[This commentary drew such a heavy response Monday in the Rick’s Picks forum — 60 posts so far — that I am letting it run for a second day. RA]
We lean strongly libertarian on the issues of the day, especially when debating those who would raise taxes to feed the insatiable maw of Government. So why are we rooting for the revenuers in their battle to squeeze more tribute from the customers of retail giant Amazon? That’s right: We’re hoping the company loses its knock-down, drag-out battle to avoid collecting taxes for cash-strapped states, even if it means online shoppers will ultimately pay billions more for their purchases. The states want Amazon to collect and remit taxes wherever the company sells merchandise and irrespective of whether it has a physical presence where the sales are conducted. In the long run, we would argue, it will be better for consumers to go along with this than letting them continue to buy untaxed goods online. In the end, leveling the retail playing field between virtual and brick-and-mortar sellers in this way will help avert the day when Amazon and other globally scaled sellers have driven most of their brick-and-mortar competitors into the ground.
Such an outcome may be more likely than shoppers might care to imagine, as the chart of Best Buy (below) suggests. Shares of the big-box purveyor of consumer electronics, computers and appliances have fallen by half since last November, when they traded for as much as $45, and recently touched a three-year low of $22 on weak earnings. To be sure, the Great Recession has played a significant role in the collapse of Best Buy’s once high-flying stock. But with the firm’s release of dismal sales figures for Q2, analysts have begun to question whether the retailer is becoming just a showroom for customers planning to do their buying online.
We must confess to abetting this trend ourselves recently, having purchased a Sony digital camera online after visiting some local retailers to try it out. Store prices ranged from $289 to $410, plus sales taxes that would have added as much as $28 to the camera’s cost. Weigh that against Amazon’s deal – $279, no tax, and free shipping — and the decision to purchase online was a no-brainer. Who can resist such bargains? Although we try to buy most of our books from independent local sellers, paying a few dollars more than at Amazon to help keep them alive, it’s more difficult to rationalize buying big-ticket items such as cameras and computers locally when online prices are so much lower, as is often the case.
The Wal-Mart Effect
But isn’t this what killed Main Street? Shoppers flocked to Wal-Mart looking for low prices, eventually driving small retailers out of business in towns all across America. Now an even bigger predator, Amazon, threatens to do the same thing to big-box operators, leaving gaping holes in shopping malls that may never be filled. If an aggressive, savvy operator like Best Buy cannot pay the rent, then who can? Even department stores, which still attract shoppers who want to try on shoes and clothes, and to sample cosmetics, are not drawing enough traffic to survive. This is conjectural on our part, but stores in general, most particularly department stores, seem nowhere near as busy as we remember them during our childhood. In fact, the only stores that appear to be drawing crowds of buyers are Apple’s phenomenally success retail outlets and cell-phone stores. Hardware, jewelry and sporting goods stores are somewhat of an exception, since their customers frequently require knowledgeable help. But competition is brutal in these areas, and if the glut of such stores here in Boulder is typical for towns of comparable size, then many of the stores are fated to die as The Great Recession deepens. Their demise will only be hastened if world-killing competitors like Amazon are allowed to sell their wares tax-free to customers.
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Yeah, shopping sure ain’t what it used to be….
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