6 reasons why customers will still shop online even if they have to pay sales tax
The recent Supreme Court ruling on South Dakota v. Wayfair is going to increase the cost of online shopping for customers. One of the biggest reasons why people shop online is because it’s not only cheaper, but there’s also no sales tax if they’re selective about their shopping. While customers are responsible for reporting and paying sales tax, most customers don’t. For residents of Louisiana, that can mean a “savings” of $100 on a $1000 purchase.
But that doesn’t mean that everyone will now return to physical retail stores. There are still many good reasons why customers will continue to shop online. We’ll go over some of the most influential factors that inform customer shopping decisions.
Online shopping is convenient. You can browse an entire catalog of products from various merchants within minutes, and you can do so in your pajamas with a drink in hand. Another added convenience: free shipping and returns. There’s almost no consequence to buying online now because Amazon has trained customers to expect free shipping and free returns, regardless of the reason. You can quickly meet most requirements for free shipping on websites.
With the recent Wayfair ruling, online and offline shopping will now be equal, at least regarding sales tax. But this factor alone won’t change customer behavior. Prices will probably increase amongst online merchants to pay for new tax services, but those merchants are still at a competitive advantage because they don’t need expensive retail locations and employees to draw in customers.
Online shopping makes purchasing decisions easier. You can easily comparison shop for the best price across several websites. Buying online also makes using coupons quick and easy since it eliminates that back-of-the-mind fear of being judged when the cashier is struggling to scan your crumpled coupon for a dollar off.
Shopping in physical retail locations can also be frustrating since online stock information often doesn’t match actual in-store stock. And good luck trying to get a signal in large stores so that you can check prices or inventory against other nearby retailers.
Then there are other related costs of shopping that people don’t generally consider. There’s wear and tear on the car. There’s gas. But perhaps the most significant cost is time. You’re spending time in traffic and the store looking for that one product. If you’ve been to a large store like Ikea or Home Depot, you know the pain of having to hunt down three or four different items spread across the entire store. Finally, if you live in a densely populated area like Los Angeles, you’ll also have to pay for parking or spend time looking for parking. Of course, if you think of all the exercise you’re getting, then perhaps the time is a benefit rather than a cost.
No one is going to judge you online if you’re buying 20 packages of cookies a week. Amazon certainly doesn’t care. Nor does the merchant. You might get a raised eyebrow from the Amazon worker packing the order, but he doesn’t see your personal information. Try doing that at a grocery store, and you’re going to get a lot of judgemental stares. It’s especially worse if you’re stuck in line with a cart of nothing but packages of cookies. Then you’re frantically trying to come up with some plausible excuse that you can verbalize. But that doesn’t extend to just junk food. Customers are more comfortable purchasing specific products online than they would be in stores, like personal hygiene products.
Ask anyone who has worked in retail, customer service, or restaurants long enough for a story about horrible customers, and you’re sure to get at least one. If you’re trying to shop at a physical store after a long day of dealing with people, you don’t want to deal with even more people. Think about Costco on a busy Sunday afternoon. People park their shopping carts in the middle of an aisle. People move at a snail’s pace. People leave their carts anywhere there’s space to get at a free sample. And that’s not even the worst of it.
Online shopping has the added benefit of being able to see reviews of the product you’re checking out and similar products that you may not have even known existed. You can’t do that in stores since they carry only a limited selection. Some retailers, like Best Buy, will display ratings, but this isn’t as comprehensive as the actual reviews you get from customers. You want to make an informed decision when you’re making a big purchase so that you won’t regret it later.
Having to collect sales tax isn’t going to destroy online sales for smaller merchants. It’s true that it’ll cost small businesses more to comply, but the added cost will be for everyone, not just some businesses. Ultimately, these additional costs will be passed onto the customers, much like credit card fees have been. And online merchants need not fear a drop in sales to physical retail locations.
For physical retail locations to increase and expand their sales, they’ll have to address the issues presented above, and there’s no easy to way to do it. Crowds, lines at the cashiers, constant problems at the self-checkout, being charged for bags, and other issues are obstacles for younger shoppers. A crowded store may seem good for retailers, but it’s discouraging for younger shoppers, many of whom will leave when they see a store that is too crowded. After all, why deal with that when you can just step outside and make the purchase on your phone?