Santa Shopped Online This Year

An anonymous reader writes "ZDNet is reporting on another blockbuster year for online shopping. Online shopping was up almost 30 percent over last year." From the article: " Clothing was the top seller in terms of dollar amount, at $5.3 billion total, up 42 percent from last year's revenue, the report said. Computer hardware and peripherals showed the most growth, 126 percent, at $4.8 billion. Consumer electronics was the second fastest growing category, garnering $4.8 billion, up 109 percent. People spent $3 billion on books online, up 66 percent, and $2.3 billion on products in the toys/video games category of hardware and software, a drop of 9 percent from last year, the study found. "

Comments

So how long ..

[vodkamattvt]

before the gov't demands all those juicy sales taxes? You know its coming, especially after the huge growth in online sales every year.

That's Odd...

[scheming]

I got nothing at all for christmas this year... :(

Clothing, eh?

[06metzp]

It seems odd that clothing would be the top seller online, given that it involves more to return/exchange items to an online store than a regular store if the clothes should happen to be the wrong size.

From a retail store owner

[dada21]

I own 2 (and 1/2) retail stores in the Midwest US, and this will be our final year in retail.

Our inventory was better than or equal to more dotcoms. Our service was better (30 day DOA or defect replacement and lifetime labor). Our pricing was equal. Our hours were "better" since we were open 7 days a week.

What killed us? Sales tax. Our average sale in 2005 for about $230 (we sell paintball, skateboards and a ton of clothing). At 7%, we were consistently $16+ over per average sale than the dotcoms, even with instant acquisition.

2005 was our best year ever, so we're ending it at the top. Next year's outlook is bleak as many states want to raise sales tax and other fees. No thanks. In 2005 I paid more in sales tax than I did in payroll.

I'm not mad, actually -- the dotcoms are a great way to save money AND screw the state. I feel bad about my customers who loved our store, but I also know many bought online for the higher margin items that didn't need servicing (we were not competitive on those items as we had to price in future service and were always about 20% higher).

Local communities WILL suffer, though. Retail sales can be a big income base for the local community -- my mechanic performs almost 80% of his work for retail employees' cars. My dentist has almost 1/3rd of her patients working in retail. As retail suffers, these secondary markets will also suffer. But the positive is that the money we save in retail by shopping online should offer us more money to spend on other things.

It was a great 5 years, I did very well financially, and in the end, the state decided they didn't want me around -- otherwise they'd have ended the vile sales tax that is quickly ruining retail.

Re:From a retail store owner

[dada21]

I'm not sure I understand how you went out of business.

We didn't go out of business, we're making the choice to close our doors -- big difference. In every business, in every market, there comes a time when the old ways are obsolete. Ma and pa retail stores are pretty much antiquated, so I figured we'd best get out on top. One of my 3 stores closed up on its own (major cash flow problems and a very disloyal community), so I found my exit strategy and took it.

Also, since you so clearly identified the problem (and have great understanding of it) what would you propose a solution to be?

There is no solution. It is so convoluted, but in the end I have to blame government -- and I know I'll get flamed for saying that.

Look at it this way:

1. Our rent is outrageous -- almost $18-$25 per square foot. I fully blame this on the Fed's easy credit and a massive amount of "new" money entering the property market. There is no way my main store's rent should be $5000 per month -- but it is! This is in a town of 4000 people, mind you.

2. Our payroll is outrageous -- for every $1 I pay my employee, I have almost $1.50 to also pay to government and accountants (because of the tax laws). There's no way around it, especially since the warehouses who sell for the big dotcoms hire people either at minimum wage, or as contractors below minimum wage. I have friends who work at the big dotcoms in the warehouses and they're practically slaves.

3. We pay 7% to sales tax, plus the an additional 3.5% to accountants to handle the sales tax. One store files over 45 different forms a year for various government bodies. This puts us at a significant penalty over companies that don't have to pay this portion.

4. We pay a larger portion in shipping -- we don't move millions annually so we don't get the same discounts as the big guys.

But its ok! The dotcoms won because they were more efficient. Yes, my customers who lose me will lose great service and a very community oriented business, but if they weren't willing to pay the extra 15-20%, why should I take a big risk?

Retail is dead, except for the megacorps who have ways around the issues plaguing me. I recently found out 3 super stores in my neighboring town get a sales tax rebate -- they charge 7% to the consumer but get to keep over half of it. Yeah, that's fair.