Internet Sales Tax law that will force online retailers to collect sales tax for the shipping destination state. Initial plans are to have Internet retailers with over  $1 Million sales to collect the state sales tax for all transactions. The sales tax for each state is different  and   five states viz. Alaska, Delaware, Montana, New Hampshire and Oregon  do not have Sales Tax.

In the second half of the video alongside a brick retailer representative is arguing that "no sales tax" gives an advantage to the online retailer.  She mentions the phenomena of "showrooming"  that adds insult to injury for the brick businesses as customers come in to understand the product, touch and feel it -and then search online for a better price!

The question of whether adding the burden of sales tax will slow down online retailers is a matter that will be addressed at the House of Representatives where the bill is now headed. If passed, the new law will over ride a 1992 US Supreme Court decision that a business without a presence in a State will not be required to collect sales tax.In other words, businesses will be required to collect sales tax for whichever state your customer is within the US.

States and city tax revenue lost due to online sales is estimated at $23 billion for 2012. Brick retailers are in the community and provide employment at the local level which makes them really important for main street America. 

But the question from this blog's point of view is whether an average tax of 9% really deter online competition for brick businesses? Will customers stop "showrooming"  because the  9% price difference and shipping will be  an avoidable no brainer for online shopping?  Or will lower overheads  and better inventory and logistics by online retailers continue to keep pure brick businesses in trouble.

A better option for the brick businesses is to perhaps open their own online division because they have deep knowledge of (1) customers (2) products and (3) supply sources and they should be able to serve both domestic and international markets. Staying pure bricks is no longer an option for businesses of any size. And  opening an online global branch of an existing local  bricks business is rather simple today. Contact StratoServe.

How is B2B different from B2C marketing? The New Task opportunity

Organizations face B2B buying challenges that are very different from what a consumer grapples with when buying something for personal consumption. Thus, when you get replacement tires for your car you consider factors like brand name, price, installation service, free rotations/balancing, warranty etc.. For those consumers who have the expertise and tools to replace tires, a whole new set of options like buying tires online can open up. On the other hand a car manufacturer wanting to buy the same brand of tires for OEM (Original Equipment Manufacturer) will have considerations that are different than an individual customer.

While the auto manufacturer will look for some evidence of consumer awareness of the tire brand, it will not be the overwhelming decider. So long as the car buyers don't react with “never heard of this tire brand," the consumer brand power is not as useful in B2B markets. Instead things like: what safety record does the tire have? Will the tire supplier be willing to provide tires on a Just-In-Time (JIT) basis to the assembly line? Will the tire supplier be willing to take payments in 90-180 days? Will the supplier be willing to develop innovative new tires for the new SUV the automaker is planning and which has specific tire requirements? Will there be an assurance of quality and supply time?

Once the tire supplier gets to be an OEM to an auto company and does a good job... the chances of getting fired is low. This because over time the auto maker, its distributors and even final customers develop relationships, processes, routines and preferences for a particular tire brand.  Somewhat like the "Intel" chip which seems to be an important consideration in deciding which computer to buy despite tech expert assurances that the "AMD" chip is as good and AMD chip computers are less expensive than comparable Intel chip ones. 

This lock in process in B2B markets makes it hard for new suppliers to enter these markets. Unless the marketer is able to frame the “buy task” of the buying organization as a "new task." If for example a new SUV is being planned and a new tire supplier gets a chance to come up with ideas ... it the best chance of getting in to be a supplier. Contact StratoServe.

USPS Saturday closing: Opportunity for Direct Mail and Deliveries?

US Post announced today that it would stop delivery on Saturdays from August 5, 2013. Only about 12,400 people decided to vote on the CNN Poll after 12 hours of the story and of them 69% claim that they would not miss Saturday delivery. Those (31%) who would miss Saturday delivery include folks like this blogger who receive "Time" magazine on Saturdays. Agreed the "Time" magazine has become so much thinner and Newsweek has disappeared into the digital world. One wonders if "Time” magazine logistics folks understand this change at the USPS or whether the magazine will now arrive on Mondays from August? At any rate, the implications of the USPS stopping Saturday deliveries is huge for Direct (Junk) mail and deliveries. Here is how:

• Direct Mail: Is one thing that keeps USPS going. If you think about your relationships (Bank, employer, utility company etc.) everyone is pushing to get you away from mail and into "digital delivery." Very very few personal letters seem to come in these days. So what you are left with are all those direct mail pieces. These include auto insurance deals, credit card offers and similar stuff. And even these Direct Mail pieces have become less grandiose. Fewer of those "real" credit cards that you have trouble in putting through the shredder. In other words, even the stalwarts of Junk mail seem to be shrinking on their investments. Given the five day delivery starting in August, those Direct mailers who get reasonable results from their investments should consider upping their attention and budgets. There is so little competition in Direct Mail!
• Deliveries including subscriptions need to look at what no Saturday delivery means to their customer satisfaction. "Time" magazine needs to probably rework their deliveries so that the magazine reaches on Fridays from August. Amazon.com and all other E-Commerce businesses need to look at how their fulfillment works today. It does feel great to receive an order on Saturday compared to Monday ... perhaps USPS will come up with a solution for this segment of its B2B customers.

Although 77.3% of the US population is online, everyone does enjoy receiving a piece of traditional mail occasionally just as print media becomes less fashionable. Innovating in a shrinking market with less clutter is an exciting challenge for Direct Mail marketers and postal channel fulfillment business models. Contact StratoServe.

US Economy grows 2 % while online sales grows ten times at 20% Thanksgiving weekend

The US Economy growth rate at 1.6% -2% is in marked contrast to the average 20% growth rate of online sales since Thanksgiving, Black Friday and Cyber Monday today according to IBM. Black Friday when US retailers turn from the red (negative or losses) to positive (black or profits) was remarkable this year for online sales that crossed 1 Billion $ for the first time. And today Cyber Monday which is supposed to be for online sales, sales are up 26% with iPhones and iPads taking the lead in driving traffic.

Surprisingly “Social Sales"  (see last point in IBM report summary) including  Facebook, YouTube ,Twitter and LinkedIn accounted for  only 0.34% sales and was down 35% from 2011. In other words, folks would be getting influenced by social media for brand awareness but when it comes to the online buying decision - social is just one of the touch points along with organic search, paid search and any other brand building exercises you might be doing in the offline world. Just for comparison, Black Friday offline sales were expected to be up 3.1%, more in line with US Economic Growth of 2%.

Why is this major difference between offline and online sales growth figures? Consider that since Thanksgiving the numbers indicate that online sales are at least six times offline sales. Here are some reasons:

• Younger folks comfortable with buying online are now in the market.
• These younger people are at ease with buying through an App on their iPhone.
• The tight economy calls for comparison shopping made easier with easy search through Google,Yahoo,Bing and search engines.

Given that offline sales was expected to grow by about 3.1 % , more in line with the US economic growth at 2% it is remarkable to see that online sales grew by at least six times this Thanksgiving weekend compared to last year. This is a radical shift in consumer buying behavior and how Internet is affecting business. Contact StratoServe.

Obama re-election not status quo: Dow plunges and why America will avoid the fiscal cliff

Most folks in America did not expect that the Presidential election results would be called yesterday, November 6 by the news channels just after 11 pm US Eastern time. As more results came in, President Obama seems to have won by a landslide, going by electoral votes. The re-election of President Obama, a Republican majority in Congress and a Democratic majority in the Senate is not a status quo as Alan Greenspan says. Here are some thoughts why:

• The Dow plunged today given that the stock market was expecting Governer Romney to win and the real concern over the fiscal cliff of $600 Billion of tax increases and spending cuts that the Republican Party majority Congress and the Democratic Party  President and Senate must decide on before January 1.In addition coal related stocks are down amidst fears that an Obama administration will be tough on coal seen as polluting the environment by the Obama administration. In addition the election of Elizabeth Warren as a Senator from Massachusetts is seen as Wall Street's worst nightmare. It was  Elizabeth Warren a  Harvard Law Professor who criticized Wall Street and helped set up the US Consumer Financial Protection Bureau (USCFPB) after the financial collapse of  2007.
• Just as Wall Street is re-grouping, politicians on both sides realize that the American people have spoken. They do not want time wasted and confusion on things like rolling back Obamacare ( Healthcare shares were up today)  and Americans clearly want both Republicans and Democrats to work together and find solutions. Accordingly the hardline stance of House Speaker John Boehner (Republican) and Senate Democratic Leader Harry Reid on the issue of the fiscal cliff is softening. 
• Although President Obama has won, politicians on both sides are taken aback by the clarity of purpose of the American electorate. Candidates that were perceived to understand and empathize with the plight of the average American seems to have got their vote. For example, in Connecticut after spending  about $100 million for the Senate seat,  the very competent Linda McMahon lost by a wide margin to Chris Murphy.

Economics Nobel Prize winner Amartya Sen concluded from studying the 1943 Bengal Famine and other world famines, that people died of starvation not because of lack of food but due to non-democratic regimes that had no incentive to distribute food to the needy. Thus, no famines occur in democratic societies as politicians might bicker a lot, but do pull together that deliver results to the people, lest the next elections result in payback from the electorate. Although Americans do not face food famines common in the 20th Century, they do face a famine of economic opportunity. Overcoming the fiscal cliff is just a minor roadblock  that both Republicans and Democrats will surely overcome. Contact StratoServe.

Perfecting your "ground game" in marketing- learning from US Elections

As the US Presidential elections arrive tomorrow (finally) political pundits are unwilling to say which candidate will win as the polls of likely voters are so close. Nevertheless, it does seem that both Democrats and Republicans are going all out tomorrow for what is called the "ground game" or "get out the vote" effort. Whatever way the US Presidential election goes the "ground game” on election day will continue to be talked about and should give some great clues to marketers. But after all what is the "ground game" in politics and elections? 

The "ground game" is the effort of political parties to get voters out to actually vote on Election Day. Candidates generally exhort everyone to vote in a sort of "create the market" strategy in their campaign speeches. However, the door knocking on days immediately before the election or on election day is like getting the sales force to call on both loyalists as well as those that might lean your way after a billion dollar Ad campaign that have bombarded the electorate with differing messages. 

Here are some take-a-ways for marketers from the unfolding ground game of the US Elections:

• TV Ads can create only awareness and hopefully positive feelings about your brand - they cannot persuade the customer to buy (the act of voting in elections)
• Unforeseen natural events like Hurricane Sandy can demotivate voters who are in the affected areas even when they had  every intention to vote and would have done so if there was no disruption of life due to the hurricane
• Coupled with TV think of more central routes to persuading un-committed voters before the voting days 
• Although in marketing you do not have only one day of reckoning (Election Day) there are promotions that can last for only a few days. These include Groupon and Living Social type of promotions that are priced to close in a few days. Since you have calculated your margins, volumes and customer acquisition costs when you run a promotion, get your ground game in order
• Ground game in marketing can be door-to-door only when you have a large value product or some kind of a recurring sale (like an electricity supplier or cell phone company) for ground games involve sales folks that tend to be very expensive. Augmenting the ground game sales force with digital marketing that offers a short term immediate benefit like a coupon or discount can work for certain segments of your customers

More on ground games and marketing lessons as the US Presidential elections play out tomorrow. Contact StratoServe.

 

Hurricane Sandy: what can businesses really do?

Hurricane Sandy is arriving today at the East Coast of the US and is being hailed as a "Super Storm."  Hurricanes are a rarity in the East Coast and local and State Governments, private and public organizations are pulling out all the stops to keep people safe. Businesses have to wonder what they can do better, at least next time because it is turning out that Hurricane Irene last year was not an isolated event for the US East Coast. Here are some thoughts:

Transportation: In an unprecedented cautionary move, Connecticut has banned trucks on highways from 11 am and all non-emergency travel on highways from 1.00 pm. Better safe than sorry is the mantra of all officials across the region. The subway trains have been closed in New York and generally transportation has ground to a halt in the East Coast according to CNN. If you are in the transportation business there is nothing much you can do except share with customers you are delivering to that there will be delays. Going forward improving delivery "status" updates via digital  and social media means might at least keep everyone on the same page. Those businesses that deliver their product or travel to customers or work need to probably develop routines that can deal with several days of transport disruption. Delivery schedules could perhaps come under review as soon as this type of Caribbean hurricane is forecast which provides a week's lead time. If the processes are in place - customers can be contacted for moving up deliveries of supplies, before the storm.

Electricity: Electricity companies across the region are a beleaguered lot. Contractor crews are moving by road from Texas over 2000 miles (3200 km) away. Since everything is so dependent on electricity life comes to a complete halt as water gets into substations, trees fall on power lines and transformers burn out. Since food spoils in the refrigerator and there is no electricity for the microwave or stove, folks dash to the coffee shop who cannot offer coffee because most of their equipment is based on electricity. It's probably time for smaller restaurants to look at the cost benefit of getting generators or trying liquid petroleum gas as a standby heating source. Between internet service providers, utility companies, telephone and wireless providers there needs to be some way of providing a solution to smaller businesses to keep going as power is restored.

Property Insurance: Insurance companies and their customers need to probably explicitly deal with what is hopefully not going to repeat every year. There is a flood zone provision in most policies but insurance companies need to review their estimates of what are flood zone regions in such hurricane situations. Businesses probably should be more receptive and be willing to pay that extra premium when the insurance company clearly spells out the payment after its actuarial calculations.

Thus businesses can try and prepare better for transportation, electricity and insurance matters going forward. Meanwhile this blog wishes all its US East Coast readers safety during and after Hurricane Sandy. Contact StratoServe.

Newsweek to close print edition: should you close your bricks business and go all digital?

Newsweek has a print customer base of about 1.5 million and has decided to go all digital. Should you close your bricks business and go all digital? No, and here is why from the magazine business that should apply to other brick/click combo businesses:

• Bricks will always be there: So long as human beings have physical bodies and senses of touch taste, smell etc. the bricks world will have a market. It does feel nice to read a Newsweek or Time at the dentist's waiting room. And when you get that 80-90% off offer for the print magazine you do tend to sign up. Time magazine has 3.3 million subscribers while Newsweek has about 1.5 million subscribers. 
• Getting online paid subscribers is hard: According to Felix Salmon of Reuters , Huffington Post tried the paid subscriber model for just five issues before going free. There are almost no chances of picking up the 1.5 million subscribers that Newsweek print would have to convert to digital only. 
• Thinking Brick costs is a fallacy: Newsweek Editor Tina Brown says that it costs $43 million to produce the print magazine including the paper, printing and distribution, before hiring a single writer. Going by this logic almost every venture that serves large numbers of people spend more around the supporting infrastructure. Thus every major university and hospital spends far more on the campus, equipment, managers, support staff than the faculty and doctors.
• What business are you in - the US News case: What business are you in, is the question to ask. US News went all digital since 2010 and have an iPad subscription version at 99 cents that has very few takers - comparatively speaking. However, rankings in various categories like colleges etc. provide US News with a huge following. There are 50,000 subscribers for the college rankings detailed information at $29.00. There are 10 web clicks for rankings against two web clicks for news and note that both produce no revenue for US News. In other words, US News appears to be more in the rankings business than the news business.

One must wonder if Newsweek actually asked its print subscribers why they really subscribed to the print magazine, for when you have a customer base in the brick world you have an ongoing relationship in the CRM sense. Asking customers to change to digital en masse also raises the question of the technology adoption ability of the entire customer base.

To summarize,if you have existing "bricks" customers make sure that they will be able and willing to pay for your product digitally before you go entirely digital.   Contact StratoServe.

Priceless: integrating Mastercard offline purchase data with Google AdWords Search Advertising

Integrating Mastercard offline purchase data with online Google AdWords Search Advertising is well, Priceless ! To the marketer that is. 

According to the wired.com report, Mastercard is trying to sell aggregate data to marketers for the holidays.The wired.com article wonders about exactly how Mastercard offline purchase data could be useful in online applications and here is one possibility by tailoring Google AdWords search advertising based on Mastercard aggregate transaction data. 

So for example, if you used your Mastercard to buy online electronic gifts after Black Friday or offline last minute clothing gifts on Dec 23, its very likely that your behavior from last few years will not change. OK you might have resolved at the 2012 New Year to do your holiday shopping early... but that was back in January and now you are back at your old ways! At an aggregate "big data" level, credit card data can point to customer behaviors like off line clothing gifts on December 23 and online electronics soon after black Friday in November. And you know that there are say 100,000 people, mostly men in their 30's and 40's in Cleveland Ohio who did this for the last 3 years.

If you are an electronics retailer with a store in Cleveland Ohio launching a geo-targeted Google AdWords search campaign at Cleveland Ohio with keyword search terms that appeal to the demographic can be really effective. Adding direct mail flyers, Facebook and banner advertising just focussing on reaching this 100,000 very specific audience can also pay huge dividends.

For example, if your online sales margin on an electronic gift is say $20 and you precisely know a great deal about folks who bought this type of stuff last year you can be lavish in your keyword bids with Google and what you are willing to pay for Internet banners, direct mail etc. The point is , there is nothing more powerful than accurate data about past buying behavior.

Unless of course, there is a major innovation like an iPhone or game system that pushes traditional choices to the background. Here too, past transaction data gives you a good idea of what groups or segments of customers bought a lot of $20 gifts and who are the folks who spent in the $200-300 range who might switch to a new iPhone or video game system.

The marketing possibilities are endless and I guess consumers have to start getting used to this lack of privacy in the digital age. Consider that today anyone can take a video shoot of anything from their cell phones like the Philadelphia wedding brawl video. At least the Internet and transaction data will be aggregated but anonymous - hopefully. Contact StratoServe.

Staples to grow 10 Billion $ online retail and cut 15% retail floor space but needs to re-think business model

One does not realize that Staples has a $10 billion online retail presence and is considered by some to be second only to Amazon.com, according to the Wall Street Journal. Now Staples understands that they need to save by cutting down 15% of the retail floor space that includes 15 stores in the US, relocate or reduce 30 US stores and shut down 45 European stores. Probably  Staples needs to re-think its business model and re-define its business.

Similar to Best Buy customers many folks visit Staples for only the immediate necessities like printer cartridges, files and folders that can't wait. For all higher valued items from computers to printers customers are reluctant to actually buy from Staples before checking online prices. And like Best Buy Staples sales folks are very knowledgeable and cannot be faulted for changes in consumer behavior.

On the business buy side, Staples does have strong B2B relationships and here too business buyers would like to handle most items through a master contract as apart of the indirect spend. Businesses would like to order custom printed stuff for some items like letterheads but for most of the generic stuff businesses like to order online and pay by P-Card against a negotiated master contract.

The biggest change that Staples is trying to deal with, is the whole scale digitization of business. A traveling salesperson is moving away from a bulky presentation folder with each slide neatly put away into a plastic sleeve. Instead, the iPad or tablet helps deliver a constantly refined pitch as illustrated in the Salesforce.com example of the Rossignol sales rep revving up the sales presentation on the iPad while waiting at the client's lobby. Naturally if salespeople are moving away from plastic presentation folders you can imagine that Staples business is down.

So what is the future for the office supply business? It's exciting and sometimes scary to think about because technology and globalization is changing the office so much. Many offices are giving up office space as people either work from home or work on the move from the cloud. Offices do have meeting spaces and a few folks to keep up physical appearances. Naturally these physical appearances do not include files, paper, filing cabinets or staples- if you think about it. You need paper to staple together and the movement away from paper does make Staples seem like a dinosaur!

Redefining its business as helping the 21st century office just as staples and staplers were helpful in the 20th century office could be the way to go. Instead of offering to take digital copy for printing and pick-up at the store copy center, Staples and other office stores might want to offer services that help the modern digital road warrior. For example, the digital road warrior might provide some excel data and need a slick digital presentation in 24 hours while on an international flight. Imagine that Staples is able to deliver the drafts and the finished presentation through a virtual assistant to the travelling executive. Sounds like higher value and margins than paper and staples. Contact StratoServe.