business news in context, analysis with attitude

We reported Friday on a study by the Direct Marketing Association (DMA) that conventional wisdom about the amount of taxes being lost to e-commerce has been incorrect, and implication being that states looking to plug their budget gaps on the back of a new online sales tax may be surprised by the results. In 2001, for example, it as believed that $13.3 billion in sales taxes were lost to the online channel, but the DMA study says it was closer to $2.5 billion.

One MNB user wrote:

“Since most of the items purchased on line are goods as opposed to services, the DMA lacks credibility on their estimate that taxes lost by states for on-line sales will be less than 1/10th those estimated by a non-biased University study. I hate the idea of sales taxes on line but I hate worse the trade organizations that bend and twist the truth in order to glad hand their members. Call it like it is. If you buy a TV in a store you pay sales tax. If you buy that same TV on the Internet, you don't.

“Frankly, I think the DMA is naive if it thinks that payment of sales taxes will effect the public's use of the Internet to buy products. The force pushing Internet sales has nothing to do with sales tax avoidance. The world is different post 911. States are pinched to provide basic social services, much less added security programs. The Internet sales taxes are a way for some states to make up the difference without raising their basic tax structures, cutting services, or introducing (increasing) dependence on gambling. I really do hate the idea of paying more taxes....but somebody explain to me...exactly why products sold on line don't qualify for sales taxes?”

Another MNB user wrote:

“The DMA report estimates that states will miss out on $4.5 billion in tax revenue in 2011, while a different study by the University of Tennessee suggests that states will lose $54 billion. I know I went to school when they used "old math", but anyway you count it, there is a BIG difference in $4.5 Billion and $54 Billion.

“Let’s see them quantify how they reached their respective estimates. My gut feel, is they are both wrong and your numbers are correct in assuming that it is closer to somewhere in the middle. Does anyone have a real handle on the amount of sales actually made that could be taxable? I would suggest they use last reporting years numbers, not some estimate in the future.

“I really don't think that someone on E-Bay would be paying taxes on what they sell, so take those sales away. Take away those sales that are currently being taxed. Take out the non-taxable amounts (those items that are not taxed if you purchased them at retail) and get to a truer number. Then, maybe, I will believe we can have a discussion on this issue. Garbage In - Garbage Out. I don't believe DMA or University of Tennessee, they are both garbage numbers.”

On the subject of loyalty marketing, MNB user Charlie Young wrote:

“Stores want customers to be loyal, but they base loyalty on price. It doesn't matter if that is two tiered pricing or Gold Points or Green Stamps... it is price. It seems strange that price becomes the primary loyalty locus when it is a ubiquitous tool, available to all, dominated by some (Wal-Mart), featured by others (Costco).

“Consumers are loyal to brands. Some like Coke because of the taste, some pick Chinet because it looks clean and is sturdy, some select Tide because = they believe it cleans better, some like Wegman's because it reeks of quality...differentiators come in all types and sizes.

“Retailers have trouble communicating one-to-one. It does not fit the existing patterns of merchandising. Flyers and coupons are mass tools, trade discounts and slotting allowances do nothing for the loyalty of your best customer. If these offers and communications reach the shopper and price is the offer, that consumer will certainly read all the offers and probably go to more than one store.

“Now a retailer cannot be all things to all people but the shopping environment and experience needs to be more personal and involving if you want loyalty. In a world full of databases why can't the retailers do a better job of communicating with their customers. Some of them like sardines, some don't... making the same offer to all doesn't generate loyalty.

“I believe the stores don't know who they are, so it is difficult for them to tell consumers why they should be loyal. Here in the east, A&P is not Kings, nor Stop & Shop. But if you shop all three you begin to wonder what is going on. Well, they had better be careful because here comes Wegman's and they seem to know what they are and what they want to do. Next thing you know they'll know who I am and start talking directly to me.”

Also on the subject of loyalty marketing, one MNB user wrote:

“As a consumer I drive miles out of my way to shop at non-loyalty card stores. These stores are in all respects inferior to the loyalty-card stores that are closer to my home, with the exception of the "loyalty card"! I was formerly a loyal QFC customer, and have not spent a penny there since the card was introduced.

“I'm not alone, either...”

From the “sometimes we get it wrong” file, we offer the following email from an MNB user about our correction regarding an earlier story about a unionization rally at Genuardi’s:

“When commenting on the union organizing effort at Genuardi's last week, you quoted an inaccurate story that ran in the Philadelphia Business
Journal. Unbelievably, the PBJ wrote this story before the event took place and reported on it as if it had happened. We assume they were working off a union press release. Contrary to their article, Genuardi's employees did not hold the rally or participate in it. Paid union members did. Additionally, the rally did not take place at Genuardi's headquarters. It took place at a Genuardi's store. The article also failed to mention that the rally was dispersed by East Norriton Police when the participants failed to listen to police instructions and violated an agreement they had with the police
department. The moral of the story is: don't believe everything you read in the media."

Even, apparently, MNB. We apologize for our imprecision.

We reported Friday that a Canada-based holding company, Jim Pattison Ltd, has acquired 6.6 percent of U.S. supermarket chain Pathmark Stores. MNB John B. Lightfoot offered a perspective:

“Could be a fascinating move for both companies. Pattison Group owns close to 100 well-merchandised supermarkets...half wear the Overwaitea banner and almost a half have the Save-On-Foods logo out front. Throughout the late 1980's and into the 21st century these stores were the class act of food retailing in Western Canada. Under Pattison ownership, Save-On-Foods always seemed to be on the leading edge with fresh ways to keep its customers coming back.

“Both Pathmark and Save-On remain largely subscribed to pile it high, present it well, price it sharply and move it out philosophy of merchandising. Like Pathmark, many Save-On units generate weekly sales averaging above $500,000 a week. Pattison also owns other notable food distributor properties: among them wholesaler AG of Calgary and the Buy Low franchised small-store ( ala ALDI group ) , making the diverse operation the leading food distributor in west coast Canada. Could put new life into Pathmark and perhaps even be the signal that like Loblaw's in the 70's and Sobey's in the '80's, Pattison intends to become a bigger time player throughout North America. Interesting...and worth watching.”

And finally, one MNB user wrote:

K-Mart must be breathing a sigh of relief now that Ahold has taken up so
much of your space and time. I'm reminded of the "wag the dog" analogy,
except K-Mart wouldn't be smart enough to pull it off intentionally.

Oh, don’t worry. Kmart will do something stupid one of these days, and they’ll find their way back into our sights.

We promise.
KC's View: