Hamilton Davison, Executive Director of the American Catalog Mailers Association, recently sent a letter to members and prospective members that listed some of the changes catalogers are beginning to make as a result of the new rates:

“Most catalogers are looking at co-mailing. . . . Lists are under review. Plans are being made to reduce frequency to house list customers. The marginal 10% are being paired off. Some mailings are being converted to “Slim Jim” size. Others are moving some prospecting to postcards with “can miss” promotions to drive web traffic. . . . One cataloger I spoke with is mailing more books and is aggressively pursuing a Negotiated Service Agreement (NSA) with the USPS.”

Davison acknowledges that none of these strategies is a silver bullet, and the direct-to-customer industry has entered uncharted waters.

Have the new rates begun to affect your business? If so, what steps are you taking to cope with the changes? Leave us your comment(s) on this subject.

–

Paul Sobota is a Vice President & Partner with F. Curtis Barry & Co., a warehouse consulting company focusing on the entire direct fulfillment process with expertise in freight analysis.

The Streamlined Sales Tax Project (www.streamlinedsalestax.org) currently includes participating governments of 22 states who have signed on to promote the institution of a simplified sales tax for Internet-based retailers. Proposals call for collecting Internet sales taxes even if there is no nexus in the state the consumer is purchasing from. State governments are eager, in some cases desperate, for extra revenue sources. They claim that Internet businesses that contribute nothing to local communities have an unfair price advantage against local stores that are invested in those communities and do pay taxes.

On the other hand, Internet businesses claim that it is unfair to make them pay taxes on local services and infrastructure that they don’t use. In addition, this will hurt any number of businesses as calculations to compute taxes are not straight forward. Any interstate tax-collecting mandate would somehow have to be framed to take account of the estimated 7,500+ different tax jurisdictions that exist in the United States—one of the professed goals of the Streamlined Sales Tax Project. Since tax rules vary from state to state as to what is taxable and what is not, when an item is considered a luxury item and it is taxed, or not, the software to keep up with this collection and reporting to the states is not inexpensive and needs to be integrated to order management software. This sort of requirement would certainly put some small, pure-play companies at a disadvantage, or worse, out of business.

Growth rate debate
Some of the urgency of the Internet sales tax discourse is driven by perceived growth rates for online sales. The actual rate of growth depends on the source of statistics. Direct magazine has just quoted comScore Inc. as projecting online sales for 2007 to reach $200 billion this year, after reaching $170.8 billion in 2006.

A June article (June 16, 2007) in the New York Times was titled “Online Sales Lose Steam,” and used the phrase “the dot-calm era” to describe a picture of online sales rates dropping dramatically in the last year. The Times article claims that Internet sales “are expected to reach $116 billion this year. . . .” They must be talking to someone other than comScore.

Will e-commerce sales continue to grow at previous rates? Online sales still account for only about 5% of total retail sales, so there’s certainly room for growth in this sector. But how much would states actually be able to collect in sales tax on Internet sales, and how much damage would such a tax damage do to online retail sales?

Gives us your opinion on this heated topic by submitting your comments.

–

Paul Sobota is a Vice President with F. Curtis Barry & Company. Mr. Sobota has over 25 years experience in designing, developing, selecting and implementing systems for Direct Marketing and Retail companies on a variety of platforms. He has first hand experience as a systems manager, project manager and programmer/analyst before becoming a consultant.