Taxation

1
Taxation

• 3-year moratorium imposed in 1998 ended Oct. 21
• Congress plans to pass an extension by years end

2
Taxation

• Why should Internet commerce be taxed?
• Why should Internet commerce NOT be taxed?

3
Taxation - for

• Required to collect from customers who live in
  states of e-tailer presence
• State/local govts argue loss of sales tax revenue
  harms
• Bricks and mortar retail
• Local schools
• Local governments

4
Taxation - against

• Retailers argue state/local tax codes are complex
• Lost tax revenue is a drop in the bucket since
  e-commerce is a small percentage of total retail
  sales

5
Taxation - Michigan

• State says it is no different than catalog
• Puts Internet and stores on level playing field
• Cost to collect is 2 million
• Additional revenue is 240 million

6
Taxation - future

• Moratorium will probably be extended
• Tax codes need to be simplified
• Sales tax calculation and remittance software
  needs refining and validating

7
Pricing

• Feasible to test new pricing models
• Traditional price setting is being modernized due
  to information availability
• Internet reduces transaction costs for consumers
• On-line prices are usually lower

8
Pricing

• Most prevalent model is fixed pricing
• Prices are set consumers decide
• 79 of all e-tailers use it
• Amazon.com, bn.com, buy.com, etoys.com, gap.com,
  macys.com

9
Auctions

• Publicly held sale
• Property/goods sold to highest bidder
• 20 of on-line sales
• Amazon, eBay, Egghead, uBid, Yahoo!
• Reverse auction
• Buyers specify sellers compete to offer best
  price liquidprice.com

10
Auctions - problems

• Inefficient commerce and pricing
• Artificially bidding up prices
• Collusion
• Two bidders can illegally team up to win
• Payment
• New systems credit card is debited

11
Auctions - benefits

• Create hype and bolster traffic
• Improve inventory management
• Excess goods/returned merchandise
• Generates repeat business
• Estimate consumer demand
• Evaluate price points for new products

12
Name your own price

• Consumers suggest price
• Service presents price to sellers
• Sellers decide whether to accept price
• Similar to reverse auction
• Priceline.com

13
Demand aggregation

• Group buying
• Service assembles buyers who want to purchase
  same product
• More buyers lower prices
• 1 of online sales
• Actbig.com, mercata.com, mobshop.com

14
Automatic price decline

• Initial retail
• Prices fall by seller-determined at regular
  intervals
• Prices quit declining when all is sold
• Basement.com, jcpenney.com, outletzoo.com

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Negotiated buy

• Search for lowest prices available for specific
  product
• Shoppers negotiate with select sellers to obtain
  better price
• Hagglezone.com, nextag.com

17
Barter sites

• Person-to-person trading communities
• Trade second-hand goods
• Users negotiate with each other and reach
  agreement online
• Mail items to each other
• Intellibarter.com, swap.com, switchhouse,com,
  webswap.com

18
Internet Levels playing field

• Consumers
• Lowers transaction costs
• Price comparisons, easily and quickly
• Retailers
• Easy to shop the competition
• Ability to track consumer clicks online
• Helps identify price thresholds and willingness
  to pay for different products/services

19
Synonymous pricing

• Availability of pricing info places overall
  downward pressure on price
• Creates an environment of frequent price changes
• E-tailers offer similar products at the same
  price

20
Synonymous pricing

• Feasibility depends on nature of product
• Stephen King novel is Stephen King novel,
  regardless of retailer
• Wal-mart polo vs. Ralph Lauren polo
• Differentiated products are not likely to
  experience synonymous pricing

21
Synonymous pricing

• Price is not always the driver
• Gift giving
• Some consumers are unwilling to spend time to
  track prices
• Retailers will focus on the most important
  products for synonymous