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Continued: For Target, Best Buy, long sought online tax bill seems close

  • Article by: THOMAS LEE , Star Tribune
  • Last update: May 6, 2013 - 3:56 PM

That’s why Best Buy and Target said this year that they would match online prices all year around, a move that will cost both companies some profits. Forcing online retailers to collect sales tax might ease the pressure on Best Buy and Target’s profit margins, analysts say.

Sales taxes aren’t the issue

But experts say the sales tax is obscuring the more relevant issue that in many ways, Amazon is simply a better multichannel retailer than Target and Best Buy. Over the years, Amazon has pioneered user reviews and free shipping, which major retailers now have incorporated. The retailer also rolled out its own tablet, introduced cloud data services, and will soon stream original movies. With its foray into same-day shipping, Amazon will negate another reason for visiting a store.

“Amazon has a lot of other unquantifiable benefits, like the power of Amazon’s website as a research tool for consumers,” said Laura Kennedy, an analyst with Kantar Retail. “I never heard of anyone who shopped at Amazon because they didn’t want to pay a sales tax.”

Best Buy and Target are trailing in their e-commerce efforts, though both companies are trying hard to fix that.

Target, for example, hired a new executive to oversee multichannel retailing, including Target.com, and recently bought Cooking.com and Chef’s Catalog. Still, Target.com has yet to contribute meaningful sales, although it has improved the overall performance of the website.

Best Buy currently converts only 1.3 percent of the 1 billion annual online visits into actual sales. Customers who wanted to buy something ultimately didn’t for a variety of reasons. They listed the need for more product info, not pricing, as their top reason for not pulling the trigger. Among the other reasons: prices were too high, product was unavailable, the desire to see the product in person and the feeling that shipping takes too long.

In other words, analysts say, Target and Best Buy can do plenty to lift e-commerce sales without complaining about sales taxes. The issue will diminish if both retailers can reduce their heavy reliance on brick and mortar stores.

In the meantime, Target and Best Buy will seek to improve their competitive positions any way they can.

“In many ways, there’s probably more urgency to [the tax bill] as our e-commerce efforts open up,” said Bishop, Best Buy’s top lobbyist. “We can compete on products, selection, and availability. We can’t compete with the sales tax.”

 

Thomas Lee • 612-673-4113

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