Retailing: “Globally, retailers have had to adapt to the changes ongoing in the market in order to survive. The retail response appears to be toward strong, more personalized engagement, flexibility and community.” – AMP Capital
Time was when storeowners focused on keeping their customers in their hometowns instead of losing them to the trade center an hour away.
In recent decades, those same retail outlets have seen the battle front expand from the big box stores to the worldwide internet.
This hasn’t gone unnoticed by state government, which is dependent on the sales tax to fund a large part of its budget.
South Dakota’s point man on the matter, Attorney General Marty Jackley, appeared before the U.S. Supreme Court last week and argued that the state sales tax should be applied uniformly to brick and mortar and online businesses.
Why was he making this argument? Because the growing impact of online buying is costing South Dakota perhaps $70 million a year in sales tax revenues.
At this writing, speculation on the upcoming decision varies, but many see a divided court. In other words, it could be a narrow decision either way.
Jackley’s presentation to the highest court in the land signals its importance to retailing, main streets, malls, and South Dakota’s economy. Online buying has been a key factor in the demise of many retail businesses. We’re seeing retail stores – big ones – close right and left in South Dakota. Just last week Herberger’s announced it was shuttering its operations in Watertown, Aberdeen and Rapid City. Younkers, a sister operation, will close in Sioux Falls.
Earlier, Toys R Us announced bankruptcy even though it controlled nearly a fifth of the toys purchased in the United States.
JCPenney ended its operation in Aberdeen and many other locations and Sears and Kmart took a similar action.
Clearly, these closures aren’t solely because of uncollected sales tax. They are the result of changing shopping habits. Research has shown that more and more consumers buy online because of convenience, price and selection. Retail operations without heating bills and property taxes can offer products at a lower price than the store owner in the mall or on main street.
Moreover, as Baby Boomers fade away and younger, saavy, smart phone consumers make up the dominant part of the buying public, brick and mortar operations will find the business climate even more challenging.
Nevertheless, from a sales tax standpoint, the operating environment for retailers should be a fair one. The playing field should be level. The marketplace will change in response to consumer desires. Online shops already have many advantages; they don’t need an unfair one.
April 25, 2018